Final Report Summary - ESTER (Social regulation of European transnational companies)
The ESTER project was an empirical research into the social responsibility of European transnational companies (CSR). European Commission (EC) Green Paper has described CSR as follows: 'companies integrate social and environmental concerns in their business operations on a voluntary basis'. The project focused on the analysis of how CSR contribute to the achievement of the Lisbon strategic objective (March 2000 - 2010) and European strategy on sustainable development. The sociological and legal analyses, as well as the principle economic observations, focused solely on the social dimension of CSR, while the contextual analysis of websites included both the environmental and social dimensions. The project had three directions: the observation on the existence of a European model of CSR, the exportability of the European social model, and it examines the hypothesis of a 'codification of ethics'.
Firstly, a qualitative approach to analyse CSR practices and norms drafted and developed by companies: 350 semi-directive interviews in 30 European multinational companies, as well as with various social and institutional players. Secondly, a quantitative analysis of economic effects: 1 537 questionnaires, 533 corporate websites, and a random panel of 214 companies. Thirdly, a scenario approach, analysing the impact of legislation on CSR: 45 interviews using the scenario method with a range of players (NGOs, standards organisations, trade unions, companies, and civil servants in several ministries concerned with CSR or sustainable development). Five scenarios were proposed to the interviewees:
Scenario 1: Binding regional regulation (European Union (EU))
Scenario 2: Non-binding regional regulation (EU)
Scenario 3: International regulation (ILO/ONU)
Scenario 4: Transnational regulation (company)
Scenario 5: National regulation (head office country).
The contribution of the ESTER project includes a critical analysis of the concept of stakeholders, systematically linked to CSR, focusing on the reality of their links with the company. NGOs and rating agencies were exploited in some cases, and called upon to meet certain needs (lack of skills, enhancing visibility, etc.). The social partners had evolved from a refusal to become involved in social responsibility issues to a more active approach, while commercial partners (e.g. suppliers) were held hostage by these corporate commitments on CSR.
Finally, the ESTER project demonstrated that the implementation of CSR practices was primarily motivated by a series of organisational or economic windfall effects. For instance, CSR was not only useful for enhancing corporate 'image' and legitimacy, but also for gaining an advantage over competitors and demonstrating the company's performance in a new area, at a relatively modest cost to the organisation, especially when implemented via the existing corporate structure.
The first key finding was that corporate social responsibility was mainly motivated by image issues:
- either, to obtain a competitive edge, i.e. a social responsibility policy may be assimilated to an enhancement of the social quality of the goods, which may result in increased market share;
- or, to offset the risk of damage to the corporate image. As corporate image is a very important intangible asset, firms often feel an acute need to protect themselves from this image risk.
The second major learning point of the ESTER network's research was that little reference was made to the EU's normative framework in defining the social responsibility policies of European enterprises. The economic reason for this was the advantage of referring to the most common norms.
Control and monitoring procedures associated with CSR norms are diverse and varied, but they have one aspect in common: they do not rely on legal and court mechanisms, but leave monitoring and implementation in the hands of the transnational standardsetters. Independent or external organisations are chosen as auditors only in those rare cases where transnational corporations are subject to political risks and / or market pressure. When it comes to the implementation and monitoring of corporate undertakings, transnational enterprises mostly rely on internal mechanisms.
Any initiative on corporate social responsibility in transnational enterprises should:
- be developed in the context of a global forum of international institutions;
- contribute to ensuring global recognition for the definition of CSR presented in the EC Green paper.
Any instrument for regulating corporate social responsibility should:
- be applicable to all companies that have any connection whatsoever with the EU;
- be adopted on an international level, with possible amplification on a regional (European) level, and, in any case, implementation via transnational corporate norms. These norms should place the greatest emphasis on consensus and the involvement of the social partners and other stakeholders, in order to avoid, as far as possible, the pitfalls of a unilateral approach;
- entail a voluntary commitment to the entire contents of the norm;
- take the form of a framework norm harmonising corporate practices;
- have a reasonable substantive content that is easily accessible and verifiable;
- include both substantive and procedural content, drawing on the body of existing international legislation on universal standards for its substantive content. Further developments will be required concerning procedural content, as there are fewer established sources for this aspect;
- define a scope of application capable of covering the specific activities of transnational companies, as well as all the enterprises within their sphere of influence (subsidiaries, suppliers, subcontractors, etc.), inside and outside the EU.
Any implementation in response to an initiative on social responsibility or the adoption of a regulatory instrument requires a common monitoring and audit strategy, which should:
- confirm the full competency of public administrations in monitoring all binding legal norms, on every level;
- promote all types of cooperation and mutual assistance among public monitoring organisations for this purpose;
- set up effective monitoring systems for non-binding instruments on CSR. A European monitoring agency on corporate social responsibility could be established for this purpose. An agency is a body governed by European public law; it is distinct from the institutions such as the European Council, the European Parliament, etc. and has its own legal personality. It is set up by an act of secondary legislation in order to accomplish a very specific technical, scientific or managerial task, in the framework of the EU's 'first pillar';
- monitoring could also be carried out by industry-specific bodies with employer-employee representation;
- define macroeconomic indicators to measure the impact of social norms on changes in European trade patterns to determine whether norms have an effect on the international competitiveness of European firms or impact imports from the South and could, therefore, be considered protectionist.
Firstly, a qualitative approach to analyse CSR practices and norms drafted and developed by companies: 350 semi-directive interviews in 30 European multinational companies, as well as with various social and institutional players. Secondly, a quantitative analysis of economic effects: 1 537 questionnaires, 533 corporate websites, and a random panel of 214 companies. Thirdly, a scenario approach, analysing the impact of legislation on CSR: 45 interviews using the scenario method with a range of players (NGOs, standards organisations, trade unions, companies, and civil servants in several ministries concerned with CSR or sustainable development). Five scenarios were proposed to the interviewees:
Scenario 1: Binding regional regulation (European Union (EU))
Scenario 2: Non-binding regional regulation (EU)
Scenario 3: International regulation (ILO/ONU)
Scenario 4: Transnational regulation (company)
Scenario 5: National regulation (head office country).
The contribution of the ESTER project includes a critical analysis of the concept of stakeholders, systematically linked to CSR, focusing on the reality of their links with the company. NGOs and rating agencies were exploited in some cases, and called upon to meet certain needs (lack of skills, enhancing visibility, etc.). The social partners had evolved from a refusal to become involved in social responsibility issues to a more active approach, while commercial partners (e.g. suppliers) were held hostage by these corporate commitments on CSR.
Finally, the ESTER project demonstrated that the implementation of CSR practices was primarily motivated by a series of organisational or economic windfall effects. For instance, CSR was not only useful for enhancing corporate 'image' and legitimacy, but also for gaining an advantage over competitors and demonstrating the company's performance in a new area, at a relatively modest cost to the organisation, especially when implemented via the existing corporate structure.
The first key finding was that corporate social responsibility was mainly motivated by image issues:
- either, to obtain a competitive edge, i.e. a social responsibility policy may be assimilated to an enhancement of the social quality of the goods, which may result in increased market share;
- or, to offset the risk of damage to the corporate image. As corporate image is a very important intangible asset, firms often feel an acute need to protect themselves from this image risk.
The second major learning point of the ESTER network's research was that little reference was made to the EU's normative framework in defining the social responsibility policies of European enterprises. The economic reason for this was the advantage of referring to the most common norms.
Control and monitoring procedures associated with CSR norms are diverse and varied, but they have one aspect in common: they do not rely on legal and court mechanisms, but leave monitoring and implementation in the hands of the transnational standardsetters. Independent or external organisations are chosen as auditors only in those rare cases where transnational corporations are subject to political risks and / or market pressure. When it comes to the implementation and monitoring of corporate undertakings, transnational enterprises mostly rely on internal mechanisms.
Any initiative on corporate social responsibility in transnational enterprises should:
- be developed in the context of a global forum of international institutions;
- contribute to ensuring global recognition for the definition of CSR presented in the EC Green paper.
Any instrument for regulating corporate social responsibility should:
- be applicable to all companies that have any connection whatsoever with the EU;
- be adopted on an international level, with possible amplification on a regional (European) level, and, in any case, implementation via transnational corporate norms. These norms should place the greatest emphasis on consensus and the involvement of the social partners and other stakeholders, in order to avoid, as far as possible, the pitfalls of a unilateral approach;
- entail a voluntary commitment to the entire contents of the norm;
- take the form of a framework norm harmonising corporate practices;
- have a reasonable substantive content that is easily accessible and verifiable;
- include both substantive and procedural content, drawing on the body of existing international legislation on universal standards for its substantive content. Further developments will be required concerning procedural content, as there are fewer established sources for this aspect;
- define a scope of application capable of covering the specific activities of transnational companies, as well as all the enterprises within their sphere of influence (subsidiaries, suppliers, subcontractors, etc.), inside and outside the EU.
Any implementation in response to an initiative on social responsibility or the adoption of a regulatory instrument requires a common monitoring and audit strategy, which should:
- confirm the full competency of public administrations in monitoring all binding legal norms, on every level;
- promote all types of cooperation and mutual assistance among public monitoring organisations for this purpose;
- set up effective monitoring systems for non-binding instruments on CSR. A European monitoring agency on corporate social responsibility could be established for this purpose. An agency is a body governed by European public law; it is distinct from the institutions such as the European Council, the European Parliament, etc. and has its own legal personality. It is set up by an act of secondary legislation in order to accomplish a very specific technical, scientific or managerial task, in the framework of the EU's 'first pillar';
- monitoring could also be carried out by industry-specific bodies with employer-employee representation;
- define macroeconomic indicators to measure the impact of social norms on changes in European trade patterns to determine whether norms have an effect on the international competitiveness of European firms or impact imports from the South and could, therefore, be considered protectionist.
