Corporate Social Responsibility (CSR)

Some might think that Corporate Social Responsibility (CSR) is limited to third world charity. But what is CSR actually and can a business disclaim having such responsibility?

CSR is something we increasingly meet in the media. The Danske Bank money laundering scandal has created significant public turmoil and within the area of health & safety and environmental protection the scrapping of ships in the third world by doubtful unsafe practices have caught the eye of the media as well.

As citizens we become outraged when cheating, fraud, (intended) pollution or alarmingly unsafe working conditions are exposed to us. Occasionally, we witness such practices and conditions ‘abroad’, but in what state do we find working conditions and general occupational health & safety ‘back home’?

Does it take fatalities or chronically sick people who sustained permanent health injuries to relate to occupational health & safety in the context of CSR?

Legal Framework

In Europe the requirements for CSR is governed by the EU Directive 2014/95/EU on non-financial reporting encompassing as a minimum:

  • Environmental, social and employee matters; and
  • Respect for human rights, anti-corruption and bribery matters

The Directive applies to “…large undertakings which are public-interest entities exceeding on their balance sheet dates the criterion of the average number of 500 employees during the financial year” meaning e.g. listed companies of private or public ownership, banks, insurance companies or other entities of public interest.

It is not a requirement that such entities (by the above-mentioned Directive) pursue policy implementation of such matters, however, the non-financial statement shall in such case explain the reasons for not doing so.

By Commission guidelines to the Directive ‘health and safety at work’ is included in the category of social and employee matters and it can in overall be included that ’Non-financial Due Diligence’ is now a reality in the context of CSR.

Public demand and expectations

It comes as no surprise that banks, equity funds, pension funds and private investors increasingly choose not to engage with companies or projects which are not sufficiently governed or compliant to recognised CSR standards.

In 2016 a leading Danish renewables company experienced unfortunate local media coverage due to long term employee exposure to significant health threatening chemicals which resulted in serious personal health injuries. A group of about 40 people were awarded compensation and the case disclosed serious lack of supervision; not just by company management but also by the local government HSE agency.

Where environmental and climate matters are currently predominant on the political scene it will be interesting to observe to what extend companies will be excluded from attractive financing or strategic alliances due to a lacking or unsafe working environment. Or what about the suppliers or contractors to that company?

Lacking governance can hit a company or organisation differently and it can be very difficult to predict the outcome of CSR matters. However, a common denominator for health & safety at work can be fatalities or – in the above case – irreversible human injury. Is this acceptable in a modern world?

The future leadership

In a constantly changing world future leadership competence requirements are always eminent. In the context of CSR, requirements and expectations by the public and private investors can obviously not be disregarded.

By such, it can be expected that business life must fully adapt to those requirements and expectations and fully integrate CSR themes and standards into their business models and strategies. Many have started and are well underway.

In creating the necessary control measures, it must be reasonable to revise existing governance structures, due diligence models as well as risk management models to incorporate CSR fully in order to elevate health & safety sufficiently into the levels of top management who must never neglect their responsibility for supervision and inspection.

Many companies are clearly heavily engaged in CSR, however, the history on lacking execution of CSR strategies calls for reflection.

So, back to the question in the beginning. In conclusion, a company cannot disregard its corporate social responsibility regardless of size and applicability of the law. It simply does not make any sense to the mission and vision of a company nor to the customer if CSR is disregarded. But most importantly, the absence of CSR will for sure inflict the perhaps most important stakeholder of a company; its employees.