Corporate Social Responsibility Initiatives in Europe

Corporate Social Responsibility (CSR) is the idea that corporations should be engaging in socially responsible business practices. The discussions of CSR revolve around whether the directors and managers of corporations should have some legal duty to take into account not only the needs of the shareholders, but also other groups affected by the corporation’s activities such as stakeholders in the company and the community at large.^[1] Many companies voluntarily implement CSR policies, but governments can choose to control corporate behavior and CSR initiatives through two methods: regulation and incentivization.^[2] Regulation involves requiring corporations to abide by positive law, and also implementing disclosure requirements.^[3] The government can also incentivize corporations to practice desirable behavior by offering tax credits and deductions.

In Europe, both the European Union and individual nations advocate for CSR. The European Commission, an institution of the European Union, has introduced both voluntary and mandatory actions to promote CSR. In 2011, the European Commission adopted its most recent strategy for CSR, which combines horizontal approaches to promote CSR with more specific approaches for individual sectors and policy areas.^[4] The EU Charter of Fundamental Rights, entered into force in 2009, is one of the legally binding documents that the European Commission enforces.^[5] In addition to human rights, the charter concerns the “respect for human dignity, freedom, democracy, equality, the rule of law, rights of persons belonging to minorities, pluralism, non-discrimination, tolerance, justice, solidarity, and equality between women and men.”^[6] These values extend into European Union action in ensuring responsible supply chains and appropriate due diligence in business engagements with third-world countries.^[7] Victims of human rights abuses are able to seek remedy by bringing a private action against the entity which harmed them.

In addition to the Charter, which outlines the values of the European Union, the Commission has enacted the Non-Financial Reporting Directive which requires public interest companies with over 500 employees to disclose information on the way they operate and manage social and environmental challenges.^[8] Companies had to report for the first time in 2018, covering fiscal year 2017.^[9] The directive gives significant flexibility to disclose relevant information in the way they think is most useful. They may use international, European or national guidelines according to their own characteristics or business environment.^[10] Over 6,000 companies are required to publish reports, including listed companies, banks, insurance companies, and other companies designated by national authorities as public interest entities.^[11] The purpose of disclosure is not to enforce against or punish companies for non-compliance, the purpose is to allow transparency in important business practices. This helps investors, consumers, policymakers and other stakeholders to evaluate the financial performance and encourage the companies to develop a responsible approach to their business and the community.^[12]

The international organizations which have developed measures to support CSR have mostly endorsed mere guidelines. This leaves room for nations themselves to encourage and regulate CSR through policies and legislation that they believe best fit the values of their nation. For example, the lead ministry for CSR in Germany is the Federal Ministry of Labour and Social Affairs.^[13] The ministry established the National CSR Forum as a body bringing together various stakeholders to work on corporate responsibility and develop a National CSR Strategy.^[14] Germany has chosen to focus on small and medium-sized enterprises by providing “guidance and predictability, and to support them in putting their business practices on a sustainable path and with meeting the new corporate due diligence requirements.”^[15] Germany has also ensured access to remedies and redress for human rights violations by encouraging people to assert claims before the German civil courts.^[16] In addition, companies can be held accountable for the criminal-law-related conduct of executives, including corporate-related violations of human rights, and charged with fines of up to ten million euros.^[17]

The French government has taken CSR implementation a step further and has adopted legislation to implement its CSR strategy. France was the first EU country to introduce non-financial reporting with the New Economic Regulations Act in 2001.^[18] At the time, this Act required approximately 700 large French companies to disclose information on the social and environmental consequences of their activities in their annual management reports.^[19] In 2010, France then passed the Article 225 of the Grenelle Act, which reinforced existing provisions by making the information published subject to verification by an independent third party, and by widening the scope of the law in terms of the number of companies covered and subjects reported on.^[20] This included a “comply or explain” approach, meaning that companies could choose to omit information on subjects non-relevant to their activity, but had to provide an explanation for why they chose not to disclose this information.^[21] In 2015, the French National Assembly adopted the Energy Transition Act, which modified requirements to the Grenelle Act by specifying that companies now had to include the consequences of their activities on climate change and the use of the goods and services they used.^[22] Enacting this legislation moves CSR inside the realm of accountability. If a company is forced to be transparent, they will be more conscious of the actions that they know the community will be able to see and judge.

The requirements implemented by the European Union are broader than those of individual nations, so that the nations can enact legislation that reflects their specific values. Although many companies choose to implement their own CSR policies, regulation and incentivization by international organizations and governments allow for uniform disclosure procedures and dissemination to the public.

1. Harwell Wells, An Historical Retrospective for the Twenty-first Century, 51 Kan. L. Rev. 77, 78 (2002). ↑

2. Margaret Ryznar & Karen E. Woody, A Framework on Mandating versus Incentivizing Corporate Social Responsibility, 98 Marq. L. Rev. 1667, 1668 (2015). ↑

3. Id. at 1669. ↑

4. Corporate Social Responsibility & Responsible Business Conduct, European Commission, https://ec.europa.eu/growth/industry/corporate-social-responsibility_en (last visited July 9, 2019). ↑

5. Corporate Social Responsibility, Responsible Business Conduct, and Business & Human Rights. Overview of Progress, European Commission, 11 (March 2019) https://ec.europa.eu/docsroom/documents/34482. ↑

6. Id. ↑

7. Id. ↑

8. Non-Financial Reporting, European Commission, https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/non-financial-reporting_en (last visited July 10, 2019). ↑

9. European Commission, supra note 5 at 28. ↑

10. Id. ↑

11. Id. ↑

12. Id. ↑

13. CSR policies in Germany, Federal Ministry of Labour and Social Affairs, https://www.csr-in-deutschland.de/EN/Policies/CSR-national/CSR-Policies-in-Germany/csr-policies-in-germany-article.html (last visited July 10, 2019). ↑

14. Id. ↑

15. Id. ↑

16. Fields of Action, Federal Ministry of Labour and Social Affairs, https://www.csr-in-deutschland.de/DE/Wirtschaft-Menschenrechte/NAP-Originalfassung/4-Handlungsfelder/handlungsfelder.html#ZugangAbhilfe (last visited July 10, 2019). ↑

17. Id. ↑

18. France’s commitment to Corporate Social Responsibility (CSR), France Diplomatie, https://www.diplomatie.gouv.fr/en/french-foreign-policy/economic-diplomacy-foreign-trade/corporate-social-responsibility/ (last visited July 10, 2019). ↑

19. Id. ↑

20. Id. ↑

21. Id. ↑

22. Id. ↑