CSR has once again been high on the political agenda with the CSR Alliance meeting held few months ago in Brussels, attended by Commissioner Gunter Verheugen and Commissioner Vladimir Spidla. Their goal was to evaluate the success of the Alliance over the past year and discuss plausible solutions to the challenges that businesses and the EU are facing with regards to demographic change, competitiveness and sustainable development.
Commitment to Corporate Social Responsibility and Sustainability seem to be on nearly every company’s agenda these days. From your perspective, are we witnessing a “Zeitgeist” phenomenon or a genuine, transforming change in this regard?
I am convinced that we are experiencing a fundamental transformation in society’s understanding of the role of business. Business leaders and entrepreneurs themselves are increasingly redefining the purpose of enterprise. While the profit motive is key to the functioning of the market economy, there is a growing consensus that the creation of value for society is what will drive profit and share-holder value in the long term. The acceleration of globalisation has brought a radical change, highlighting the potential influence of business on society and also providing more opportunities for the media, NGOs and others who want more information about the behaviour and impacts of companies.
When did the European Commission first engage with the concept of CSR? Why is a political institution like the EC involved in this topic?
The European Commission has had an explicit policy on CSR since 2001. Our interest is largely explained by the fact that companies, through CSR, can promote and defend European values and contribute to strategic EU policy, goals, in particular the promoting of sustainable growth and providing more and better jobs. As the goals of competitiveness, sustainability and social inclusion rapidly converge, CSR becomes a more important part of the competitiveness equation for individual enterprises and for the EU itself. The debate about CSR is also a debate about the role and purpose of business in society, and as such the European Commission has a duty to make its voice heard.
On many occasions the EU has spoken of its desire to become a “pole of excellence” in terms of CSR. How do you feel the EU is progressing toward that target?
The main achievement since the launch of the Commission’s new policy on CSR in 2006 is that more enterprises are integrating CSR and sustainability as part of their business strategy, rather than merely as a communication tool, as has sometimes been the case. The signals I am getting from the business sector in this respect are clear. I am a bit disappointed that some stake holders have not yet fully acknowledged this trend or fully reflected on its implications. I am convinced that civil society has a clear role to play in creating an environment where sustainable and responsible businesses are rewarded.
Who are your most important partners in this?
Any discussion about the role and purpose of business clearly has to take into account the views of different stake holders in society, such as trade unions, civil society organisations, including consumer groups, as well as enterprises. That is why we continue to attach importance to the European Multi stake holder Forum on CSR. When it comes to implementing CSR, enterprises are in the driving seat, but to be successful they need to engage in dialogue and often joint action with other stake holders. We have challenged the business community to step up its commitment to CSR on a voluntary basis and the response has been an increasingly powerful European Alliance on CSR. The involvement of a number of non-business stake holders is important to the success of the Alliance.
Are citizens aware of the active role the Commission is taking with regards to CSR? What channels does the EU use to communicate its efforts on CSR to the public? What role does the media play in this?
I think that citizens are generally quite well aware of the Commission’s commitment to promoting high social and environmental standards in the European Union. The coverage given to the Commission’s recent proposals on climate change are a good example of this. However, awareness of our policy to promote CSR specifically is perhaps not as high as it might be. But the most important thing is that there is a growing awareness amongst citizens of what it means to be a sustainable and responsible business. The media has obviously played a key role in this, even if the tendency is usually to prefer “bad news” stories at the expense of “good news”.
Up until now CSR has mostly been implemented on a voluntary basis. Can we expect European Directives to make stricter future requirements, for example, in the direction of obligatory reporting on CSR?
I am convinced that CSR is a question of values and diversity. CSR varies enormously according to the size and sector of the enterprises and according to different national and cultural contexts. It is not meaningful to try to regulate this diverse and fast-changing field. Making CSR a box-ticking exercise or a formality would harm it not help it. That is why I have always been against the establishment of a European regulatory framework for CSR, and I will stick to this position.
From your perspective, what motivates companies/enterprises to take on social responsibility?
People who work in enterprises are as much part of society as anybody else. They have values and aspirations, and often wish to contribute to a better world as much as people who work in politics or in non-governmental organisations. Values are therefore always going to be a significant motivation for CSR, and this is especially true amongst entrepreneurs and in SMEs. But also, I believe that the trends I have already described will increasingly lead to a situation in which the best companies in CSR will also be the best in terms of shareholder value.
What concerns, if any, do you have regarding the effect of CSR norms on the competitiveness of EU firms and industry? Can we imagine foreign companies (from China for example) who want to establish themselves on the EU market, having to comply with certain norms and EU expectations of a specific degree of social responsibility in their activities?
I strongly believe that imposing a regulatory straight-jacket on to our businesses’ CSR activities would increase their costs, decrease their competitiveness and worsen their CSR performance. Our CSR approach applies to all companies and I am glad that many non EU based companies are very active in the European Alliance for CSR. But let me be clear: all companies operating in the EU have to comply with our legal requirements including, of course, those covering social and environmental issues. But we are talking here about legal compliance, not about CSR.
What differences do you see in the attitudes and approaches to CSR in different EU member States? Where are the efforts to promote sustainable and responsible policy and behaviour among companies most advanced, and which countries still need to catch up?
CSR varies from country to country, according to different political and social traditions. We need to respect those differences and encourage each Member State to develop an approach to CSR that fits with its own circumstances and priorities. The Commission organises regular meetings between representatives of national governments to allow them to exchange information about their national policies to promote CSR.
We have recently seen the launch of the Enterprise Europe Network that particularly supports SMEs. Where do you see the role of small and medium sized enterprises in terms of globalization, and how does the EU promote this role?
The role of SMEs in regard to globalization is crucial. Let me give you three reasons for that. Firstly, European manufacturers will continue to invest and produce outside Europe. We will see further losses of jobs in these sectors and the only way to compensate this is to exploit the potential of SMEs for growth and jobs. Out of the 6 million new jobs between 1998 and 2004, 5 million were created in SMEs. It is clear that SMEs will also account for an important share of the 8 million new jobs expected between 2007 and 2009. Secondly, the recent financial turmoil and its significant impact on the economy as a whole have shown clearly that a strong SME structure makes an economy less vulnerable in a crisis like this. SMEs normally do not invest in highly complex financial products and they normally stay where they are. And thirdly, SMEs are close to customers and therefore more flexible. They generally demonstrate a high level of corporate social responsibility and, as they are very often family owned, have a higher awareness of the needs of their local society. What big companies must develop, implement and monitor, is for many SMEs part of their traditional culture. In other words: SMEs are the most important factor of stability in an economic environment which is characterized by rapid and permanent structural change. The new Enterprise Europe Network clearly shows that we acknowledge the crucial role of SMEs. For the first time ever, all major players of business support join their forces at a European level, and even beyond, to provide services tailored to the needs of companies, especially to our SME-Community.
In your opinion, what are the most important changes, regarding the situation of SMEs in the EU, to have been implemented since the launch of the new SME policy three years ago?
If I compare the situation of today with the situation that existed at the beginning of 2005, I can proudly say that together we have made a huge difference. SME policy is now firmly anchored in the European strategy for growth and jobs. The Modern SME policy has put SMEs high on the national and European reform agenda, and increased the commitment of stakeholders to commonly agreed goals. I think it is no exaggeration to say that in a little over two years Europe’s 23 million SMEs have become the centre of interest not only at the EU level but also in most Member States. It is now easier to start up a company in the EU, and entrepreneurship education is increasingly becoming a part of school curriculum. I call it a political breakthrough that the “Think Small First” principle is now being integrated into Community and national policies.
CSR is often still perceived as an activity that mainly large corporations engage in. Where you see the specific challenges and opportunities for SMEs in this regard?
SMEs are not less responsible than larger enterprises, even if the majority are not familiar with the term CSR and do not recognise it as a separate distinct concept. So the first thing we need to do is to give more recognition to the responsible business practice of SMEs, and to their economic and social contribution to society. Once we have done that we can credibly seek ways to help SMEs further develop their CSR practices. The Commission has played a pioneering role in this field, in cooperation with major SME organisations such as UEAPME, and EUROCHAMBRES, and their network of national and regional chambers of commerce.
What is your personal vision for the future of CSR and Sustainable Development in the 21st century? What do you think are the foremost priorities to attaining that vision?
I believe that responsible and sustainable business practices are crucial to the legitimacy of the market economy in the eyes of our citizens. The EU and national governments will have a higher success rate in creating a positive operating environment for businesses, if business itself is seen to share the values and interests of the society in which it operates. Businesses must be recognised as part of the solution to societal challenges. If citizens believe that enterprises are playing their part in defending our common values, then we will be in a much better position to take advantage of the chances globalization offers us. Beyond that, the business community, stakeholders and the EU as a whole continually need to find ways to combine competitiveness with social and environmental sustainability, including setting the conditions in which market players (consumers, investors, public authorities etc.) reward companies for CSR and sustainability.
*Gόnther Verheugen, is Vice-President of the European Commission in charge of Enterprise and Industry. After graduating he started his political career at the German Liberal Democratic Party (FDP), later working as their General Secretary. He moved on to the Social Democratic Party (SPD) and was elected into Parliament. Verheugen held a number of positions including Minister of State for European Affairs in Germany before he joined the Commission in 1999. Commissioner for Enlargement saw the accession of ten new Member States in 2004.
By: N. Peter Kramer
