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Setting the benchmark in corporate integrity

EU’s proposed CSR rules split industry and NGOs

Businesses call CSR rule changes too strict, while NGOs say they don’t go far enough

Disagreements between business groups and NGOs have caused another setback for the European Union’s ongoing attempts to make large corporations to strengthen their Corporate Social Responsibility (CSR) reporting.

The proposals, launched in Strasbourg in April by Internal Market and Services Commissioner Michel Barnier, would require large corporations to disclose non-financial information, specifically their policies on diversity and the environment, in their annual reports.

Although many already report on these activities, the new rules, which would amend three existing accounting directives, would make the disclosures compulsory, although as a slow introduction of the rules only listed companies would need to report the information at first.

Businesses reject plans
After four German industry groups rejected the proposals, other European trade bodies have bemoaned the Commission’s plans. BusinessEurope, a trade body that speaks on behalf of some of Europe’s biggest firms, said that the new rules would “demotivate” those companies that have already set about reporting CSR policies.

The group’s president, Jurgen Thumann, said in a statement: “This proposal will create red tape and further disadvantage for a large number of European businesses in international markets, running counter to the urgent necessity of re-establishing the conditions for confidence and competitiveness in Europe.”

Thumann added that the requirement to put this detailed CSR information in annual reports was unnecessary, as these were specifically for the use of investors, and not the wider community as a whole. He said: “If required solely for public policy reasons, [the information] should be kept out of the annual report.”

NGOs say they lack teeth
However, industry watchdogs told reporters that the Commission’s proposals did not go far enough. Although welcoming the intent, the European Coalition for Corporate Justice (ECCJ), told reporters they had concerns about the wording of the directives allowing companies “too much flexibility”. The group’s Jerome Chaplier told the EurActiv website: “We fear companies will only identify and disclose the risks that affect their economic performance, and won’t take responsibility for the impacts they have on the people and the planet.”

However, some groups were more enthusiastic, with Jana Mittermaier, director at the Transparency International EU office, telling reporters: “This private sector has a critical role in the fight against corruption in the EU, and these proposals will help determine of the biggest companies are playing their part.”

Catching up with the rest of the world
One leading European politician, Richard Howitt MEP, who is a specialist on CSR, added that compulsory reporting of such policies was already standard in many other parts of the world, and these plans were just a step towards parity with these regions: “Mandatory sustainability reporting has been introduced in India and China, and through stock exchange requirements in Brazil, South Africa and the United States. In Europe we had reached a glass ceiling on corporate sustainability reporting where the number of companies reporting on their social, environmental and governance impacts had peaked. It had fallen to individual European Member States to move ahead with their own legislation. Today’s EU proposal opens the door to growth of over 600 percent in new reporting.”

 

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