Julia Beier, Analyst, BSR

In 2011, the European Commission published its new corporate social responsibility strategy and updated its definition of CSR. Previously defined as “a concept whereby companies integrate social and environmental concerns … on a voluntary basis,” CSR is now defined as “the responsibility of enterprises for their impacts on society,” with respect to applicable legislation and demand for non-financial disclosure of EU companies.

Yet vigorous debate continues at the country and European Union levels as whether or not to regulate CSR efforts and whether non-financial reporting should be required by law. Whereas some countries such as France (with the Grenelle II Article 225) and Denmark have already adopted national laws on CSR reporting, Germany continues to resist this commitment.

I recently attended a discussion in Brussels on “CSR—Made in Germany,” organized by the German Federal Ministry of Labor and Social Affairs, which is in charge of the national CSR strategy. The objective was to present the consensus paper of the National CSR Forum and discuss the positions taken by German businesses, trade unions, and NGOs in response to the Commission’s renewed strategy. (The National CSR Forum is composed of experts from businesses, government, the civil society sector, and others who advise the German government on CSR strategy.)

During the debate, a number of national government officials and German business interests spoke out against CSR regulations and mandatory non-financial reporting, favoring guidance over regulation at the EU level. In contrast, Germany’s trade unions and NGOs favored the new definition of CSR because it aims to increase transparency, engagement, and compatibility among European companies.

Interestingly, while the German government resists mandatory standards, many large German companies are internationally recognized for their CSR efforts. As two examples, BMW was identified this year by the Dow Jones Sustainability Index as the greenest automaker for the seventh consecutive year, and PUMA published the first-ever environmental profit and loss account in 2011. In general, large German companies are quite advanced on environmental performance, as well as social dialogue and stakeholder engagement, notably with unions and works councils.

So what’s the real challenge here? In fact, the backbone of the German economy is not large multinational companies, but small and medium-sized companies (SMEs) that represent 99.7 percent of all businesses and provide up to 60 percent of all jobs in Germany. Non-financial reporting may be difficult for these companies, as they often lack the data and financial resources for third-party verification of their sustainability reports.

Moving forward, sustainability actions and solutions will be expected not only from multinational corporations but from all stakeholders in Germany, including SMEs. To achieve this, easily applicable tools and frameworks must be developed specifically for SMEs to enable them to demonstrate their leadership in the sustainability field. Finally, non-financial reporting should not be seen as a financial burden, but rather as an opportunity to advance a company’s sustainability journey.

 

For more on CSR reporting in Europe, see BSR's guide on the Grenelle II law, recently passed in France.

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