This article is written by Inés Rodriguez Nello.
“Corporate social responsibility is not just about managing, reducing and avoiding risk, it is about creating opportunities, generating improved performance, making money and leaving the risks far behind. »
-Sunil Misser, Head of Global Sustainability Practice at PwC
But, the question is what is Corporate Social Responsibility?
In general, Corporate Social Responsibility (CSR) refers to “a continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”.
However, there is no specific definition, and the concept remains broad. Essentially, corporate social responsibility aims to create a new social conscience in the business world compatible with the profit maximization strategies. Private companies increasingly regulate their activities by taking into account factors than the traditional ones, most notably the continual increase of profits.
Professor Archie B. Carroll, a business expert at the University of Georgia in the United States who has researched and written about CSR, has created a four-level pyramid to visualise the responsibilities of private companies. From the bottom to the top, the pyramid consists of economic responsibility, legal responsibility, ethical responsibility and philanthropic responsibility. According to Professor Carroll, economic and ethical concepts are key considerations of corporate social responsibility in private companies’ activities.
Today, due largely to the influence of CSR principles, companies are increasingly likely to act in favor of objectives like gender equality and environmental integrity, channeling their resources into supporting positive change.
What is Environmental Social Responsibility
The notion of Environmental Corporate Social Responsibility has emerged because of the progressive increase of environmental concerns at international, european and national levels such as the challenge of climate change. Green initiatives are not seen as a “cost”, but as a new opportunity to make more profits and transform a polluting activity into a greener one.
The European Commission has included the environment in its definition of corporate social responsibility, stating that CSR means “actions by companies over and above their legal obligations towards society and the environment”.
Now, private companies are compelled to act more responsibly and Environmental CSR creates an “environmental responsibility” for private companies to be more environmental friendly.
How is Environmental CSR enforced today?
At an international level, the International Chamber of Commerce has enacted a Business Charter for Sustainable Development which is composed of principles that should be enforced by private companies in order to achieve sustainable development.
Private companies are considered to have a new duty to progress in their environmental performance by respecting and enforcing sixteen principles mostly for environmental protection.
For instance, the “compliance and reporting” principle urges private companies to provide information on their environmental impact while improving their environmental performance. In practice, all information related to environmental initiatives must be given annually to the board of directors, shareholders, employees, authorities and the public. Furthermore, employees are encouraged to adopt environmentally-friendly behavior and promote products and services with less environmental impact.
The principles accord with the necessity of businesses to integrate environmental protection into their business strategy and in their daily activities.
In addition, the OECD has developed a similar set of guiding principles regarding multinational companies (“Multinational Enterprises”) on the relationship between the environment and the private companies. Basically, private companies are required to protect the environment because it contributes to safety and the protection of health. In effect, “Environmental Management” is the first principle requiring direct and accurate information on health, safety and environmental impacts by agreeing to achievable targets improving environmental performance. Private companies should respect the notion of “business confidentiality” and “Intellectual Property rights” by informing the public and the workers on their environmental impact and the newest improvements and goals.
Finally, they should prepare an “environmental impact assessment” and constantly improve the environmental impact of their different activities by improving their products, reducing GHG emissions, and informing consumers. Consequently, private companies must inform on their environmental impacts as stated by the Rio Declaration on Environment and Development. Environmental management should be enhanced by every private company concerned because it is considered as both an opportunity and a responsibility for their main activity. Meanwhile, private companies would reduce their costs by paying less insurance, conserve energy and reduce their potential exposure in liability cases. And finally, consumers would look more satisfied and it could steadily improve the private companies’ reputation.
At the European level, the EU promotes and frames a set of actions that private companies can adopt and implement internally benefiting the society as a whole. It can only become reality thanks to a strong sustainable development implemented by each private company participating in the European market. The financial crisis of 2008 incentivized companies to participate in the creation of the society’s welfare because European countries have reduced their current welfare system. In order to fill the gap, companies had the duty to participate in creating the society’s welfare by participating in the mitigation of climate change.
In practice, private companies are only voluntarily ordered to include environmental concerns in their activities and business strategies thanks to “innovative products, services and business models that contribute to societal wellbeing and lead to higher quality and more productive jobs”. The European Commission has chosen to promote only voluntary actions instead of compelling companies to apply mandatory regulations. It is seen as something that “goes beyond the law” and the European Commission is willing to raise awareness between stakeholders and the public. The new strategy for 2011 to 2014 has been clearly followed by voluntary national initiatives.
Although the European approach seems voluntary, it is considered as partially mandatory. For instance, the new strategy requires that Governments promote more transparency, act with responsible conduct and enhance companies’ accountability. Furthermore, CSR is complex to implement for different countries because they have different perceptions of the concept due to disparate economic and social backgrounds. This is why CSR is not only voluntary but it is also integrated into a legal framework depending on the Member States. Nowadays, the main observation is that over the years, multinational companies are not controlled by national governments because they have a wide scope and more influence than the latter. This is one of the reasons why CSR is initiated by the Government but still experiences limits as CSR goes beyond the legal framework and gives liberty to companies.
Then, the European Commission developed different measures which regulates CSR.
The first measure concerns non-financial reporting by large companies and multinational groups originating from the necessity to enhance companies’ transparency on environmental information without distinction on the sector of activity. It is considered as a complement to the financial reporting for certain types of companies such as banks, financial institutions and insurance undertakings. It would increase the trust that consumers put on the economic sector while companies would be encouraged to act in the long-term thanks to environmental protection. For instance, regarding environmental matters, the private company should disclose health, safety impacts, the development of alternative energies, GHG emissions, and other polluting elements.
Then, the non-financial reporting is combined with the EU’s Eco-Management and Audit Scheme (EMAS) aiming at improving environmental performances of private companies at national level in all the economic sectors. EMAS is useful for a better environmental performance, risk management, and increases transparency and reputation of private companies. It includes climate change mitigation by reducing CO2 emissions and it has been the case for registered companies.
Indeed, private companies accepting to be a part of EMAS are registered publicly after rendering their Environmental Review, Environmental Programme, and finally a Report. It will be verified and validated by EMAS Environmental Verifiers that would lead to its registration by National Competent Bodies. However, this mechanism seems limited because it only assesses the environmental performance for companies willing to participate to this mechanism. According to Eurostat, only 48 companies in the UK have joined the EU EMAS whereas Spain leads the way with 1 261 Spanish companies’ members in 2012. Furthermore, a registration is a cost as the competent authority should receive registration fee from each member. Consequently, this costly element is not encouraging private companies to participate in this voluntary mechanism.
After studying all the measures, Environmental CSR is not as efficient as it could be because the voluntary measures are more present than the mandatory ones. Private companies are not really incentivized to prioritize strong environmental protection and prefer to create more profit which is exacerbating climate change.
About the author: Inés Rodriguez Nello is a French Law Student who studied European Business Law in University Paris-Saclay, Paris-Descartes and Trinity College Dublin. She is particularly interested climate and environmental law. She works with CliMates and is currently pursuing job opportunities in the legal field.