The honeymoon period for voluntary self-regulation on CSR may be beginning to draw to a close, says Adrian Henriques
Should corporate social responsibility be regulated by law? The current situation in the UK is a celebration of diversity. There are laws or regulations covering things such as the minimum wage, health and safety and disclosure to investors, but none covering overall disclosure of environmental impact, little covering supplier relationships and almost nothing on community impact. Opinion in the CSR world is just as diverse, some favouring a legal framework for CSR and others fearing it would destroy everything.
The most common reason given for why new legislation would set CSR back is the lowest common denominator argument. This suggests that if there were legislation on CSR, then companies would deliver what the law requires, but never more. At the moment, voluntary CSR is experiencing a hundred flowers in bloom. But legislation, the argument goes, would wither ethical motivation. Strangely, the EC green paper even suggests that CSR be defined as that which is not legally mandatory. This is a very odd position. In many parts of the world where legal norms are not well embedded, ethical performance is centrally concerned with whether or not the laws which do exist are actually observed in practice. And in the UK, if you want to know the ethical performance of the catering trade, in which many people are paid around the minimum wage, it is crucial for the companies to disclose their policies on the distribution of tips.
In reality, minimum wage legislation has not meant that we are all suddenly paid only that minimum. Why should CSR, as a whole, be any different? If there is a business case for CSR, then it will still be there after legislation. Legislation on performance functions as a floor. It would remove the long tail of under-performers, not the headroom for high achievers.
But is legislation also going to raise the ceiling? There is a big difference between legislation on actual performance, say on wages, and legislation on disclosure. Legislation or regulation of performance may sometimes have perverse effects (for example the firing of child workers in supply chains). Legislation on disclosure will not. Legislation on disclosure works by generating trust and change through the development of policies, management systems and commitment.
This year the UK government may introduce a Companies Bill requiring some level of non-financial reporting. It will ask only that companies report on what they do, not tell them what that should be. So perhaps the first real law of CSR will be, ‘disclose’. Will that be supported by the CSR community?