Business ethics in the EU and Malta

Growing concerns about large corporations and their power fanned the concept of Corporate Social Responsibility early in the 20th century. As the century turned, CSR was listed by the United Nations as a millennium development goal.

Definitions of CSR range from staying "within the rules of the game", and "improving society in ways that are good for business and development", to behaving ethically while producing an overall positive impact on society. However too often there have been cries of "cherry-picking" and "green-washing".

Critics are suggesting that stronger government and international regulations rather than voluntary measures are necessary to ensure that companies behave in a socially responsible manner.

Can companies be trusted with the future? Should they be monitored - and if so by whom? Do European and global systems of trade and commerce offer the best policy mix? Do religious, ethical principles have any role in guiding international trade?

Corporations may care very little for the welfare of workers or the environment and, given the opportunity, have been known to move their production units to sweatshops in less well regulated countries. The expense of cleaning pollution falls on society in general when companies fail to pay the full cost of their impact. As a result, profits of corporations are enhanced at the expense of social or ecological welfare.

While it is not suggested that European business is only interested in short-term profit to the detriment of society, some pertinent questions were put forward at a conference organised by the European Documentation and Research Centre. Professor Peter Xuereb, chairman and project co-ordinator, opened the conference with a reminder that the EDRC's Civil Society Project next year would be dedicated to the fight against poverty.

Professor Xuereb also observed that a separation has occurred between the business world and the rest of society. Citizens have become increasingly concerned over a business environment that appears unable to prevent what, in a globalised world, can turn out to be ruinous practices with a global negative impact.

"Policy-makers are showing signs of awareness and concern in response to this heightened public awareness, " he said.

Are current systems of wealth creation and distribution failing? Do we need to rethink our theory so as to reflect the demands of an emerging world society?

Trickle down politics

Former Green MEP Irene Soltwedel-Schafer saw the state as withdrawing from its responsibilities and depending more on entrepreneurs, while the way CSR was defined by the European Commission was being influenced more by companies' advancement and possible profit. Yet CSR could only be taken seriously if it has a role in a company's daily business rather than occasional gestures such as donations to nature.

One of the major questions of the next century will be whether the much heralded new world economy order actually brings the world together or widens the split.

Speaking on the role of the elected politician in negotiating standards, Michael Hindley expressed doubts that "trickle down" politics could solve poverty when there was moral and historical evidence to show otherwise. He flagged the tendency to rely on Europe to solve problems that were not being tackled on a national level.

According to Mr Hindley, policy decision-making is often done to satisfy the financial market while civic social responsibility (CSR) is not always addressed. Beyond the EU's accepting attitude toward casualties among social groups and its consequent setting up of compensatory mechanisms, Mr Hindley believes that advancement should be defined not only by a country's economic wealth but also by its social health.

Malta, he added, often overlooked the social agenda in the world trading area. While economic growth has increased we have forgotten how we relate economically to the rest of the world. A company is only as good as the regulatory systems in the countries where it operates.

In the Eighties it was realised that artificially low production and labour costs were creating an unfair edge, but talk of a social agenda for world trade was seen at the time as putting the bar too high. Yet today, decisions about trade and economic arrangements around the world are still in the hands of executive power, "just like decisions about war", as Mr Hindley put it.

Democratisation of trade is an important part of CSR as long as scrutiny remains poor and deals are scantily accountable to national parliaments. Voluntary codes of practice have been an inadequate response. Instead, companies need to move toward social advancement by regulation.

"You have to allow elected politicians to take power back into parliamentary assemblies and not allow the world to be devalued by Group 8, 9 or 10, said Mr Hindley, in a reference to key policies being sealed at a high level between an exclusive club made up of the most powerful industrialised nations.

A former MEP, Mr Hindley is a freelance consultant in international politics and trade. His firm, registered with the Ethical Exchange, carries out evaluation audits and provides lobbying and advocacy services on human rights and green issues.

Joseph Muscat, MEP and rapporteur for the European Parliament committee on Internal Market and Consumer Protection, posed the question whether companies might be passing on the cost of fair trade to consumers to meet standards. Some even argue that child labour is a way to fight poverty, he said. While Europe is the biggest single donor in development policy, some of its agricutural policies could be hindering development.

Banking is one area where CSR is often neglected. Muscat noted that the EU does not see CSR as a horizontal issue but rather something that should be dealt with by a particular directorate. Some banks boast of their CPR record but then give loans to developments which spoil the environment. Bonds of companies should be rated by the regulator (Malta Financial Services Authority) to allow consumers to make an informed decision according to the social and environmental impact of a company's activities.

While criticising the Global Adjustment Fund, which came about as a response to free markets to help redundant workers affected by globalisation, he noted that the while the EU helps workers after their job is lost, nothing is done to help retain jobs.

Illegal employment sanctions

Dr Simon Busuttil is the main negotiator of a proposal made last May in the European Parliament intended to hit out at illegal employment by penalising employers of illegal stay third country nationals. This would not apply to third country nationals with a work permit or a residence permit. Designed to deter an unrestricted flow of illegal immigrants, serious sanctions aimed at employers are expected to help curb unethical worker exploitation and poor standards.

In addition to a steep fine, employers of illegal immigrants would also bear the cost of repatriating illegal immigrant workers to their country of origin and pay the difference in wages, taxes and social security contributions due. The company would be deprived of state aid and unable to enter into public contracts while any EU funds that the company made use of would have to be returned.

Dr Busuttil said that abysmally low working conditions for foreign workers, a form of modern day slavery, is often linked with human trafficking, which is illegal in its own right. It also means a disadvantage for countries where workers are employed legally.

Citing the freedom to undertake business, he disagreed with forced closure of offending companies as being too harsh. Sanctions for member states with repeat offences drew further reservations from Dr Busuttil, who was unconvinced that the EU should enter the field of criminal law.

Different approaches to CPR were explained by Professor Franco Prausello.

Approaches to CPR vary from minimalist - where trade runs counter to morally relevant relationships and policies are the exclusive business of each company - to acknowledgement of a duty to developing countries with possible protective measures. In between these two, the moderate view is trade regulation so that it does not harm other countries. Where this is violated, some form of compensation is made.

Fair Trade (*) is still only a niche, although increasing. The Fair Trade movement has certification systems in most European countries, although Greece, Spain and Portugal are exceptions. As consumers, Europeans are willing to assess the ethical character of goods but need to be given a clearer understanding of a product's contribution to social advancement.

The head of the Centre for Entrepreneurship and SME Development, Professor Ted Fuller, related how entrepreneurship between business and consumers had become entangled with free market liberalisation and capitalism: "The quality of life for all is under threat by current trends, and inequality is amplified by present market conditions."

Commenting on compensation mechanisms of businesses he said, "Giving something back to society assumes you have taken something out."

The case for development of a social conscience through Fair Trade as the ethical patrimony of nations was presented by Professor Tonino Perna.

Morality and values

Showing how the EU Constitutional Treaty places the individual at the heart of its activities, Professor Enrique Banus shed light on the foundation of European values.

With morality normally seen as a collection of civic values, he argued that local politics could not develop unless there were convincing definitions of these values. With the market included as a value in itself, there is a suspicion that this is not working for the common good. Confidence can be created by regaining the idea that business is part of society.

The market is transmitting many different values and forming a different society with its own mentality. This is not without social consequences as it is creating a society made up of differing messages of behaviour and priorities. This involves a radical transformation from the idea of culture to the idea of border where identities are expressed through dialogue or confrontation.

Parallel workshops were held on fair trade policy in the EU and Malta, what CSR means in practice and corporate governance (Who controls and monitors management?)

* A trading partnership which contributes to sustainable development by offering better trading conditions to marginalised producers and workers, especially in the south. Fair trade organisations backed by consumers campaign for changes in the rules and practice of conventional international trade.

www.waronwant.org/Challenging+Corporate+Power+11640.twl