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Corporate Social Responsibility IW News 8. December 2016

What’s the business of business?

Many companies are voluntarily committed to CSR activities. Now, larger companies are required to publish sustainability reports. Whether these help to drive the commitment, however, is questionable, since conflicts of interest still remain.

This week, European member states had to translate the European Corporate Social Responsibility (CSR) Directive – formally known as EU-Directive 2014/95/EU on disclosure of non-financial and diversity information – into national law. Companies with more than 500 employees will be obliged to publish not only a financial report but also information on their sustainability efforts such as environmental protection, conditions for employees, human rights or corruption control. The directive and other initiatives currently underway, emphasize the change in sensitivity towards the impact of companies.

Companies themselves are also more sensitive to this topic. There is an increasing number of CSR activities. However, when these activities are no longer on a voluntary basis but instead based on legal grounds and obligations, there are conflicting arguments. Where does the responsibility of companies end? Are they not only responsible for their stakeholders but also for enforcing institutions along their value chain that are usually in the hands of government, e.g. human rights?

Many companies engage in voluntary associations and projects that find practicable solutions for assuming responsibility. These initiatives on a subsidiary level are usually ahead of government regulation and can have a big impact in coping with environmental or social challenges. Nevertheless, CSR measures are yet to be professionalized and systematized as surveys show. They should help achieving social, environmental and economic goals.

The CSR-directive can help developing reporting standards and measuring sustainability efforts. However, it will not necessarily help finding a common understanding of the social responsibility of companies. Assuming responsibility ca be a challenge given the different stakeholder demands. There is not only the often mentioned conflict between profit and social or environmental goals. Within these groups there are conflicting interests e.g. between customers who strive for lower prices and employees who strive for higher wages. These tensions are not dissolved by a sustainability report but can only be handled in close dialogue and cooperation.

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