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1 63((&+ $QQD'LDPDQWRSRXORX European Commissioner responsible for Employment and Social Affairs &65LVQRWD]HURVXPJDPH Address to the Danish Presidency Conference on CSR +HOVLQJRHU1RYHPEHU

2 Ladies and Gentlemen, I am delighted to be with you today. To review, our European approach to Corporate Social Responsibility. To see where we are today. And to look to where we might go in the future. I would like to cover four key dimensions of CSR: The political which explains why the agenda has developed so rapidly; The economic which address the business case as well as the wider impact; The social which takes us to the heart of the European Social Agenda; And the environmental which links to our global as well as European concerns and responsibilities. I would like to consider what can, and should, be done in terms of action. Not just internationally. But within Europe. Building effective practices. Attuned to our goals, and our ways of doing business. Building on voluntary action and co-operation. While facing the obvious need to ensure some degree of convergence in the context of two process. European integration on the one hand. Enlargement on the other. In political terms, CSR has appeared on the European political map during the last couple of years. However, Commission interest dates back at least a decade. Especially to the time when Jacques Delors launched a successful initiative to engage business in the fight against social exclusion. Our current renewed, and expanded, commitment to CSR came out of the Lisbon Summit in March Which set a new strategic goal for the Union - of becoming the most inclusive and competitive society in the world. With EU leaders making a specific appeal to companies' sense of social as well as economic responsibility. As we set about the wider process of modernising, and strengthening, the European economic and social model. Helping the Union develop policies in which economic growth, competitiveness, social justice are mutually reinforcing. With an additional focus on environment protection and sustainable development following the Gothenburg Summit. Since then, of course, we have had new experiences and developments. Not all of them welcome or comfortable. First there was the roller-coaster ride of the new technology companies. Which raised extraordinary hopes, and which will still deliver much good over the longerterm. But which brought serious financial losses for some investors. And which undermined, to some extent, public confidence. Then we had the affairs of Enron and others. Which exposed serious weaknesses in even mainstream company accounting and auditing practices. With consequences for economic management as well as company performance. And now we have to face serious uncertainties about our economic and employment prospects. All of which underlines the need to build robust CSR practices. Fit for bad times, as well as good. Ensuring that CSR is not just seen as a 'fair weather' policy, but as an integral part of our longer-term strategy for the development of the Union. Which brings me to the economic dimension, and the business case for CSR. Which needs to be build on sound financial arguments, and not just moral pressure. 2

3 We need to work on the principle that responsible businesses work best for themselves, as well as society at large. Indeed, more and more companies have recognised that CSR makes good business sense. 95% of the top 400 US-based corporations have already adopted CSR codes of conduct. With more and more European businesses doing the same. Companies like this have recognised the importance of engaging in dialogue with stakeholders. In order to understand their expectations and needs. In order to align company values and those of society at large. Which brings me to the social dimension. Which is not, of course, a separate box. Certainly not for those who understand the nature of the social policy agenda reforms we are pursuing in Europe. Which recognise the fundamental inter-dependence that exists not just in theory, but in practise - between the economic, social and employment dimensions of life. But it is not just a question of public policy. Dialogue and partnership between all interested parties is the key to developing a wider concept, or model, of Social Responsibility founded on European values. Recognising that, until now, CSR has been largely business-led. And here I would like to be clear about my concept of CSR. Firstly, for me, CSR does not, in any way, represent a drift back to old-style 'corporatism'. Whether of the post-war type, from which we all removed ourselves at considerable social and economic cost in the 1970s and 1980s. Or the more worrying form that developed in some countries in the 1930s where the role of the State and industry became confused in pursuit of authoritarian political goals for society. CSR is fundamentally different. It is no longer just about charity, philanthropy or even ethics. It is about the fact that companies are increasingly held accountable to shareholders, to workers, to suppliers and to society as a whole. At the same time, CSR should also be seen in the light of the Community's overall strategy for economic and social development. Which is based on three guiding principles. Firstly, the pursuit of basic rights human, social and equality. Secondly, the maintenance and modernisation of the European social model. And, thirdly, the pursuit of economic competitiveness and social inclusion goals, as agreed at the Lisbon European Council. In that context, basic rights are absolute, and needed to be defended by law. As do basic minimum standards. But other goals are more aspirational. Giving us direction and purpose. With techniques to measure performance, and keep us moving forward. But operating outside of a legal framework. In that respect, we naturally look to companies to respect legal rights and minimum standards. But we hope they will do more. Whether they do this out of 'enlightened self interest'. Or whether they do it in pursuit of more elevated goals. On this point, I know that some believe that, unless I keep the threat of EU legislation 'up my sleeve', we will never make progress on CSR at European level. 3

4 I disagree. CSR is not about threats. Hidden or otherwise. It is about doing better than basics. It is about doing better than legally required. With methods that are both effective and flexible. At the same time, the voluntary nature of CSR does not mean that there will never be any further legislative proposals affecting the conduct of businesses in the context of the internal market, consumer protection, or environmental policy. Where standards need to be raised, then the Commission will always be ready to act. But we cannot expect to make the world a better place only through legislation. We need to look at the framework within which CSR is operating. Its tools, practices, instruments and processes. On this point, social and environmental reporting is crucial. And I believe, we must consider how we can best integrate reporting into standard operating procedures. Linked to this is the need to increase transparency and comparability. A recent survey of OECD countries revealed that only one in five companies which have adopted codes of conduct make public information on their compliance. At the same time few objectives sources of information exist to compare CSR performance between or across companies. Research institutes and bodies have, I believe, an important role to play here. In all of this, open and constructive dialogue, involving all actors of social responsibility is crucial. So as to spread the message, identify issues of concern, and improve the quality, credibility and effectiveness of CSR tools. Hence the setting up of the Multi-Stakeholder Forum. Which has been asked to facilitate the exchange of experiences, to improve knowledge on CSR, and to promote convergence and transparency. Including techniques like codes of conduct, social accounting, labels, social partners agreements and so on. One issue we have instructed the Forum to look at in close detail is evaluating bodies both internal and external. This issue is vital for the entire credibility of the CSR process. Now I know that some critics would dismiss the new Forum as 'just another talking shop'. I sincerely hope that will not be the case. But I recognise that it will succeed only if it focuses on common concerns, and does not waste its time simply trying to 'paper over the cracks' of the different arguments. CSR is a win-win approach. Not a zero-sum game in which one party gains at another's expense. Which is why the Forum must always look for the higher common factor. Not the lowest possible denominator. We want it to be innovative, experimental, and transparent. So that good practice solutions can be quickly and widely spread. Which is why we have given it a clear and well-defined mandate. And a clear first deadline of mid

5 In 2004, the Commission will look at the results, and see how best to take the initiatives forward. Looking in particular at the triple market benefits for companies: Firstly, in terms of consumers. With surveys showing that almost one in two Europeans would be willing to pay more for products that are socially and environmentally friendly. Secondly, in terms of workers. As socially responsible firms attract and hold onto quality staff more easily than others. And thirdly, in terms of investors. As we have seen with the surge in popularity of socially responsible investing. Which has led to the creation of over 200 ethical funds across Europe, representing around 11 billion euro. These benefits underline the fact that companies do not exist in a vacuum. Enlightened companies realise they must look not only at profits, margins and competitiveness. Because every firm, every factory, every office operates, not in isolation but in an economic, political and social sphere. Which in turn shapes and impacts on the firms themselves. These inter-linkages and ties are at the heart of the CSR debate. And are central to the new model of governance which we are working to achieve. Our belief for which there is ample proof is that socially responsible behaviour pays. I want to promote that message. I want to demonstrate how CSR can contribute to the achievement of our EU-wide objectives. Of growth, competitiveness, better governance, and sustainable development. And I want us to look carefully at the techniques such as labelling, reporting schemes or codes of conduct - that can help raise performance. Our EU-wide task is to add value. To help and encourage companies and stakeholders deliver on the commitments they already have: Commitments to their workforces in terms of health and safety, labour law, equal opportunities, and so on. Commitments to the environment in terms of a growing range of agreements, often international. As well as commitments to society at large, by being good corporate citizens. At the end of the day, we can all benefit from living in a world in which common, positive, standards are respected by all. Which brings me to my final point. On global standards. On development issues. On the environment. CSR initiatives cannot, of themselves, address all the complex issues with which we wrestle at the moment. But they can and are playing an increasingly important part. We need to harness the potential of globalisation and improved global governance. Reducing poverty. Ensuring greater environmental security. Respecting diversity not least of religion and belief. 5

6 I cannot address all these issues now. But I do want us to ensure that they are part of the Agenda. So that we match our desire to improve the performance of European business and society, with a desire to assist better than we have so far, the greater part of the World. Which is still almost untouched by our levels of achievement. I thank you for your attention. And look forward to our working together to make Europe and the world a better place. 6