EU CSR K.O.

Wednesday, 20 November, 2013

EU member states are to reject a pledge they made in May to improve CSR reporting. The pledge was to make CSR reporting mandatory for listed companies, a move which has seen much kick back since May.

One of the key aspects of the pledge was to introduce country by country reporting, which would make companies report their CSR on a country based taxonomy, making it easier and clearer to see what, where and how they are practising CSR.

Yet the move was rejected largely on the back of the bottom line. One of the most prominent groups against the pledge, The Federation of German Industries said the costs would be too much:

“These additional financial burdens would put European companies at a serious disadvantage with regards to their international competitiveness, and should therefore be avoided on all accounts”

Some estimates for the costs of this CSR reporting were up to €600,000 whilst the EU commission said it would cost just €5000 on average.

The discussion between these organizations leaves a bad taste however, and smacks of elite myopia. Firstly, the talk about ‘the costs of CSR reporting’ suggests some kind of objective cost to be taken on by companies. Yet CSR is a scalable practice, and it follows that smaller companies with smaller CSR programmes, also have smaller reporting duties. That their costs could get up to 600,000 is clearly absurd.

And of course the bigger companies already spend much more than this on their CSR activity and reporting, so the news is of little relevance to them either way. The pledge seems to be most troubling for medium sized businesses with little culture of CSR who seem to be equating to just another set of taxes.

But others in Europe also do not buy the bottom line argument, a Ukrainian businessman spelled out much of the CSR raison d’etre, saying:

“One reason that the Ukraine finds it difficult to attract foreign investment is the lack of transparency, so the business community would welcome introducing more European standards of rules. Perhaps that would result in higher labour costs, but it would be better for innovation, and help the country to sort some of its environmental problems with dioxin pollution and radioactive waste."

With a lack of any genuine feasibility issues, what this looks like to the public is a push back from business against the ‘burden’ of sociability; not a message the private sector ought to be sending right now. In the extractives industry, many small companies are already happily reporting non-financial issues, and some even (believe it or not), take pride in their CSR! And they do so for considerably less than the arbitrary estimates provided, with huge gains in terms of social goodwill and hence easier operations.

If there is an argument against obligatory CSR reporting, then it’s that it can remove the company’s right to claim good intentions. An increased cynicism towards private sector CSR reporting may result if everybody knows that they have to do it. But this is a light point, as it only looks at the reporting of CSR and not CSR itself; good CSR is good CSR, regardless of the laws, companies should be doing it properly and reporting it properly.