EU2020 must prioritise corporate accountability

The business activities of multinational corporations influence almost every aspect of development in our societies. Unfortunately, this influence is not always positive. From mercury poisoning in South Africa to child labour in India, company breaches of environmental and human rights standards have revealed systemic failings in the operation of many companies -including European ones- that have resulted in environmental and social harm over many years. The ongoing economic and financial crises have further underlined the interdependence of our globalised world. Today, EU legal frameworks fail to regulate this vicious influence in order to protect public interests against undesired adverse impacts of corporate operations.

A new sustainable social market economy, as is currently outlined in the EU2020 consultation document, must also include concrete policy proposals to address this situation. Unethical operations of European companies have adverse systemic effects in their own national markets as well as in the EU internal market. Currently, the situation in the internal market is such that responsible businesses are competitively disadvantaged and forced to follow the same path and relocate or outsource their production. This contributes to undesired patterns in market development, such as disadvantaging small enterprises or hampering required systemic shifts to a low carbon economy. The financial markets furthermore reward companies for the aforementioned additional profits that are reflected in the value of their shares, limiting investors’ interest in other companies.

This is clearly not in line with the principle of creating value nor with the promotion of European values. The new Internal Market Commissioner-designate, Michel Barnier, insisted during his hearing in the European Parliament on the 13th of January for men and women to be at the heart of the EU internal market. He also stressed the need for the EU internal market to be at the service of citizens, and not the other way around. The EU2020 document also underscores this point very clearly: “we need a new agenda that puts people and responsibility first.” This can only happen if the EU2020 agenda takes into account the indispensable role that corporate accountability and CSR must play in ensuring a more competitive economy but also to ensure that the achievement of EU’s social, economic and environmental goals go hand in hand.

As stated in the Commission staff working document accompanying the European Competitiveness Report of 20081 “CSR needs to be part of core business strategy if it is to be a competitive differentiator. In this way CSR can also help to strengthen the European social model (…) Enterprises in which CSR remains a peripheral concern, mainly confined to public relations functions, are likely to miss opportunities for competitiveness gains”. That same document states that CSR can make a valuable contribution to the goals of the European Growth and Jobs strategy. Thus, EU2020 being the continuation of that very strategy, really falls short if it does not consider corporate accountability and CSR at its core.

Read the whole submission by downloading the attachment below.

The European Commission adopted on the 21 April 2009 a Report and a Green Paper on the review of Council Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, with the aim to launching a broad consultation among interested parties on how to improve the operation of the Regulation and achieve a true free circulation of judgments in the European Union.

Jointly with the EU office of Amnesty International, ECCJ submitted a position paper to the European Commission’s consultation on the Brussels I regulation (EC No 44/2001 on jurisdiction and recognition and enforcement of judgments in civil and commercial matters).

For more information about this process click here

The Human Rights Subcommittee of the European Parliament organised a hearing on the issue of Business and Human Rights on April 16th 2009.

The UN Special Representative on this issue, John Ruggie, was the keynote speaker of the event where he presented the framework “Protect, Respect and Remedy” to the members of the European Parliament. Under the state duty to protect, he highlighted the need for states to ensure that their policies are coherent both with their international human rights obligations and across all their relevant departments and he underlined the important role the EU had in this respect. "Europe must do more than say nice words to ensure that business respects human rights", he said. He also emphasised the need for corporations to fully integrate human rights due diligence process throughout their structures. Finally, he underlined the fact that many businesses would welcome stronger guidance from their governments on human rights, especially when operating in uncertain environments such as conflict zones.

Photo: Elaine Rudolphi

The hearing also featured professor Jan Wouters from the Leuven Centre for Global Governance Studies (Catholic University, Leuven) who presented a study commissioned by the European Parliament including concrete recommendations for action for the EU on this field. He called for the EU to reconsider its focus on voluntary CSR and institute a new legal framework of accountability for corporations, including mandatory reporting and the possibility of prosecuting companies for human rights violations in international criminal courts. He also suggested that external human rights policies should focus on companies as well as on states and that the focus should be on outcomes and accountability, not simply dialogue.

John Morrison from the Business Leader for Human Rights Initiative (BLIHR) spoke on behalf of the private sector, again highlighting the support of business for state action on business and human rights, in particular to provide legal certainty for companies. He described the Ruggie framework as “a real opportunity for European leadership” and urged the EU to draw from it in considering its next steps. This message was echoed by ECCJ’s coordinator, Ruth Casals, participating in the hearing on behalf of the NGO community. She presented the need for the EU to take concerted action to improve the regulatory framework governing how EU companies operate overseas.

ECCJ together with the network Fatal Transactions, and the organisations Cafod, Global Witness, the European office of the Jesuits, and IPIS prepared a special submission for the hearing outlining the key demands and recommendations to the EU. Download this document below.

John Evans, Secretary General of the Trade Union Advisory Committee to the OECD (TUAC) also spoke at the event, expressing the need for practical solutions to the “institutional dysfunction” of governments in relation to the issue of Business and Human Rights.

A video of the session is available here

More information can also be found in the page of the European Parliament

The meeting documents can be found here

On 10th February, ECCJ participated in the European Commission’s Multistakeholder Forum on CSR. Representatives from our member organisations were invited to speak on a variety of issues and engaging in debate with representatives of business, academia, trade unions, investors and public authorities.

Videos of the Forum and the presentations by ECCJ members are available online at the following webpage: http://webcast.ec.europa.eu/dgenttv...

Tune in to see:

• Olivier de Schutter UN Special Rapporteur on the Right to Food

• Aloysius Arockiam Director of SAVE discussing decent work and supply chains

• Orencio Vazquez, co-ordinator of Observatorio RSC on transparency and reporting on non-financial issues

• Ruth Casals, ECCJ co-ordinator introduce ECCJ and it’s proposals

• Paul de Clerck, Head of Economic Justice at Friends of the Earth Europe discussing what more needs to be done to make Europe a pole of excellence on CSR, and how to do it with a more efficient multistakeholder engagement.

Background documents for the meeting can be found on the Commission’s website at http://ec.europa.eu/enterprise/csr/..., including the final agenda and documents submitted by stakeholder organisations in preparation for the meeting. ECCJ’s documents and Vicepresident Verheugen’s closing remarks are downloadable below.

One of the main results of the meeting was the announcement by Vicepresident Günter Verheugen that the European Commission will conduct a study to assess and clarify the applicable legal framework for EU companies in their operations abroad. ECCJ has been requesting the European Commission to carry on such study in order to clarify the rules of the game for EU companies but also to identify where gaps exist which are allowing these companies to violate Human Rights and environmental rights in their operations abroad. ECCJ welcomes this announcement and looks forward to engage with the Commission in drafting the terms of reference for it.

"I will therefore encourage my fellow Commissioners -said Vicepresident Verheugen- responsible for the different aspects of this matter to further deepen our knowledge about the nature and scope of the existing EU legal framework applicable to European companies operating in third countries, for example through an analytical report with multi-stakeholder involvement. It is in our interest and in the interest of obtaining a level-playing field for our businesses to remind each and everybody that human rights are universal and should be globally respected".

ECCJ believes that there are significant opportunities within European Law to improve accountability of European companies.

After a year of hard work, we have compiled research and have conducted a series of consultations with company law specialists, CSR academics and civil society groups to evaluate the current obstacles to corporate justice. During the exercise we have also stopped to consider what changes to EU law could help prevent human rights abuses and environmental degradation within the sphere of responsibilty of European Multinational Enterprises.

The findings of our work can be found in the following two documents:

• The report "Fair Law" which presents the legal analysis and arguments for the proposals;

• The report "With power comes responsibility" which presents our proposals through an analysis of what could have been their effect in concrete real case studies of corporate misconduct;

On February 8, 2007 the European Commission released the results of the last reconvening of the European Multistakeholder Forum (MSF). The Forum took place on December 7, 2006 in Brussels and included 145 representatives of employers’ organisations, governments, European institutions and trade unions.

Due to our disappointment with the outcome of the last meeting of the MSF and the resulting March 2006 Communication, which defined CSR as purely voluntary, NGOs and other civil society organisations collectively decided not to attend. The signals we received in the meantime simply did not convince us that anything had changed and we did not believe the Commission was ready to take a leading role in the formulation of CSR policy.

Although many participants expressed their regret at the absence of civil society, representatives of DG Enterprise, such as Pedro Ortún and Commission Vice-President Günter Verheugen, reinforced the ECCJ view that DG Enterprise has hijacked CSR for use in its push to improve European competitiveness without concern for social and environmental costs. They reiterated their unequivocal support of a voluntary-only approach to CSR and contentedly remarked that the discussions in the Forum did not reflect ideological differences. Best practices were shared and successful initiatives applauded, but constructive ways to ensure compliance with internationally agreed standards, standardise codes of conduct and ensure adherence to such codes were not examined.

To view the outcomes of the meeting: http://ec.europa.eu/enterprise/csr/...