Climate Change Insights : Climate Change Law and Policy Lawyers & Attorneys : McKenna Long & Aldridge Law Firm : Climate Change Regulation, Green Strategies, Environmental Policy

The Communication is titled "A renewed EU strategy 2011-14 for Corporate Social Responsibility" ('2011 CSR Communication.) The nature of this EU instrument makes it in essence legally non-binding. This does not mean that the Communication should be disregarded by Member States or the business community, as it does set the seeds for a new policy direction in the field of Corporate Social Responsibility (‘CSR’). The Commission has perceived the concept of CSR along with the concept of “corporate governance” as central to furthering the internal market.[1]

In 2001, the Commission already defined CSR as “a concept whereby companies decide voluntarily to contribute to a better society and cleaner environment”.[2] The corollary of CSR was that “companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.[3] Building on earlier CSR instruments at the EU and international levels, the Commission in its 2011 CSR Communication proposed a new approach to CSR which emphasizes companies’ need to set up a process for reflecting ethical, human rights, environmental, social and consumer considerations into their day-to-day business operations and corporate strategy. The new Communication insists that CSR capture human rights, employment practices, the fight against bribery as well as environmental questions (e.g., resource efficiency, biodiversity, pollution prevention and climate change). The bulk of the new approach centers around: (i) the importance attached to the integration of a “core business strategy” into any business model; (ii) the emphasis on “creating shared value”; and (iii) the express insertion of “human rights and ethical considerations” into the conceptual definition of CSR[4] (even though the scope of CSR at the EU level already covered human rights pursuant to the Commission’s 2001 Green Paper).[5]

The Commission, in its 2011 CSR Communication, also strives for greater corporate disclosure of environmental information, in particular that pertaining to climate change, with a view to better involving stakeholders and unfolding “material sustainability risks”. The latter transparency concern will lead the Commission to issue a legislative proposal[6] whose objective would be to provide a generic regulatory framework for the corporate disclosure of social and environmental information across all sectors.[7] The Commission had already initiated a Public Consultation on Disclosure of Non-Financial Information by Companies on 22 November 2010, a procedure which was closed on 28 January 2011. This consultation procedure involved not just Member States’ representatives but also private stakeholders such as social partners from national and international unions, professional federations and academics.[8] On the question of whether institutional investors ought to be bound by non-financial disclosure requirements,[9] most stakeholders involved responded that these investors “should disclose information on environmental, social and other aspects and explain how these considerations influence their investment decisions” subject to a proportionate and size-based approach.[10] Most of the stakeholders were also of the view that qualified external auditors should audit corporate disclosure of environmental information, a requirement which should also be tempered by a sized-based approach (e.g., exemption for SMEs).[11]  

The 2011 CSR Communication is overall discreet on the relation between CSR and climate change, which could arguably be explained for two main reasons.

First, the relation between the two had already been tackled in more detail in the “Energy Efficiency Plan 2011” Communication in which the Commission implicitly drew a direct link between CSR and one of the three principal pillars of the EU climate change policy.[12] Here, the Commission encouraged recourse by large companies to an energy management system such as that embodied in the EN 16001 standard, and invited the industry and energy-intensive sectors to enter into voluntary agreements for the implementation of energy efficiency processes and systems. Such agreements would be premised on concrete targets, clear methodologies and effective monitoring schemes.[13] The Energy Efficiency Plan 2011 especially targeted energy performance or ‘ecodesign’ measures as the way forward towards promoting “innovation in energy efficient European technologies”.[14]

Second, the 2011 CSR Communication is drafted, to some extent, on the basis of the renvoi technique: it encourages all large EU-based companies to ensure that, by 2014, they attend to the UN Global Compact, the OECD Guidelines for Multinational Enterprises or the ISO 26000 Guidance Standard on Social Responsibility when fashioning their CSR position. The 2011 OECD Guidelines do contain some language on climate change compliance strategy. They invite multinational enterprises to set up a “sound environmental management” system premised on three layers of good corporate governance: (i) effective and efficient gathering/assessment of information on the environmental impacts of business activities; (ii) setting out measurable objectives and, if applicable, targets for improved resource utilization and environmental performance; and (iii) periodic monitoring of progress towards completing these environmental objectives/targets. At a more substantive level, the OECD Guidelines encourage multinational companies to aim for higher standards of environmental performance, amongst others, through the development of strategies on biodiversity or resource efficiency or for GHG emissions reduction. The OECD through its 2011 Guidelines interprets the expression “sound environmental management” in the most extensive way: it covers “activities aimed at controlling both direct and indirect environmental impacts of enterprise activities over the long-term, and involving both pollution control and resource management elements”.[15]

There is scope for substantial improvement as regards companies’ adhesion to CSR codes of conduct and Member States’ adoption of CSR incentivizing programs. The Commission has indicated that the number of EU companies officially endorsing the ten UN global Compact CSR principles had increased from 600 (2006) to 1900 (2011). It has also reported that only 15 out of the 27 EU Member States had put in place some form of CSR policy framework.[16]