The honeymoon period for voluntary self-regulation on CSR may be beginning to draw to a close, says Adrian Henriques
Should corporate social responsibility be regulated by law? The current
situation in the UK is a celebration of diversity. There are laws or
regulations covering things such as the minimum wage, health and safety
and disclosure to investors, but none covering overall disclosure of
environmental impact, little covering supplier relationships and almost
nothing on community impact. Opinion in the CSR world is just as
diverse, some favouring a legal framework for CSR and others fearing it
would destroy everything.
The most common reason given for
why new legislation would set CSR back is the lowest common denominator
argument. This suggests that if there were legislation on CSR, then
companies would deliver what the law requires, but never more. At the
moment, voluntary CSR is experiencing a hundred flowers in bloom. But
legislation, the argument goes, would wither ethical motivation.
Strangely, the EC green paper even suggests that CSR be defined as that
which is not legally mandatory. This is a very odd position. In many
parts of the world where legal norms are not well embedded, ethical
performance is centrally concerned with whether or not the laws which
do exist are actually observed in practice. And in the UK, if you want
to know the ethical performance of the catering trade, in which many
people are paid around the minimum wage, it is crucial for the
companies to disclose their policies on the distribution of tips.
In reality, minimum wage legislation has not meant that we are all
suddenly paid only that minimum. Why should CSR, as a whole, be any
different? If there is a business case for CSR, then it will still be
there after legislation. Legislation on performance functions as a
floor. It would remove the long tail of under-performers, not the
headroom for high achievers.
But is legislation also going
to raise the ceiling? There is a big difference between legislation on
actual performance, say on wages, and legislation on disclosure.
Legislation or regulation of performance may sometimes have perverse
effects (for example the firing of child workers in supply chains).
Legislation on disclosure will not. Legislation on disclosure works by
generating trust and change through the development of policies,
management systems and commitment.
This year the UK
government may introduce a Companies Bill requiring some level of
non-financial reporting. It will ask only that companies report on what
they do, not tell them what that should be. So perhaps the first real
law of CSR will be, ‘disclose’. Will that be supported by the CSR
community?
