Opening Speech of Richard Howitt MEP at the European Commission Multi-Stakeholder Forum on Corporate Social Responsibility (CSR), Brussels, 3 February 2015.
Today, (Tuesday 3 February) more than 400 businesses, trade unions, government representatatives and NGOs begin a two-day meeting in Brussels of the «European Multi-Stakeholder Forum on Corporate Social Responsibility (CSR)», which represents the last stage in a European Commission consultation leading to a CSR Communication and new strategy 2015-20, due to be published later this year. The Forum is the brainchild of Richard Howitt MEP, who has served in three successive European parliamentary terms as Rapporteur on CSR and who also played a leading role linking it to European implementation of the UN Guiding Principles on Business and Human Rights. Here is Richard Howitt MEP’s keynote speech to the forum, outlining the action he expects Europe to take in the next five years:
I’ve been honoured to serve as Rapporteur on Corporate Social Responsibility in three successive terms of the European Parliament. I am honoured today to be opening this event which is the culmination of the consultation on the European Commission’s CSR Strategy, and which will allow business and all of the stakeholders present to take part together at the deciding moment in preparation for the next Communication on CSR, which will itself lay out the next phase of the European Commission’s CSR Strategy, 2015-20.
Together we’ve achieved a lot over the last decade and more.
Responsible business has always been an issue for companies, but we’ve established it as a European issue too, with concrete European action to promote and to support it.
We’ve stayed true to a multi-stakeholder approach, recognising the multiple stakeholders who have a legitimate interest in the company. And as we promote dialogue and partnership between companies and their stakeholders, this very Forum has led by example by ensuring European actions are shaped through the very same approach.
We’ve ended a destructive argument about definition and about the old false dichotomy between voluntary or mandatory approaches. Instead we’ve built a consensus that a ‘smart mix’ between the two provides the only constructive basis for action. We’ve chosen to promote CSR through incentives rather than sanctions.
We’ve engaged during what has been a crucial period of standard-setting at the global level on issues of corporate responsibility; in the United Nations, in the OECD, in the ILO. And we’ve been insistent that European companies are global companies too, and that European action should shape and then implement global initiatives, not seek to duplicate or replace them.
I pay particular tribute to the Commission’s DG GROW, formerly Enterprise, now working under Commissioner Bieńkowska, who play the leading role in organising this Forum and – with DG Employment – in coordinating the Commission’s CSR Strategy. But there are seven DGs present today and what we have also achieved is an understanding that CSR is a cross-cutting issue across policy areas, and that companies themselves want a combined not a separate approach on labour and social standards, on environmental sustainability, and on respect for human rights.
And that work on CSR doesn’t just span different DGs but overlaps too with and contributes to related EU policy discussions, including the agreement for country-by-country reporting by extractive and logging industries, and the current discussions in relation to conflict minerals and to shareholder rights.
Above all over this last decade, all this activity has helped to ensure that many more companies are now asking themselves, and are being asked, about the responsibility of their conduct? And that major societal challenges from the inequality, inequity, injustices within our continent, to the global challenges of conflict, poverty and climate change – that business is absolutely needed to itself be a stakeholder, if Europe and the world is to have any hope that each of these challenges can be addressed.
Now over four hundred representatives are due to be present here at the Multi-Stakeholder Forum. Thank-you for being here. And over five hundred responses were received in the public consultation on CSR that took place last year.
And it is important to remind ourselves what that consultation found.
Four-in-five want the European Commission to engage in CSR.
That there is consensus amongst different stakeholders in favour of European action on CSR, and that European action doesn’t simply raise awareness of CSR but helps affirm or legitimise it in the eyes of companies. You have told us CSR is crucial both for competitiveness and for sustainability. You told us that the new Non-Financial Reporting Directive is actually (I quote) «the most successful initiative» arising from the strategy.
The specific action areas in the Commission’s past CSR Strategy had an approval rating between 71 per cent at minimum, 86 per cent at maximum.
This is indeed a very strong platform for future action.
And, in terms of the next strategy, 2015-20, respondents to the consultation emphasized some of the areas this Forum has itself highlighted.
Better alignment of European with global approaches, including a specific emphasis on implementation of the UN Guiding Principles.
More emphasis on the global supply chain.
More focus on SMEs.
And if you look at the agenda for the next two days, these are amongst the issues we will be discussing in detail.
What is my own message to some of the panels?
To the panel on International Market Access, given the very hot debates around TTIP at the moment, let us understand that a commitment to high labour and environmental standards is a necessary part of maintaining public support for an open trading agenda for Europe. I acknowledge the important role to be played by Commissioner Malmström and welcome the fact that CSR and specifically the OECD Guidelines on Multinational Enterprises have begun to be included in Europe’s Trade and Investment Agreements. I would like that to become standard and to ensure a follow-up mechanism in each and every case. The joint work between Europe and Latin America in the run-up to this June’s EU-CELAC Summit is an excellent example in this respect. I would also like to see all the EU’s external relations functions play an active role in encouraging and assisting third countries to sign up to and implement both the OECD Guidelines and the UN Guiding Principles. Let us call this: CSR diplomacy.
To the panel on Education, let us recognise the traumatic impact youth unemployment is inflicting on our societies, and the enormous social consequences if we preside over an era which produces a ‘lost generation’, alienated and disenfranchised from the values we like to call common European values. Commissioner Thyssen, who I will be meeting later this week to discuss the results of this Forum, has committed herself to supporting those companies, trade unions and others who have already signed up to the European Charter on Apprenticeships. I believe the ‘youth jobs guarantee’ shouldn’t just be the title of an EU policy, but can be part of the CSR challenge for every major company in Europe.
I know Commissioner Dombrovskis will want to consult social partners on new framework agreements related to CSR, as part of his future agenda too.
To the panel on Development Co-operation, let us show leadership in the world by taking what Europe has agreed on Non-Financial Reporting, and ask Commissioner Mimica to make this a core part of Europe’s negotiating mandate on the new UN Sustainable Development Goals or SDGs. In his synthesis report last December, Ban Ki Moon proposed a draft SDG saying (I quote) «All countries should consider… requiring companies to undertake mandatory economic, environmental, social and governance reporting, accompanied with regulatory changes that ensure that investor incentives are aligned with the sustainable development goals.» Europe has a key role to play, working in New York to defend and maintain this text. Forgive me if I say as a football fan, this is an «Open Goal,» and one in which we mustn’t fail to score.
To the panels on Business and Human Rights and on National Strategies, we should celebrate the fact the idea of ‘National Action Plans’ for implementing the Guiding Principles is actually a method invented by us in the European Union; and one in which the commitment to adopt one by President Obama is a very significant mark both to Europe’s approach and to the importance of implementing the Guiding Principles themselves. In the next period we should ensure all EU Member States complete their action plans; I suggest asking Member States to conduct a peer review exercise on their plans similar to the very successful one they did on CSR action plans; after two years the European Parliament has also proposed that the Commission report on progress – to ensure the EU itself is upholding «the state duty to protect» on the Guiding Principles.
Implementation of the Guiding Principles should be a key part of the EU’s own new Action Plan on Human Rights. And acknowledging the presence of Caroline Rees at this Forum who is working on this, I hope we can give explicit support to the new global Human Rights Reporting and Assurance Framework, RAFI, and support those many European companies who I know later this month will be announced as signing up to it. I am very pleased that the EU Human Rights Special Representative Stavros Lambrinidis has been asked to make the closing speech to this Forum, and I think that sends a very appropriate signal about future priorities for European CSR action in itself.
To the separate panel on «Access to Remedy» for victims, I remind this Forum that this constituted pillar three of the Guiding Principles; that an outstanding commitment to address the sensitive area of extraterritorial litigation was made under the Swedish EU Presidency in 2008 – in direct response to a proposal to the EU from former UN Special Representative Ruggie. But that this commitment was never enacted despite a proposal from the European Commission to do so. This is not just about Rana Plaza a year ago, but about Bhopal thirty years ago. This is a sensitive area. However, how long is too long?
Here again events in the UN may help us. An initiative for a new binding instrument on business and human rights has been lodged in Geneva, with a number of Member States and Professor Ruggie himself today saying that this is best responded to by developing mechanisms to ensure only the most egregious violations of human rights involving companies are brought to court. I guess a number of the company representatives present may also prefer that approach, even if others take a different view. But the debate means we can’t and mustn’t avoid the question. I acknowledge the presence here of Lene Wendland who is leading the work on this from the Office of the UN High Commissioner on Human Rights, as well as of the services working under Commissioner Jourová in DG JUST who will have responsibility in taking this forward and who have drafted a new Staff Working Paper addressing the whole subject of access to justice in this area.
They are also working on the important trade-offs companies as well as governments are battling with in this new digital age: to protect privacy and freedom of expression on the one hand, but to avoid complicity in abuses connected to online child sex abuse, terrorism and conflict on the other. There are no easy answers, which surely means this also must be an enhanced priority for future action and where respect for human rights must remain a benchmark.
To the panel on Public Procurement, I think we should acknowledge that we continue to have made much more progress on green procurement than social procurement. Given the fact that the Guide on Social Procurement was written before the upgrade of the procurement directives was voted last year, I hope this will be the prompt for the European Commission to update and strengthen its guidelines.
To the panel on Investment, you provide us with the opportunity for this forum to enter in to the key global debate about short-term versus long-termism, about the need for long-term investment, which is a big priority for the new Juncker Commission itself.
And the evident truth is that today too much of the whole system continues to reward short-termism. This is not just about the incentives that can be created by public funding, but about shaping remuneration across markets to incorporate social and environmental goals. Otherwise we will be making the very same mistake those American banks did – pursuing short-term gain and believing we can pass over long-term risk to someone else, at no cost to ourselves. And look what happened next?
And in that panel and throughout the Forum, we must challenge the false assumption that companies want to do this, but it’s all the fault of investors that they can’t. Just as we encourage other stakeholders to work together to achieve common goals, our EU policy should assist companies and investors to do so too. Look at the exponential growth of the UN Principles on Responsible Investment. Look at all major stock exchanges having signed up to the Sustainable Stock Exchanges Initiative, under the aegis of UNCTAD. Look at the remarkable «Sustainable Capital Markets Union Manifesto» written by Aviva Global Investors, and I acknowledge the presence of their representative Abigail Herron here. Their paper quotes the International Energy Agency estimate that incremental investment in the energy sector alone will need to reach around US $1 trillion a year from 2012-2050 in order to keep global warming below two degrees Celsius. They identify what they call ‘the investment supply chain’ and how each element needs to change to generate the massive funds required. I have already discussed this with Commissioner Hill, and know he is very interested in addressing this set of proposals. The key watchword for all of us is «stewardship.»
And I do mean all of us. This is not just about trillions managed by big investment companies or sovereign wealth funds. It is at the same time about advancing socially responsible investment and recognising that all of us who save for our pensions should be able to know and to make choices to be responsible investors too.
These arguments apply similarly to the separate panel on Banking and Finance. Looking back on it, it is incredible that proposals for financial services were completely missing from the last CSR Communication.
But my worry with the raft of financial services regulation we have seen since, is that the attempt to learn the lessons about the economic crisis put such great emphasis on financial transparency and accountability, that ten years of work on social and environmental transparency and accountability get forgotten. If you forgive me quoting from my own last report: there will be no sustainable economic recovery if businesses themselves aren’t sustainable.
In the proper emphasis put on jobs and growth by the new Juncker Commission, the CSR element must ensure that the language of «value» for companies used by the Commission is one of «long-term value creation» and that of «shared value» for companies and their other stakeholders too.
On Non-Financial Reporting which touches on this and several of the panels, we should welcome the transposition workshops planned in a number of countries by the European Commission, DG MARKT. Clearly the Commission already also intends to prepare proposals for country-by-country reporting on taxation paid by companies, and as an elected representative I have to say that «tax justice» represents a touchstone issue in European public opinion.
On Non-Financial Reporting more generally, as well as the proposal for an SDG, the Commission could take a close interest in the Corporate Reporting Dialogue, which has been established at the world level between financial accounting codes, standard-setters and regulators and those involved in codes and standard-setting for corporate sustainability. The EU CSR Strategy could foster similar levels of closer alignment between these actors within Europe.
As reporting increases, there must also be a role in establishing expert, objective, non-judgmental technical analysis of the reports produced, to enable wider lessons to be learnt. I never like proposing new institutions or agencies but – in these times of virtual working – I wonder whether some sort of new EU ‘observatory’ might be considered in this respect? In a similar vein, in the five years of the next strategy, perhaps it will be timely to begin to consider to what extent and in which ways we can best achieve «assurance» of the new reporting? And as I have argued before on the benefit of EU Research in this field, I would like to see new emphasis in the future on evaluating not just individual companies’ CSR strategies and reports, but on the cumulative impact of CSR in meeting societal goals and in measuring how much more needs to be done by business as a whole?
On transparency, the Commission must honour its promise to support the concept of ‘integrated reporting’ as it develops worldwide, made in the wake of the Non-Financial Reporting Directive. We have to ensure this promise is itself ‘integrated’ in the CSR Strategy. The World Bank, UNDP, the National Health Service from the UK, together with companies like BNP Paribas, Microsoft, PepsiCo and Unilever have all joined a public sector pioneer network for integrated reporting – why doesn’t the Commission or one of its DGs do the same? Once again I acknowledge the presence here of Philippe Peuch-Lestrade from the International Integrated Reporting Council and Teresa Fogelberg from the Global Reporting Initiative, both taking part in this Forum, with whom I am pleased to work and who contribute to my own thinking on these points.
To the panel on Responsible Supply Chain Management, your job is to make sure it doesn’t all end in tiers. The OECD Guidance shows it is possible to have ‘due diligence’ in the extractive industries. Perhaps there are other sectors where we could support guidance – the OECD is thinking about doing so in agriculture and in textiles too. I very much welcome the flagship initiative on clothing announced by Commission DG DEVCO which could better apply this with European companies specifically. My own country, the United Kingdom, is passing ground-breaking legislation on companies combating modern slavery in their supply chains, and I hope this may be taken up at the EU level too. Looking ahead, perhaps the next CSR Strategy could look at a Recommendation or a Directive on what actually constitutes ‘Due Diligence’ for all companies from a European perspective? It could be an interesting avenue for future action.
Finally, I have increasingly felt that a vital component of the success of CSR is vision, inspiration, creativity. Some of the work that has most challenged and inspired me over the past year has been a European project on «The Purpose of the Corporation.» It has taught me that sometimes misleading assumptions about company law have provided an unnecessary barrier to promoting CSR. In particular that the whole concept of «fiduciary duty» is a norm rather than a legal requirement. And that there is a case in European corporate governance rules to redefine fiduciary duty to shift from an overly shareholder-centric to a more stakeholder approach. I encourage a debate about this, both in the forum and in the new Communication.
After all, although I didn’t have a classical education, I am told that «fidus» in Latin simply means «trust.»
And I do know a bit about CSR and know that «trust» is the currency of CSR.
Trust in the company. Trust in business. Trust in ourselves.
So let’s trust ourselves and others over these next two days not to simply repeat pre-determined positions, but to genuinely engage in dialogue, be open to new ideas, forge new common understandings.
I’m afraid it was me who was personally responsible for proposing the setting up of this Multi-stakeholder Forum, and it really was the spirit I intended to foster between stakeholders in doing so.
I hope these ideas I’ve shared with you will inform your discussions. But together with many of the Commission colleagues, I will be present for as much as possible of the two days – in exactly the same spirit – wanting to listen to and learn from all your ideas.
We want companies to be responsible.
All of us.
So let’s now have the debate. And take responsibility ourselves for its outcome.