In April 2013, the European Commission launched an initiative to expand the corporate social responsibility (CSR) rules within the European Union, mandating that the reports released by large corporations include non-financial information, such as the company’s environmental and diversity guidelines.
According to the Commission, such reports are currently published by only 10 per cent of the largest businesses within the Union; thus, this proposal would expand the number of organisations that disclose non-financial information from 2,500 to 18,000.
In May, European heads of state and government pledged to further develop the legislation by requiring country-by-country reporting, compelling corporations to organise their non-financial data by each European nation in which they operate.
This would enable the quick comparison of the CSR standards between member states.
However, member states have recently eased their support for country-by-country reporting, diminishing the probability of its inclusion in the legislation.
The European Commission defines CSR as “the responsibility of enterprises for their impacts on society”; therefore, it supports the establishment of clear guidelines that would encourage the incorporation of social, environmental and human rights concerns into the business plans of large companies.
A comprehensive survey of EU citizens revealed that 47 per cent of the population believe that large companies do not make sufficient efforts to behave responsibly towards society, while 67 per cent of EU citizens feel that they lack adequate information about the impact of business activity on society. Therefore, the EU is working towards increasing market transparency with investors and consumers alike.
Those in favor of the expansion of the CSR standards claim that greater transparency will lead to countless benefits within the EU, attracting foreign investment in European organisations while encouraging the development of more innovative and sustainable business practices.
Clear and available data regarding the non-financial aspects of corporations enables investors to make informative decisions that lead to a more efficient distribution of capital. Thus, some claim that the obligatory reporting should be transferred down the supply chains to ensure full disclosure of industrial information.
Moreover, CSR standards hold enterprises accountable for their treatment of employees, the environment, and the communities in which they operate, fostering an improved relationship between citizens and businesses.
Greater consumer trust is fundamental to the recovery of the European economy as it climbs out of the recession and moves towards an era of growth and development.
Not all are in favour of the new CSR rules, however, as many claim that such extreme reporting obligations will put European businesses at a disadvantage in the global market.
Although the Commission expects that the new reports will only cost companies an extra €5,000 each year, estimates released by BusinessEurope, the leading group advocating business’ interests in Europe, reveal that the actual price tag for producing such reports will be between €155,000 and €604,000 per year.
47 per cent of the population believe that large companies do not make sufficient efforts to behave responsibly towards society
The cost of collecting and auditing the additional data required to meet the new standards imposes an unnecessary burden upon organisations, namely the small and medium sized businesses whose growth is crucial to decreasing unemployment and stimulating the European economy.
According to BusinessEurope’s president Jürgen Thumann, corporations should not be obliged to release non-financial information that only serves to placate public policy goals and is irrelevant to the health of financial sector.
The European Parliament’s legal affairs committee is scheduled to adopt a report regarding the Commission’s CSR proposals on December 16. Although heads of state previously supported country-by-country reporting, member states’ recent hesitation regarding these conditions has diminished the probability of their inclusion in the proposal.
The European Parliament does not want to threaten the chances of passing the entire report; thus, Raffaele Baldassarre, member of the legal affairs committee and rapporteur for the proposal, suggests the discussion surrounding country-by-country reporting obligations be delayed until 2018 after a complete review of the rules is conducted.
Baldassarre is confident that the committee will reach an agreement and draft its final report in the December meeting.
David Casa is a Nationalist MEP.