Dr Bla Galgoczi: European Trade Union Institute, Brussels

1
Dr Béla GalgocziEuropean Trade Union Institute,
Brussels

• Changing patterns of corporate social
  responsibility in Europe
•  
• EU Japan workshop on Corporate Social
  Responsibility
•  
• Hitotsubashi University, Tokyo, Japan
•   
• 26-27 November 2004, Tokyo

2
Brief overview of the different corporate
governance models, in Europe

• Liberal market economy vs. Co-ordinated market
  economy /with alternatives, as social-democratic,
  Rhineland model or etatistic/.
• The basic differences of the two major models
• -   financing /dominantly/ through capital
  markets or bank credits
• -  corporate governance /CEO, dual board,
  patron/
• - innovation /market, venture capital,
  incrementalistic/
• -  participation, employee representation
  /conflictual, co-operative, participatory/
• -   qualification, training and human resource
  policies.
•  

3
Universal problems with corporate governance

• Raising uncertainties and complexity regarding
  the social dimension of company behaviour
  /co-operation vs. Conflictual relations short
  term vs. Long-term perspective/
• Dealing with people in a global economy
• Need for stability externalisation of social
  and environmental aspects is not sustainable in
  long-term perspective
• Declining influence of nations vs. Social
  partners rooted nationally

4
The emergence of the CSR concept

• One of the most important drivers of CSR is the
  idea that there is a business case for
  responsibility.
• not only the financial performance of a company
  can be objectively measured,
• but the non-financial performance can also be
  analysed, reported
• auditing and certifying methods to be developed
• the term triple bottom line - which links
  financial, environmental and social performance
  of companies.

5
Definitions of CSR

• Corporate social responsibility is a commitment
  by a company to manage its role in society as
  producer, employer, market player, customer and
  citizen in a responsible and sustainable
  manner.
• including a set of voluntary principles over
  and above legal requirements that seek a
  positive impact on societies
• CSR is good corporate governance doing good
  /not being seen as doing good/ by recognising the
  companys responsibility to all its stakeholder
  groups.
• CSR is a concept, whereby companies integrate
  social and environmental concerns in their
  business operations and in their interaction with
  their stakeholders on voluntary basis.

6
Promoting democracy on company level

• Workers involvement is a social and economic
  advantage it is a need in civil society
• European framework and support must help to
  improve traditional practices in national/local
  working cultures inshaping challenges from
  globalization
• Workers involvement will become a new importance
  in thinking on a new social role of
  multinational companies after the decade of a
  pure shareholder value approach
• Workers involvement is more than strong legal
  framework f.e. HRM, CSR, financial participation

7
Structure of European level governance

• Legally binding
•  
• Regulation ? European law ? legislative act
• Directive ? European framework law ? legislative
  act
• ? European regulation ? non-legislative
• Decision ? European decision ? non-legislative
•  
• Not legally binding
•  
• Recommendation ? Recommendation
• Opinion ? Opinion
•  

8
Workers Involvement Pieces of a Puzzle
9
Workers Involvement as legislative elements of
the European Framework
Information Consultation
European Works Councils
SE-Directive
10
The European framework of WP

• Information and consultation and participation
  of employees belongs to the core elements of the
  European Social Model. n      
• From the end of the 1980s workers participation
  has received particular attention and has been
  embedded in several EU Directives.
• This went parallel with the rediscovery of the
  importance of human resources and trust-based
  employee relations in company success

11
Renewing the European governance system

• Less top-down approach
• Complementing policy tools by non-legislative
  elements
•  Appropriate use can be made of alternatives to
  legislation without undermining the provisions
  of the Treaty
• -  co-regulation
• -  self-regulation
• -  voluntary sectoral agreements
• -  open method of co-ordination (encouraging
  co-operation, exchange of best practice, agree
  common targets and guidelines for member states)
  
•   Legislation as part of a broader solution
  combining formal rules with other non-binding
  tools.

12
Place of CSR, as soft law element in Eur
governance

•         Soft law ? independence with respect to
  state law as adaptation to globalisation
•  
•         Privatisation of labour standards ?
  deregulation
• Defined as a (additional and) different form of
  regulation ? self regulation or auto-regulation
  of undertakings
•  
•         Advantage social control over
  transnational production activities
•         Dangers lack of social compensation for
  economic inequality, selection of issues ?
  weakening of workers rights, substitute to state
  law and negotiated norms
•         Remedies Involvement of social partners
  (sectoral level, European Works Councils), to
  adapt legislation (procedures, social labeling).

13
Accountability vs responsibility

• The term corporate accountability is being used
  to refer to the obligations on corporations
  imposed by governments and to the corporate
  governance framework established to hold
  management accountable. On the other hand,
  corporate social responsibility stands for
  voluntary activities without being accountable.
  It is widely accepted that that regulatory and
  corporate governance frameworks can shape
  corporate behaviour more than CSR principles or
  initiatives. There is a growing recognition
  especially among trade unionists that these
  regulatory frameworks are inadequate.

14
Challenges of CSR for trade unions

• Most trade unionists see CSR as a desirable goal,
  although some see it more as a dangerous attempt
  to create a substitute for the traditional roles
  of both governments and trade unions. In this
  regard unionists often see CSR as a mere public
  relation exercise by companies
• The most controversial issue in the concept of
  CSR for trade unions is its voluntary character,
  being above and beyond legal requirements.
• Some see CSR as an alternative to regulation and
  as an alternative to interest representation of
  employees by trade unions.

15
Challenges of CSR for trade unions

• Private standard-setting
• Trade unions face a series of challenges with
  respect to standards. Business is using codes of
  conducts and other forms of private standard
  setting in the social area to redefine or
  reinterpret standards so as to make their
  responsibility seem less, than it really is.
• Reporting and verification
• Agreeing on what to report to the public about
  the social impacts is a crucial form of
  standard-setting. Unlike financial and
  environmental reporting, the social dimension has
  a high level of intangibles.
• Socially responsible investment (SRI)
• Influencing investment funds that claim to
  invest in companies that are socially
  responsible. Works, where workers institutions
  with an interest in CSR have influence on
  investment decisions (e.g. Pension Funds)

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Challenges of CSR for trade unions

• Social rating, social labels and awards
• The CSR phenomenon features positive incentives,
  such as awards, labels, best practices. These
  concern labour issues ranging from human resource
  practice awards to labels related to supply chain
  codes. Trade unions are often bypassed and
  experts engaged to judge the reports may not be
  familiar with industrial relations. Such labels
  and awards have serious credibility problems, as
  the basic motivation is to gain commercial
  benefits..
• The CSR concept can thus appear in contradictory
  forms. It stresses the importance of engaging
  stakeholders but at the same time, stresses
  unilateral management action. The danger is that
  CSR is more about management systems and
  checklists than genuine dialogue. The management
  prefers to choose its stakeholders for
  dialogue. Too often, companies engage NGO-s over
  workplace issues and avoid trade unions.

17
The major concerns of ETUC regarding CSR

• The basic message of the ETUC resolution is that
  CSR should complement, but in no way replace,
  legislation on social and environmental rights or
  standards set by collective bargaining.
• The most important unfounded illusions towards
  CSR, as the ETUC sees
• The illusion that CSR would sweep away the
  balance of power, as the employers
  responsibilities are diluted
• The illusion that all stakeholders are on equal
  footing in this policy
• The illusion that the voluntary method of other
  best practices would be enough to assert CSR.

18
The major concerns of ETUC regarding CSR

• The Executive Committee of the ETUC stressed
  that, rather than being regarded as an added
  extra, CSR must permeate the very being of the
  company and its governance, covering its entire
  operation and taking on board social and
  environmental issues in its day-to-day
  management.
• The prerequisite for CSR is respect for
  collective bargaining and laws, which means
  companies must act to
• promote collective bargaining where there it
  is insufficient or even nonexistent
• enhance the involvement of trade unions,
  workers and their representatives as well as the
  respect for and defence of their rights.

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Opportunities for trade unions through CSR

• Even if the acceptance of CSR principles in
  European trade union circles are rather mixed, it
  is vital to address these questions by trade
  unions in order to be able to shape them. Trade
  unions could use the instruments of CSR as a
  springboard for reaching employees, having been
  out of their scope sofar.
• It could be a proper strategy for trade unions
  to oppose the unilateral, voluntary approach of
  companies and opt for a framing of corporate
  social responsibility either by laws or by
  contractual agreements with the trade unions and
  other stakeholders.

20
Possible priority topics for trade unions

• Activities in alliance with NGO-s and other
  stakeholders, as
• Meetings and debates to formulate trade union and
  NGO approaches to CSR
• Educational activities in using intl
  standard-setting systems
• Joint campaigns for identifying major TU
  principles on CSR
• Work on the establishment of countervailing
  powers in the field of consumption and
  sustainable development.
• Setting a target for the following major goals
• Within a foreseeable time, all international
  companies to sign contractual agreements with the
  workers reps in all their daughter and branch
  companies in order to implement at least the
  eight ILO Conventions to be registered at the
  ILO.
• Work for extending the ILOs standard-setting
  system.
• On European level, trade unions should contribute
  to developing the European governance in its
  tools in tackling CSR.

21
The option of using the EWC-s in shaping company
policies in line with CSR

• As EWC-s operate on corporate basis, on European
  or even worldwide level, they can deal with many
  of the issues, taken up in CSR
•    Internal issues
• - Human resources management training, equal
  opportunities
• - Health and safety issues
• - Adaptations to change restructuring
• - Management of environmental impacts
•        External issues
• - Local communities
• - Business partners, consumers, suppliers
• - Human rights, trade union recognition
• - Global environmental concerns.

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Concluding remarks

• CSR is neither an objective nor an option, it is
  a context offering challenges and opportunities
  that can also be shaped.
• These opportunities all mean that trade unions
  would have lots of options in shaping CSR
  practices and make sure, that the CSR initiative
  is not weakening their basis and influence, but
  contributes to their strengthening. It needs
  however a nuanced approach and not a defensive
  stance.