Corporate Responsibility and the Competitive Advantage of Nations

Tracey Swift & Simon Zadek

(July 2002)

Today's global economy provides opportunities for increased international trade and thus for the creation of economic wealth. Equally, it raises new challenges in how best to develop trading relationships that deliver in support of the UN's Millennium goals of reducing poverty and ensuring greater environmental security.

This is the context in which 'corporate social responsibility' in its diverse forms has emerged as a key framework within which business operations are being re-examined and further developed. How does this tie in with the quest for competitiveness? Indeed, and beyond commonly "received opinions", the experience I gained through my current function as EU Trade Commissioner showed me that there is a positive link between social and environmental principles of behaviour of a company and its competitive advantages and performances.

Corporate social responsibility is one of the responses to the imbalances resulting from the acceleration of the globalisation process:

• Imbalance between the ever increasing pace of liberalisation (more pronounced for finance than for trade) and the time necessary to elaborate the international regulatory framework for these exchanges.

• Imbalance between the advanced governance systems in industrialised countries, who dispose of a highly sophisticated set of economic and social regulation, and the lack of such governance in developing countries as well as at international level.

• Imbalance between the highly developed economic pillars of global governance (IMP, World Bank, WTO) and the almost embryonic state of the
  social and environmental pillars of such a governance system.

Against this backdrop, voluntary social and environmental practices of business, going beyond companies' existing legal obligations, can play a major role in filling the governance gap in a creative and innovative way. CSR is thus not a substitute, but a complement to hard law. As such it must not be detrimental to public authorities' task to establish binding rules, at domestic and/or at international level, for the respect of certain minimum social and environmental standards. The focus of the debate in this respect has certainly moved on from a simple dichotomy between voluntary and binding instruments, towards the overarching challenge of devising reporting tools and verification mechanisms to ensure proper compliance with CSR commitments.

I think, however, that the societal benefits of CSR practices will remain limited unless they can be integrated into broader strategies, and public policies certainly have a role to play in this respect.

What role can Europe play in this respect? In early July, the European Commission adopted a policy paper, "Corporate social responsibility, a business contribution to sustainable development", suggesting, inter alia, the establishment of a "European Multistakeholder Forum" for all players (social partners, business networks, civil society, consumers and investors) to exchange best practices, to consider principles for codes of conduct and to seek consensus on objective evaluation methods and validation tools such as social and environmental labels. The strategy seeks to complement existing initiatives by companies themselves and by public organisations such as the OECD and the UN.

In my view, these discussions should explore the possibility of developing a European approach to CSR, which would complement the ones already developed at international level. Through centuries of economic development, European countries have developed a particular balance in their social contract between governments, citizens and markets. We need to reflect this balance also in our approach to CSR.

Until now, the debate has largely focused on what individual companies can do to enhance sustainable development goals. This pamphlet represents, I think, a significant step forward, by exploring some of the challenges, dilemmas and tensions surrounding the CSR debate and notably the link between CSR and the competitive advantage of nations, the role of partnerships between business, civil society and the public sector, and the contribution public policy could make to strengthening the links between corporate responsibility and competitiveness. I hope it will find the wide readership it deserves.

Pascal Lamy, Commissioner for Trade,

European Commission

The Copenhagen Centre is an international, autonomous institution established by the Danish Government. TCC recognises the need for governments to create a framework encouraging public/private partnerships to emerge, develop and work.

TCC focuses on social cohesion. Governments, business community and social partners can provide and support opportunities for the less privileged to retain their jobs or to be included in the workforce.

TCC builds on the assumption that joining forces, thus promoting social sustainability, is better and more cost-effective than just shifting burdens between public and private responsibility.

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