Corporate Social Responsibility

Corporate Social Responsibility - or CSR - is big business. It is not just another passing trend, but is the direction which all successful 21st century businesses will have to take in order to survive in an age of globalisation. Only five years ago, the words "corporate social responsibility" turned up around 50 company reports on an internet search engine. Today, thousands of companies display their newly developed ethical codes and socially responsible projects at the click of a mouse.

CSR is essentially about companies moving beyond a base of legal compliance to integrating socially responsible behaviour into their core values, recognising the sound business benefits in doing so. Since businesses and the challenges they face differ widely, government interventions need to be carefully considered, well-designed, and targeted to achieve their objective

Businesses have woken up to the fact that if they want to maximise their profits in the medium to long-term, with healthy, well-skilled and well motivated stakeholders in and around their businesses, they need to take a more proactive approach. CSR and sustainable development is not a new name for redistribution of wealth, it is a forward thinking strategy that will ensure that the greatest number of people can benefit from the free-enterprise system.

Indeed, everyone seems to be getting involved in this seemingly new trend. The turn of the millennium marked a significant rise in the profile of CSR at an international level, when United Nations Secretary General, Kofi Anan, appealed to business leaders to "give the market a human face" and launched the UN Global Compact Initiative, which has since gained the support of over 1,000 companies worldwide.

The message remained just as clear at the 2002 Johannesburg Summit, from which emerged a new global sustainable development plan. Beyond the normal agenda items such as health, water, energy and agriculture, the summit focused on the key Millennium Development Goal- poverty alleviation- reinforcing the fact that sustainable development is not a choice between economic development and the environment, but rather the successful co-existence of both factors.

In 2000, the UK Government set a precedent which the global community is now starting to follow, by appointing a Minister to deal with Corporate Social Responsibility. This is of course no surprise. For the Brits the basic concept of CSR is very familiar - it is giving a name to what leading British companies were doing long ago.

Some of Britain’s most successful companies discovered CSR in the 19th century. Robert Owen (1771-1858) bought four textile factories at New Lanark in Scotland. When Owen arrived children as young as five were working for thirteen hours a day in the factories. On 26th April, 1816, Owen appeared before Sir Robert Peel's House of Commons Committee, where he said: “I came to the conclusion that the children were injured by being taken into the mills at this early age, and employed for so many hours; therefore, as soon as I had it in my power, I adopted regulations to put an end to a system which appeared to me to be so injurious.”

Owen proved that having taken over an enterprise staffed largely by under-nourished people living in appalling conditions and by improving the working and living conditions of the workers, he not only acquired a healthy, and more productive workforce but increased the profits of his company.

Other industrialists took a similar view. William Hesketh Lever (1851- 1925) the founder of Unilever, believed that decent housing for workers at reasonable rents was good for his business, and in 1888 he created a new town called Port Sunlight with schools, library, institutes and public buildings.

Lever defined the company’s responsibilities towards customers and suppliers, employees, local communities, the environment, and of course stockholders. Nowadays many businesses cannot afford to neglect CSR, not only for economic reasons but also due to the increasing activities of NGOs and Think Tanks. If companies were to forget about their responsibilities, these organisations are known to have very good relations with the national press and with the political process.

Innovation is the key to CSR. At a dinner the other evening, I had the opportunity to speak with the former chairman of Ford of Britain, who described to me a good example of Corporate Social Responsibility in action. It was the initiative taken by Ford to engage the experience and expertise of its pensioners. Ford has hundreds of retired employees with a wide range of experience in engineering, accountancy, administration, law and many other disciplines, and now with time to put something back into the community. Ford provided them with an office and basic equipment, and the pensioners did the rest - helping the local community in very many ways, and reflecting credit not only upon themselves but on Ford as well.

Microcredit is another way for companies to put CSR into practice, by identifying small forward-looking entrepreneurs in their local communities, and providing them with small-scale finance and some guidance, to help them survive and create employment. In the developing world small-scale entrepreneurs in agriculture, fishing manufacturing or distribution can radically change the community they live in, when provided with a small amount of knowledge and finance from successful businesses. As small-scale lending programmes by the Grameen Bank of Bangladesh have shown, Microcredit not only works, but it is a useful weapon in the fight against poverty.

As a member of the European Parliament I am concerned to ensure that CSR is firmly established on the European agenda, and that so far as possible companies gain no competitive advantage from social irresponsibility. In the year 2000, the EU Heads of State came together at the Lisbon Summit to develop what became the ambitious aim of developing a knowledge-based and highly competitive Europe by 2010. Recognising the need for more European businesses to develop CSR strategies, these politicians made an Appeal on CSR, which has been a catalyst for campaigns right across Europe.

Since Lisbon, European business leaders have mobilised over half a million business people as partners in what has become a phenomenal campaign. Under the banner of the European Business Campaign this group has been encouraging other companies to adopt CSR strategies.

Other bodies, such as the European Multi-Stakeholder Forum and the European Governance Forum, have also raised awareness of best-practice in the EU Member States. As Commissioner Bolkestein recently said, "The more national corporate governance codes converge towards best practice, the easier it will be to restore confidence in capital markets in the wake of the scandals that have shaken trust in some major companies. "

Europe has to be forward-looking. The European Commission has therefore made a proposal to amend the Accounting Directive. This proposal was initially created to modernise EU accounting rules by introducing the “fair value” accounting method, and facilitating the worldwide raising of capital so that European and non-European companies could compete on an equal basis. Now the Commission aims to establish collective responsibility of board members, increase disclosure of certain transactions and off-balance sheet arrangements, and require listed companies to include a "corporate governance statement" in their annual report.

And if all of this leaves you in any doubt of the European Union's commitment to CSR, let me add the following quotation from The Draft for the European Constitution.

Article 3.3 of the Draft states that the Union:

"shall work for a Europe of sustainable development based on balanced economic growth, with a social market economy aiming at full employment and social progress. It shall aim at a high level of protection and improvement of the environment ... combat social exclusion and shall promote social justice"

I may be against the Constitution in principle, but I am very much in favour of CSR!

This is an agenda in which there is an inescapable role for business, not only as the engine for economic growth, but as a key contributor to social and environmental well-being in the EU and in other regions where they operate.

As I am co-ordinator for the most powerful political Group on the European Parliament's Development Committee, I have a particular interest in the role of CSR in developing countries. In the year 2000, the 191 United Nations Member states pledged themselves to the achievement of eight goals, which, if realised will drastically improve the lives of millions of people living in developing countries. The “Millennium Development Goals” focus on topics such as the eradication of poverty, on the availability and improvement of education and the fight against HIV/AIDS. Big businesses and companies have an essential role to play in meeting these goals. Not only will their accomplishment have inescapable consequences for the business community, but the private sector has much to gain from involvement with those aiming to raise the living standards of the world's poorest people. Indeed, as we will see, many businesses have already adopted a role that is benefiting both them and the societies they serve.

During my travels around the world I have been shown many splendid business initiatives that serve the needs of the free-market which inspired them, and which also promote the human rights and labour standards that we in the developed world take for granted.

As a company director and businessman I understand the importance of higher and yet higher productivity levels. I am convinced that in the medium to long term CSR can yield greater productivity and thus higher profits. Indeed, simple logic dictates that workforces perform better if they are healthy and well educated.

Nearly 40% of the world's population is below the age of 20, and these young people are the next generation of consumers and employees. If economic conditions are good, then greater numbers can afford to buy the products that will have been made by skilled, competent workers.

Invest in children through helping to ensure that they get a good education, and the benefits will be tenfold. Education breeds knowledgeable motivated and business-orientated people. It is through the aspirations of educated people that the free market and competitiveness thrive. In short, education makes economic sense.

The very antithesis of this ideal is Child Labour, which is still to be found in far too many countries, and which deprives young people and their communities of the benefits which education brings. We have all seen pictures of children forced to work in sweatshops or sold into bondage to clear the debts of their parents or 'guardians'. I am well aware of the difficulties in countries with little or no social security, and I know that there is no "quick-fix" solution, but many companies have already started encouraging, and investing in, organisations that are dedicated to eliminating child labour and returning children to education.

The Brazilian Toy Manufacturers Association has done just that. Together its members set up a non-profit organisation called the Abrinq Foundation for Children's Rights. This charity works with government, NGOs and local businesses to promote children's rights. Companies which do not exploit children are certified as 'Child Friendly.

Not only should a socially responsible company have no involvement with child-labour itself, but it should refuse to source goods or services from any company which does.

Computer literacy is at the heart of modern business and it is necessary to have people with at least a basic level of expertise. Supporting information technology and communication skills in schools is another way businesses can help ensure there will be a skilled workforce ready to meet the challenges of this age of technological advancement. We can see the ease with which companies bridge the digital divide by looking at the work of two companies that are well known. Hewlett Packard have developed an initiative called E-Inclusion which provides commercially viable ways for the poorest people to access technology while Vodacom have created community centres in southern Africa where people can learn to use the internet.

Opportunities for companies to support increased access to education are emerging across the globe. Those companies that have the patience and foresight to recognise the long term benefits of CSR will be the companies that gain financial and social standing.

Another of the UN's Millennium Goals is to combat HIV/AIDS and other major diseases. If vast numbers of people continue to be infected and die, then companies will lose their future workforce and consumers. With an increased number of people absent from work, a higher staff turnover and low staff morale, productivity levels will fall. Recruiting and training a constant flow of new people will cost money and cause inefficiency.

The European Parliament has played a pivotal role in encouraging pharmaceutical companies to get more involved in CSR. It passed ground-breaking legislation that forbade the re-importation of drugs sold in developing countries. This has given many pharmaceutical countries the confidence to sell their drugs to those in developing countries who are most at need, and has meant that countries like Botswana can afford to offer antiretroviral drugs through their national health system. Previously, there were NO developing countries offering HIV/AIDS drugs free of charge to their people.

Pharmaceutical companies have realised the advantage that a social conscience can bring to both their businesses and the world as a whole. For example, the Abbott Laboratories Fund set up an initiative called "Step Forward." This is a long term international programme assisting orphaned children, families and communities by, for example, improving local health care services and providing HIV counselling and testing. Other companies, who perhaps do not have the resources to set up such a charity, have been making donations to the Global Fund to Fight AIDS.

In conclusion, Mr. Chairman, I am going to quote the highly successful businessman Peter Sutherland (Chairman of BP and Goldman Sachs, and a former member of the European Commission). Peter recognises an age-old truth when he says that 'business thrives where society thrives'.

I put it to you today that Corporate Social Responsibility is the path to follow if you wish your business, your community, and your country to thrive.