Employment and Corporate Social Responsibility Inquiry
Good afternoon, colleagues. I welcome members to the third meeting of the European Committee in 2003. I would welcome members of the public, but I do not think that we have any this afternoon.
The first item on the agenda is an evidence-taking session on Europe's employment strategy and corporate social responsibility. Before we continue, I should note that we have received apologies from Nora Radcliffe, who is attending a meeting of the Rural Development Committee. Furthermore, John Home Robertson has to give evidence to the Finance Committee this afternoon, which means that he has to leave a little bit early.
I am pleased that our witnesses from the European Commission have been able to travel to give evidence to us and I welcome them to the meeting. First, I introduce Antonis Kastrissianakis—I think that I pronounced that better last time—and Jim Allen, from the employment strategy unit of the EC's employment and social affairs directorate-general. We would be happy for you to take a few minutes to make some introductory comments, after which we will ask you some questions.
Antonis Kastrissianakis (European Commission):
Thank you. This is an appropriate time for such a discussion and for the committee to be holding such an inquiry, as we are in the process of reviewing and refocusing the European employment strategy in order to meet the employment challenges that face Europe. In January, the EC published its initial views on revising the strategy, which will be hotly debated among member states and lead to new guidelines that should be adopted in June or July.
I want to cover three issues by way of introduction. First, I will give the committee a brief historical outline to show how far we have come. Within that, I will highlight the aims, objectives and operation of the employment strategy and the open method of co-ordination. Secondly, I will highlight the reasons why we need change and outline the EC's proposals for the new European employment strategy up to 2010, with a particular focus on governance and how relevant actors can be better involved in the process. Finally, I will say a few words from a Commission perspective on the perceived involvement of Scotland in the European employment strategy.
The employment strategy is a relatively new and pathbreaking method of European Union policy making that has pioneered the open method of co-ordination. The process began as a result of the Luxembourg jobs summit in 1997, and its initial aim was to strengthen policy co-ordination among member states in the fight against unemployment. The European employment strategy was later embedded in the Lisbon strategy, which has a broader and ambitious focus to deliver full employment and produce a knowledge-based society. It gradually moved from a strategy that would combat unemployment to one whose aim was full employment with more and better jobs.
The strategy is based on the employment title of the Treaty of Amsterdam, which implies that the member states agreed to give the EU a certain competence in the field of employment. They have conceded that employment is a common concern and have committed themselves to implementing employment policies in a co-ordinated way that promotes competitiveness, equal opportunity and welfare in the EU as a whole. That is particularly crucial in the context of economic and monetary union.
The open method of co-ordination is an innovative way of achieving such an aim and combines the action of communities, institutions and member states and, beyond that, the contributions of the various other actors to the process. A key element is benchmarking. Through that and peer review, the member states, with the Commission's co-operation, examine the effectiveness of policies and exchange best practice.
As for the process itself, the Commission and the Council of the European Union present an annual joint employment report to the spring European Council. The report illustrates the main achievements in reforming labour markets, details the strengths and weaknesses of member states' employment policies and sets out the priorities for reform. Based on those priorities, the Council's conclusions and a proposal from the Commission, the Council agrees a series of commitments for action, which are otherwise known as the employment guidelines for the member states.
Moreover, on another proposal from the Commission, the Council decides by qualified majority to issue country-specific recommendations. Every member state then draws up a national action plan that describes how the guidelines will be put into practice. That should involve a wide range of partners at member state level—unions, employers, devolved Administrations, local and regional authorities and, often, the national Parliaments. The Commission then examines the action plans with a view to drawing up a Commission draft for the joint employment report for the following year. That is how the cycle continues.
I shall say a few words about the strategy for the period 1997-2002. Since the start, the employment guidelines have committed member states to undertaking concrete action in four priority areas, or pillars, for the European labour market: employability, entrepreneurship, adaptability and equal opportunities.
The employability pillar deals with increasing access to the labour market for the unemployed, ensuring that they have the right skills and incentives and promoting an inclusive labour market. The entrepreneurship pillar addresses the creation of an entrepreneurial culture by making it easier to start and run a business and to employ people in it. The adaptability pillar tackles the issue of making employed people and the organisation of work apt to meet continuous structural change. The equal opportunities pillar considers how to enable both women and men to participate in the world of work with equal opportunity and equal responsibility.
The European employment strategy also has to be integrated with the financial instruments at national and European levels. At national level, political commitments must be translated into budgetary commitments. At European level, the almost £200 billion in structural funds for the period 2000-06 and the £60 billion of the European social fund are the financial instruments that help to attain the employment objectives.
The strategy has been in place since 1997. With contributions from member states, the Commission has carried out a major evaluation of the experience of the first five years. In general, the results are impressive and, compared with the situation that existed previously, represent a major step forward. I shall, briefly, recall some achievements. Employment in the European Union has increased by more than 10 million, and unemployment has fallen by more than 4 million, with a 40 per cent fall in long-term unemployment. That result is not merely of a cyclical nature, but has a structural element.
Although there are important differences between member states, European labour markets have become more flexible and adaptable and have contributed to a more job-intensive economic growth. However, that new job-intensitve economic growth has a potential downside, as we have seen a slow-down in the rate of productivity growth across Europe. Arresting that decline in productivity growth demands significant investment in human capital and more priority to be given to improving work organisation and quality at work.
Significant qualitative changes have also taken place in national employment policies, with a clear convergence towards the priorities that are laid down in the employment guidelines. That is most notable for activation and prevention of long-term unemployment; more employment-friendly tax and benefit systems; the adaptation of education and training systems; the introduction of more flexible working patterns; and gender equality mainstreaming. The European employment strategy has also proven its value in terms of working methods. National polices have become better integrated and articulated. The management-by-objective approach and the open method of co-ordination have fostered new ways of working, both at EU and national levels.
I now turn to the need for change based on the evaluation that we have conducted. Both evaluation and past experience have confirmed the positive role of the strategy in supporting employment performance over recent years. However, the acceleration of economic and social change, the forthcoming EU enlargement and the current climate of economic uncertainty constitute employment challenges and compelling reasons to review the European employment strategy.
That brings us to the Commission's communication of January, which presents an outline of the revised strategy in an enlarged EU. It aims to provide a basis for open discussion with all interested parties in the lead-up to the spring European Council.
I turn to the key elements of our proposal. The European employment strategy must be reinforced so that it acts more clearly as a key instrument to promote the Lisbon agenda. That requires us to avoid long shopping lists of action and too much detail. Instead, the guidelines must be simpler and more result oriented. We must provide employment guidelines within a stable medium-term framework. That is the advantage of the 2010 time horizon that was set at Lisbon. Such stability should be facilitated by fewer and simpler guidelines that reflect key common challenges. The new guidelines must have an increased emphasis on results achieved and make better use of country-specific recommendations to support member state actions and the setting of appropriate targets.
I have some brief comments on the structure of the new approach. The European employment strategy should support the three overarching goals that stem from the Lisbon agenda. The first is to deliver full employment; the second is to promote quality and productivity at work; and the third is to create a cohesive and inclusive Labour market. Those mutually complementary objectives should be delivered through a number of reform priorities.
Continuity is assured by the fact that many of the existing guidelines are also covered in our suggestions for the future. Examples include guidelines on activation and prevention, entrepreneurship, tax and benefit reform, balancing flexibility and security, and equal opportunities for all. Increased stress is placed on a number of areas that were covered previously, including active aging, lifelong learning and undeclared work. Important new priorities appear for the first time, notably immigration, tackling regional disparities and better governance.
As the evaluation has concluded, evidence has emerged that the strategy has led to an increased involvement of a wide range of actors, both at the European and national levels. A range of government ministries and regional and local actors have been brought together in the preparation of national action plans for employment. Beyond the Commission, the Council of Ministers, the European Parliament and a large number of other bodies at the European level have been involved in the evaluation and further development of the strategy. The social partners at European and national levels have been closely involved.
Consensus exists that the success of the strategy relies ultimately on improved delivery and better governance. To that end, the Commission's communication proposes several ways in which to improve the governance of the process. Key suggestions include increasing the role and responsibility of social partners; raising visibility and public awareness; partnership-based policies to develop the European employment strategy's territorial dimension at regional and local levels; mobilising relevant civil society organisations; and improving parliamentary bodies' involvement in the process.
I will say a few words about how we perceive Scotland's involvement in the United Kingdom national action plan. NAPs are drafted to reflect the latest policy developments and political intentions in each member state. Given the extent of devolved powers in Scotland on a range of issues that are central to the employment guidelines, it is vital that Scotland should be closely involved in the UK NAP process. Not only must the UK NAP reflect fully any uniqueness in the Scottish approach, but it must also illustrate important policy areas in which Scotland can offer examples of good practice. Two examples are Scotland's innovative approach to lifelong learning policy and gender equality.
Our perception is that the consultation process in drawing up the UK NAP has matured well during the lifetime of the European strategy. The Scottish authorities are now closely involved in the process. For example, this year Scotland participated in the bilateral meeting between the Commission and the UK authorities on the NAP. That does not mean that more cannot be achieved. One important priority of the strategy is to encourage local and regional involvement in it. Given the significant contribution that Scotland can make to the strategy, the committee may want to consider that possibility and to identify practical ways of achieving it.
Thank you for your attention.
That was an interesting and uplifting presentation. We welcome your reference to good practice in Scotland and it was useful to hear your analysis of how Scotland fits into the national picture. You have answered a number of our questions, but perhaps we can develop some of the themes that you set out.
I was interested in the points that you made about the local and regional dimension of the European employment strategy. I am a member of the Committee of the Regions commission that deals with employment, and I recognise the Commission's commitment to that issue. What actions can the Commission take to promote and encourage the local and regional dimension of the European employment strategy?
Member states are responsible for delivering the European employment strategy on the ground, but how they deliver it depends on the constitutional or institutional structure of each member state. The Commission is interested in results, including the success of policies at regional and local level. We respect fully the principle of subsidiarity, but we expect results to be achieved on the ground.
The Commission and the EU can help by insisting that delivery be taken into account and by emphasising local and regional employment strategies. The successful implementation of attempts to move from passive to active measures is increasingly dependent on the mobilisation of local actors. The local dimension of employment strategies is also assisted by European structural funds. We hope that it can be further explored and strengthened after 2006, when the reform of structural funds will take place.
Would it be fair to say that the Commission is keen better to integrate the EES not just with national policies but with regional and local policies?
Yes. In my presentation, I said that we see the guidelines as having a regional dimension. Under the Commission's proposal, that concern would be reflected in the guidelines.
You have dealt already with aspects of my question. What is the significance of the European employment strategy as compared with other strategies for creating employment that have been tried? How do you see it in relation to strategies that are being developed at national, local and regional levels? Will it be used as an inspiration or as a stick with which to beat people?
I agree with the member's comments. We hope that the strategy will be an inspiration, because it reflects the overall approach that we are taking at European level. It is based on our experience of what works and of what appears to have been less successful.
There has, in the past five years, been a convergence of approaches in practice at European level in relation to the kinds of policies that are followed. More flexibility has been introduced in labour market organisation; that is a shared concern throughout Europe, although some member states have gone faster than others. At the same time, there is peer pressure and the possibility of using other instruments at European level to support the strategy. The major challenge for the future is how better to integrate the use of the European structural funds with the European employment strategy and, possibly, other policies.
That brings us to our next point.
We have taken much evidence in our discussions of different views on what should be the role of the national action plans. What, from the Commission's perspective, should that role be? To what extent do the plans merely report what is happening in member states? Should they do more to influence the direction of employment policy? You have talked about the first round of funding, which was instrumental in terms of full employment policy, and you have said that you see a shift for the next round. I would like to hear your views on the role of national action plans in influencing policy direction.
One of our concerns, which is felt not just in the Commission but in member states, is that we have to move towards a more results-oriented approach that is focused more on the implementation of policies. The guidelines need to be more results-oriented, which might also mean that where appropriate, quantified targets could be fixed either at European level or at national and other levels. A results-oriented approach—linked with the more results-oriented national action plans—is central to reform. We expect that member states will in the future report more on what has been achieved on the basis of the guidelines and less on what they would like to happen. In that way we can simplify the process, focus it on essentials and avoid administrative bureaucracy.
I move on to the implementation of the national action plans. The European social fund has been an important tool for delivering on the national action plans. How is the ESF being used to implement the strategy? How do you think that the links between the ESF and the strategy should be improved to enable us to deliver on the aspirations in the action plans, and to take the approach that you are talking about in delivering outputs, achievements and targets?
There is a link between the employment strategy and the European social fund. The different priorities that are supported by the European social fund are broadly consistent with the employment strategy. We would like that to be strengthened in the future. We would like to see the social fund and, more broadly, the structural funds take better account of employment priorities and guidelines.
I am not in a position to give the committee our views on the future of the structural funds—it is early days. One must also consider that, because of enlargement, the focus of funding will need to shift from existing member states towards new member states. However, the Commission's approach is that funding from structural funds should be provided throughout the European Union. Therefore, we hope that funding can be focused on the most important priorities.
One of the most important priorities is the challenge of economic and social restructuring and the impact that it can have on local communities especially. I am not in a position to say how we will respond to such a challenge. Perhaps other priorities will be put on the table when the time comes, but in our view, that dimension is essential and must be addressed.
In Scotland, a European social fund programme has been developed by a Scottish partnership, although the employment guidelines are set by the European Commission and the member states. How well do those approaches mesh?
The approaches are at different levels. The employment guidelines are set at European level not only by the European Commission, but by the Council, with the European Parliament's involvement. The guidelines are not the product simply of the Commission, although the Commission initiates the process. On the basis of the guidelines, member states must produce their policies and describe their policies in national action plans. The link is between national action plans and management of the social fund in Scotland. That is the appropriate level at which to make the link, which is for national and regional authorities to ensure.
Mr Kastrissianakis's department deals with the employment strategy and social fund distribution, but what is the relationship—if any—between the employment committee and the ESF committee?
The relationship is limited. The Employment and Social Affairs Committee has responsibility for policy development and for advising on policy aspects of the European employment strategy. The social fund committee advises the Commission on the social fund's implementation. The initial link must ensure that the social fund responds to the employment strategy's policy priorities. The Commission has the main responsibility for ensuring that link in its proposals. In practice, there has been little connection between the European social fund committee and the Employment and Social Affairs Committee.
Article 15 of the draft treaty establishing a constitution for Europe deals with areas in which there should be supporting action, which include employment. Paragraph 3 of that article states:
"The Member States shall coordinate their national employment policies within the Union."
Will that have a direct effect on the relationship that we just discussed, or should an attempt be made to change that relationship? Do you expect that there will be a change in the relationship?
Overall, the suggested approach does not create a new dimension for the European employment strategy. It is compatible with the existing objectives, mechanisms and tools and has, therefore, no implications for the more specific relationship between the Employment and Social Affairs Committee and the European Committee, if that is what Mr Quinan was referring to.
There are distinctive traditions in this country in respect of the involvement of social partners such as trade unions, employers associations and so on. The joint employment report suggests that the UK should involve social partners more fully. What does that mean? Do you think that there is a danger that the European Commission might stray into matters that are in the competence of member states? I refer particularly to the involvement of social partners in the development of a national employment policy.
Following the Commission's proposals and with the European Parliament's advice, all of the member states decide on the employment strategy and the guidelines. Social partners are involved with the policies' design and implementation. From experience, the contribution of the social partners is extremely important in ensuring a broadly acceptable design that they can take an active role in implementing.
Of course, the approach varies throughout the European Union and there are different practices and traditions to deal with the involvement of social partners. The Commission's recommendation implies that it would like to see such involvement strengthened, while taking into account national practices, traditions and rules of how that involvement is organised. Of course, in this case, the member state is the UK. The Commission has no intention of intervening with the details of policy organisation in each member state.
Could internal structures vary slightly from one member state to another?
Absolutely.
I do not want to put you on the spot, but in evidence to the committee the UK Government gave the impression that the national action plans are a report on UK employment. From what you say, I understand that the Commission wants results-oriented guidelines. Do the two approaches sit well together? How can they work together? Should we look at this slightly differently?
Until now, national action plans have been reports on the policy that each member state wants. The results that are achieved on the basis of the guidelines should mean fewer reports. Therefore, your point reflects the reality, in a way. That said, I would like to see a shift towards a more results-oriented approach, as would the majority of the member states that have taken a view. It remains to be seen how that will work out in practice with the first round of the national action plans, which we expect to see in October this year.
Thank you. That was helpful. That concludes our questions. We appreciate your comprehensive opening statement, which covered many of the points on which we wanted to question you. We appreciate your coming along and, in our deliberations on our report, we will certainly take careful account of what you said. I thank you.
I thank the committee for the invitation and for members' attention.
You are welcome to stay and listen to the rest of our evidence taking, if you wish.
Before I invite our next witness, I welcome to the public gallery a group of members of the Parliament of Slovakia. We are pleased that you are able to join us this afternoon. Thank you for coming.
I welcome Dominique Bé, the Commission's leading expert on corporate social responsibility. It was, in fact, the Commission's document, "Corporate Social Responsibility: A business contribution to Sustainable Development", which prompted the European Committee's inquiry. It is appropriate that Mr Bé is able to come along today. I am interested to hear about the current state of play within the Commission on corporate social responsibility. I am happy for you to make an opening statement, if you wish. Otherwise, we will proceed straight to questions.
Dominique Bé (European Commission):
Thank you, Madame Convener. I will say a few words to introduce the subject. First, I am grateful for the opportunity to address the committee on the strategy on corporate social responsibility that the Commission has developed. I will first say a few words to define the Commission's concept of corporate social responsibility, after which I will say a few words about the strategy that the Commission is trying to develop at its own level to promote corporate social responsibility.
Corporate social responsibility is not new, but has been going on for a long time—what is new is the debate about corporate social responsibility. Sometimes there is confusion between that debate and defining the meaning of corporate social responsibility. Therefore, it might be useful to stress a few points that could help in approaching the concept of corporate social responsibility.
Corporate social responsibility is not new as a business practice that goes above and beyond legislation in such a way as to contribute to sustainable development and better social governance. We have adopted that broad definition, which goes back to the origin of paternalism in the 19th century. Paternalism was a form of CSR, although that concept was not known. What is new is the fact that over the past 10 years there has been more and more communication and debate about CSR. At the start, that was driven mainly by companies, which began to communicate a lot about their social performance. That attracted public interest, debate in the media and public authorities' interest in the subject.
How could we define CSR? One way is to say that it represents larger, or broader, corporate governance. Companies are faced with many more stakeholders than they used to have. Beyond shareholders, companies now have stakeholders such as consumers, the public, local authorities—which play a major role vis-à-vis companies—trade unions and non-governmental organisations. Many groups have become stakeholders, which has forced companies to have wider governance that addresses the interests and needs of the various stakeholders, and which addresses many more issues than was the case previously, when governance was mainly about maximising profit, which was companies' main objective. Today, companies must respond to many—sometimes conflicting—challenges. The challenge and difficulty for companies is to balance the interests and requests of different groups, which are sometimes in contradiction.
For us, CSR is a management issue first. It is the way in which companies deal with the new requests from different stakeholders inside the companies in their day-to-day management. CSR is not about public relations, press releases, or websites; rather, what is important is that CSR is much more about what companies do than it is about what they say they do.
Finally, CSR should rely on a very strong business case. We do not therefore expect that companies will enter into this for philanthropic reasons vis-à-vis society. Corporate social responsibility should be a good option for business and for society.
I hope that I have explained our approach to CSR. I also want to speak about the European CSR strategy, which was developed by the Commission, the Council and the European Parliament. We call it a strategy rather than a policy. It is a relatively new issue for the Commission, so it is still work in progress.
Until now, we have made three major steps. The conclusions of the Lisbon Council included a paragraph about CSR in which heads of state and Governments made an appeal to companies to be socially responsible. That launched the debate on CSR at EU level. Two documents followed—a green paper in 2001 and the communiqué that was referred to earlier, which was adopted in July 2002. Those define what could be done at European level but, in this context, a lot is taking place at local, regional, national and international level. We are aiming at a level that can be supported by the Commission and other European institutions, with the clear understanding that many matters have also developed at other levels.
We make a very clear distinction between what companies do and what they communicate about what they do. That is linked to the major axes of our strategy—the Commission's main axis or objective being to promote companies' adoption of socially responsible practices. By adopting such practice, companies can contribute to sustainable development and to better social governance; their work can be good for society. We want to raise awareness of corporate social responsibility and of the business case for corporate social responsibility, mainly for small to medium-sized enterprises—SMEs. CSR has been discussed mainly by large companies, and small companies continue to consider it a matter for large and multinational companies.
We rely heavily on networks of actors—companies, trade associations and so on—which can inform their members and convince them to take the CSR approach. Our surveys show that most companies that remain unconvinced or unaware of CSR are not involved simply because they do not see the business case for it. There is much to be done at local and regional level.
The second axis of our policy concerns the communications element of CSR. We are aware that an increasing number of companies and other organisations are communicating about corporate social responsibility. The fact that companies are selling their social responsibility to consumers, investors and citizens is an internal market issue. The public authorities are responsible for protecting the public and consumers.
Many initiatives are being developed. The Commission has resisted appeals to legislate from the European Parliament. Before we do that, there needs to be greater consensus on what we can expect and how we might approach the communication of corporate social responsibility, which can take place via reports, codes of conduct, labels and other tools.
The Commission has set up a forum on CSR, which is bringing together EU-level organisations that represent business, trade unions and civic society. The forum has received a mandate from the Commission to examine the different practices, tools and instruments that have been developed by organisations, companies and others in Europe, and to achieve consensus on how we will approach reporting, labelling and codes of conduct. If the different sectors can reach agreement, the Commission might build on that to develop its strategy further.
At this stage, we are pursuing two major objectives. The first is convergence—there are too many labels, reports and codes of conduct. The second is transparency. In most cases, consumers and citizens do not know what is behind a label or report.
The third axis of our strategy is to mainstream CSR in public policies. Public policies have their own objectives and implementation strategies, which have an impact on corporate social responsibility and its adoption by companies. In the lobby, I noticed that the coffee that is served in the Parliament is fair trade coffee. That is an example of how, through its procurement, a public authority can give preference to companies that are socially responsible. The same approach can be taken when the state is providing subventions. When regulating financial and other markets, public authorities can seek transparency and disclosure. There are many activities that have an impact on corporate social responsibility.
Actions can be developed at EU level—the Commission is committed to mainstreaming CSR in its policies—and at local and regional levels. The Commission is supporting a project that involves different regions of Europe that are considering the issue of corporate social responsibility and how a regional authority can approach CSR and what that means at regional level. I am talking about regional authorities promoting CSR in their policies, as well as in companies' policies. I am glad to say that Scotland is very active in that project.
I would be happy to answer questions from members.
The European Commission has made a great deal of the running and is responsible for much innovation in the area of corporate social responsibility. It is very useful to be given background information on that work.
I was planning to ask you about the added value that the European Union can bring to the issue, but you have already described how the EU can promote socially responsible practices and increase awareness of CSR. I believe that the EU has done that very well. Do you have anything to add?
I want to pick up the point that you made about mainstreaming. Should corporate social responsibility be integrated into other Community policies, as has happened with equal opportunities? It occurs to me that it took us quite a while to get to the point of mainstreaming equal opportunities. For a while, we used to talk about equal opportunities as something separate. Perhaps that was needed to increase awareness of the issues at the time. Should corporate social responsibility stand alone for a little while or should we work to integrate it immediately into other Community policies?
On adding value, I stress again that we do not wish to take over what exists at different levels, but we can contribute because we can help different actors throughout Europe to meet. There is a lot of activity, but most of the time, people do not know what others are doing. The Commission can help simply by helping them to meet. Most of the projects that we support simply finance and support the cost of exchanges and communication between the front regions of Europe.
The other part, which, as I said, is relevant for the EU, is that companies now sell all over Europe. Therefore, one cannot say that there is a Scottish consumer any more—there is a European consumer. Companies do not sell in one region only. We have to consider the information that is provided to Italian consumers who buy from a Scottish company or Dutch consumers who buy from a German company. We must consider the information that is given to consumers and to investors. There is an EU dimension to that.
On mainstreaming, I stress that, for us, CSR is not an objective in itself; it is an instrument of system development and better social governance. In that respect, the approach that we have in mind when we say that we should mainstream CSR in other policies can be seen from two sides. First, other policies should not put obstacles in the way of socially responsible practices. I will take public procurement as an example. Public procurement policy at the EU level, which is then adapted or put in place at the national level, is restrictive and still focuses on the best value for money. It is difficult—even though the situation is changing—for public authorities to add more criteria to their public procurement. The Commission is now considering how we could open up and have more flexibility for public procurement policies so that public authorities that wish to add more criteria are able to do that transparently.
There is a direct link with transparency. It is not as simple as saying for example, "I wish to buy fair trade coffee." How do we select coffee that has a good label? There is an issue about having good information on labels and other ways of providing information.
The other side is that one could say that the public money that goes to projects in some areas belongs to everybody—it is my money and your money. As citizens, we might want to ask questions about the use of public money. For example, it would be difficult to accept public support being given to development aid that goes outside Europe and might end up going to a company that uses child labour.
That is why we need to ensure that the way in which public support is given and the broad objectives of corporate social responsibility come together. In that context, we need a policy that not only avoids creating obstacles but might go further, and use public money to promote better social conditions. There are two sides to the coin.
What communication strategy do you have in place to promote corporate social responsibility in the business sector and to the general public?
We do not run a large communication budget. What we have done mainly is to support a few projects that can help to disseminate the information. We have a budget line that we use to support projects including conferences and publications. We try to focus on projects that are pan-European or which involve at least two or three countries—more, if possible—so that dissemination has a much wider effect. Often, we have the opportunity to inform the informers or to train the trainers, hoping that they will continue to disseminate the information.
A lot is already being discussed—there is a big debate about CSR—and we do not feel that we will need to organise many more conferences or publish many more books. A lot of information is already available. What we have tried to do is to clarify the debate. We were glad to see the green paper that has been published. That has also helped to develop a wide debate across Europe. What is new is that the debate has now gone beyond the borders.
Five years ago, CSR was discussed mainly in this part of Europe. Yesterday, I was at a conference in Italy at which there were 1,000 people. It was the largest conference on corporate social responsibility that I have ever seen. Three years ago, nobody was talking about CSR in Italy. The debate has developed. Now that the ideas are getting clearer, we need to go beyond the talk. That is what was discussed yesterday. Everybody is talking, but what do we do? That is where we need to go.
Bienvenue en Ecosse. I was fascinated when you mentioned fair trade and the possibility of fair trade finding its way right through corporate social responsibility. There will be a fair trade fortnight in Britain from 3 March to 16 March—I am delighted to have the opportunity to get that plug in.
You mentioned in your address the fact that corporate social responsibility is generally seen to be taken on by big firms, although it must also be taken on by medium-sized and small firms, which have a big part to play in the economy. What difficulties do medium-sized and smaller companies face in addressing the challenges of corporate social responsibility, and what help can be given to those businesses?
Small and medium-sized enterprises react vis-à-vis corporate social responsibility as they react when we discuss training or equality. They tend to say, "That is for large firms. We do not have resources for training or CSR." However, they will be forced to enter into CSR, not by public authorities, but by the large companies that are their customers, and which, increasingly, are requesting forms of certification labelling. Just as large companies are now requesting certification to the ISO 9000 quality standard, so, in a few years, it is likely that large companies will force small companies that supply them to be certified to the standard of ISO 18000, or whatever number. The situation is developing.
The need that we see is for small and medium-sized enterprises to understand the business case. CSR is not about charity, but SMEs still tend to see it as philanthropy—when the business is done, they will give something to the local football club or church. We try to tell them—and we try to get trade associations to tell them, as it is more convincing coming from trade associations than from the Commission—that CSR is in their business interests. We tell them that it will result in better productivity and better motivated staff, and that the community will have a better image of them, which will gain them the preference of their customers.
A series of factors could be part of their approach, which would mean that CSR would not cost a lot. There may be some expenses, but it should be seen as an investment that can bring a return.
As is often the case with SMEs, the issue is how to convince them to invest. They tend to run their business with a short-term horizon, but we have tried to focus clearly on the idea that, for us, the priority is more what companies do and not so much communication. What is important for SMEs is not publishing a report or having a label, but better performance. That is the message that we are trying to give.
We have received conflicting evidence on whether corporate social responsibility is better achieved through a voluntary or a regulatory approach. What is the Commission's view on that?
I stress that we must make a clear distinction between what companies do and how they communicate. In the Commission's view, what companies do is the important point because it will change society. CSR must, by definition, be voluntary. Of course, there is existing legislation, and there might be new legislation, for example in the field of health and safety, but our approach to CSR is different. Employment issues such as working conditions can be influenced by legislation, social partners, collective bargaining and corporate social responsibility, but public authorities cannot use CSR to force companies to do something. If there is a political consensus to force companies to do something, we must pass and use legislation.
There is a risk of confusing the debate. Corporate social responsibility is for more innovative companies that wish to go above and beyond legislation. We sometimes receive pressure from non-governmental organisations that would like to force companies, with the help of public authorities, to do things, but that cannot be achieved in the European Parliament because there is not yet a political consensus to pass legislation. The debate on CSR would be undermined if we confused those two aspects.
The debate on communication about CSR is completely different. There might be a need for regulation of how companies communicate, because there might be issues about misleading advertising or the information that is given to consumers. The label includes the price and the quantity, but there should also be an indication about CSR. We have tried to distinguish clearly between those two debates.
Has there been a change in the Commission's views on CSR since the publication of the green paper and the ensuing discussion? The European Parliament's rapporteur came out in favour of making it compulsory for companies to report on their progress on CSR. Does the Commission favour that and, if so, would that be done at national or European level or both?
There is an on-going debate about reporting. Again, the issue relates to communication. A company might report, but the report might say that the company does not do anything and, as such, the report would be simply a communication tool. The European Parliament has requested a directive that imposes reporting on CSR, but, at this stage, the Commission has decided to wait. That is partly because we need a better consensus on what should be in reports. It is easy to say that companies must report, but the issue is what they should report on, and there is not a consensus on that.
The Commission has put the issue on the agenda of the EU CSR forum. We have asked the forum what we should do about reporting in Europe. The forum is supposed to report back to the Commission in mid-2004. If there is consensus in the forum, the Commission could endorse the agreements that it reaches and perhaps propose legislation on that basis. If there is no consensus in the forum, the Commission will have to test political waters in the Parliament and the Council to find out whether there will be consensus on when we could propose legislation on CSR reporting.
It is useful to wait a while before going ahead because the positions are evolving, mainly among businesses. It is interesting that more businesses are saying that they need rules of the game because it is expensive for them to report without rules and every company publishes something different. It is an expensive exercise for every company. That system is not useful because one cannot compare the different companies and sometimes readers do not receive the information that they seek.
Having a report at EU level is supported more and more by companies. Most of them sell throughout Europe and they do not want 15 different formats for their reports. They would prefer to have the same format because that would be more effective. We will probably go in the direction of introducing broad guidelines. We will probably introduce a directive to define the broad requirements for reporting, referring to a third-party standard in the same way that, in financial reporting, there is legislation that says that companies must publish annual reports, but the standards would be different outside the Commission. That points the way ahead. It might take a few years before we reach that stage, and it would be the result of the work of the forum and political consensus being developed at EU level.
I find interesting the variations in Europe concerning where Governments, the Commission and various structures place responsibility for corporate social responsibility. You said that the philosophical base is in an area of social governance and that you work in the social dialogue section of the employment and social affairs directorate-general. In the United Kingdom, the current Government believes that CSR is primarily an element of trade and competitiveness. However, here in Scotland, the responsibility for CSR lies in the social justice ministry. Do you regard those differences in approach and emphasis as being complementary or non-complementary? Is that part of a developing concept? Who do you think is right? Where lies the philosophy in reality?
I will try to answer the first part; the last part might be for the next evidence session.
There are definitely different priorities in different regions and countries of Europe. The question is where the focus lies—on the environment or on the social aspect? For us, corporate social responsibility includes social issues as well as environmental issues. Although the title of the directorate-general has more to do with social issues, it covers everything.
In the north of Europe, the focus tends to be more on environmental issues, because social issues tend to be handled well. In the south of Europe, the priorities might be more concerned with social issues and the approach might vary. However, we find more and more convergence in the approaches throughout Europe. It is interesting to discover that the gap is not so much between countries, but between Europe and the United States, from where all of this came. In the US, especially after the Enron cases and others, the focus is very much on ethics and corporate governance in a narrow sense. In Europe, we still have more links with sustainable development and social governance. That happens much more between the different countries.
From what I have read, I am not sure that in any region there would be one, separate ministry that would lead. In London and across Europe, for example, a few ministries are involved in CSR. What might be needed is co-ordination between the various people involved. In London, the Department for Work and Pensions is interested in CSR, the Department of Trade and Industry is active in the area and the department with responsibility for external trade is also involved. Each department has initiatives that do not necessarily complement each other. One cannot say that a given country is focusing on one part and ignoring the rest.
When we try to communicate with various Governments, we find that it is difficult to get everyone round the table. There are many actors and, sometimes, even at a national level, they do not know each other. It is sometimes difficult for us to get a complete view of what is happening. In fact, much is happening. In London, for example, the DTI does work in one direction but a different department promotes the ethical trade initiative, which is to do with social governance. There are many initiatives, and the major challenge for the European Commission is to ensure that all the actors know what the others are doing and are able to work together more effectively.
Does the development of a draft constitutional treaty offer the possibility of creating that co-ordination? It might not do so by instrument or legality, but it might form part of the dialogue, particularly in the light of article 15.
I am not an expert in that regard.
The public sector is Scotland's largest employer. What is the role for public sector employers in developing corporate social responsibility? How is the European Commission involving the public sector in the development of CSR policies?
We have addressed that. Although they are not privately owned, public administrations are companies in the sense that they have employees and buildings, they pollute and so on—they are engaged in activities that have an impact on society. At the end of the communication that was adopted last July, there is a paragraph about public administrations in the context of corporate social responsibility. That paragraph makes a clear distinction between policies and the management of public authorities.
The European Commission believes that public administrations should set an example. Companies and others have told us a few times that it is all very well for the Commission to preach, but they want to see what we do in relation to corporate social responsibility. We have decided to do something about the administration inside the Commission in relation to procurement. We are launching a company to raise the awareness of corporate social responsibility among agents of the Commission. As consumers, we can influence each other's companies and so do some work in the context of CSR. Further, the Commission has undertaken to publish a CSR report on itself, with regard to social policy and the environmental side. We will try to have that ready by 2004. It will deal with questions such as how much energy we use, what our working conditions are, whether we pay attention to the working conditions of our suppliers and so on. The Commission has invited national Administrations to do the same. They should assess their performance, as the employee policies that they have will have an impact on society.
All of us will be interested in that document as it might serve as a model for Governments and other bodies involved in governance across Europe.
One of the key principles of CSR is the mechanism for organising relationships with employees of organisations. What in your view is good practice in that respect, particularly in relation to redundancies? The committee very much supports the full implementation in the UK of the information and consultation directive. Will you comment on the recent actions of Motorola and Boots? Do you think that their actions were examples of best practice with regard to informing and consulting their employees?
The Commission has stressed that, even in the case of restructuring, companies can be socially responsible. I am not familiar with the two cases to which you referred. On 3 and 4 April we will hold a conference in Athens focused on the promotion of good practice in industrial restructuring. That is an example of the action that we are promoting. We will invite to the conference representatives from the EU countries as well as from the candidate countries, because we think that we can learn a lot from the potential future members of the European Union. The conference will focus not on legislation or regulation, but on taking time to listen and to learn about good practice.
We believe that quite a few companies might have to restructure or downsize, but there are different ways of doing that. A major recipe for engaging in socially responsible restructuring might be to start with anticipation, information and consultation of the first group of stakeholders: the employees; the communities—because the effects go beyond the walls of the company; and local authorities. In that context, we try to make a link between CSR and restructuring.
In parallel, the Commission has launched a consultation of the social partners at EU level on the social aspects of restructuring. We attempt not to interfere with the negotiations between the social partners. We explore how, in addition to legislation and social dialogue, companies can develop and promote other solutions.
Thank you very much for your co-operation in attending the committee this afternoon. It is fair to say that your evidence will be crucial to our report. We very much appreciate the contribution that you have made. You are welcome to stay or leave as you wish.
The Minister for Enterprise, Transport and Lifelong Learning is not here yet, so I suggest that we move on quickly to item 2. The minister is not due to arrive until 3.30, so we could perhaps take item 2 and then have a short break, which would allow the minister and his officials to come in.