European Parliament Claims CSR Should No Longer Be Voluntary

A new field of activity is likely to get under control of the European and national law. The corporate social responsibility (CSR), defined by every specialist as a voluntary, additional activity of an enterprise, will no longer be free to choose, as MEPs discuss a project of the new directive laying down on companies an obligation to report so–called non–financial information relating to e.g. environmental and social affairs. Companies will also be obliged to report their activities relating to respect for human rights and employee matters such as “diversity policy, including aspects concerning age, gender, geographical diversity”.

Every big enterprise will have to provide not only a description of its policies in these areas but also information of their effects. Why should it be understood as an obligation to carry out CSR? Firstly, MEPs warn that “a company that does not apply a specific policy in one or more of these areas will be required to explain why this is the case.” The whole text of the directive’s proposal assumes that it is not normal if a company does not have its CSR policy. Moreover, some MEPs, in their press interviews, hope that an obligation to report CSR will increase the number of companies which carry out these policies and will prevent the next economic crisis. Finally, someone could claim that reporting non–financial information is not the same as reporting the CSR, but the very beginning of the proposal leaves no doubt: the term “CSR” is strongly linked to the mentioned obligation, e.g. in the phrase “Non–financial transparency is therefore a key element of any CSR policy.”

Introduction of the new directive can be dangerous not only because of extending the state’s and EU’s powers onto a new area of people’s activity. It will be harmful for the CSR itself. When the directive comes into force, it is likely that enterprises will decide to begin their corporate responsibility policies only with the purpose of respecting the EU law. This will significantly reduce the quality of CSR, which will end up as an artificial activity undertaken to fulfill the EU obligation; all the more so because only 6 percent of big European companies (2.500 of 42.000) report CSR. It proves that the rest do not want to carry out CSR, or are not ready to do it. Moreover, even if 6 percent of big companies report CSR, imposing an obligation to report something voluntary is unreasonable.

The new obligation would also create additional bureaucracy. It is easy to imagine that in some companies these new departments devoted to tackling the non–financial reporting challenge will be created. Perhaps it is some hidden idea of EU officials how to reduce unemployment?

The bureaucracy problem turns out to be more crucial if we pay attention to the possibility of imposing the CSR reporting on small and medium enterprises, for which coping with additional bureaucracy would be more harmful than for big corporations. The idea of extending the CSR reporting obligation on SMEs is still alive, even among some members of European Parliament, not to mention some organizations related to ecology or fair trade. When such an obligation is imposed on big companies, it will pave the way for extending it on every enterprise. Then something unimaginable will happen: something strongly voluntary will be strictly controlled by law.

It is worth mentioning that CSR should not be regarded as an obligatory activity, as enterprises often refuse to carry out CSR policies because of their very poor profitability. There is no empirical evidence that helping poor schoolchildren and financing environment protection are necessary so that the business is profitable. These activities should not be defined as an inherent goal of a company because its objective is primarily to gain profit. Moreover, the obligation to employ the “diversity policy” is based on an unjust assumption that every lack of age, gender or geographical diversity among employees is a simple discrimination. Meanwhile, this diversity lack can be caused by employing people who have the most desired competences and qualifications.

The MEPs do not reveal any evidence that lack of CSR is one cause of the present economic crisis, but claim it willingly. Moreover, they present a magical way of thinking that imposing some activity by law is enough to build a universal acceptation for it and a common will to implement this law.

The European Parliament’s plenary voting on new CSR reporting regulations will be held in the spring of 2014. There is still hope that MEPs will become aware that their main task to avoid the next economic crisis is, firstly, to reduce regulations with the purpose of creating a true common market – and, secondly, more budgetary control that will prevent excessive deficits.