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The 4CR strategic approach to corporate responsibility

4CR Working Papers

4CR Part A

4CR A1.5 - 12thJuly 2006

A multi-dimensional view of corporate responsibility

y

!r P "atsoulakos - #$%&C'( %t)

an) Pro* + "atsoulakos - Athens ,niersity o* &ono/is an) usiness

.sruest.net

.4r.org

The /ain hea)ings in this paper are links to pages in the aoe esite proi)ing a))itional

in*or/ation an) links.

The 4CR *ra/eork has een )esigne) to integrate the arious stran)s o* orporate responsiility an) to

support stakehol)er oriente) strategi /anage/ent an) the stage) )eelop/ent o* strategi apailities

enaling o/panies to reah opti/ise) sustainaility per*or/ane.

This paper )esries Part A o* the 4CR *ra/eork outlining onepts3 priniples an) praties assoiate)

ith orporate responsiility ith spei*i re*erene to CR3 sustainaility an) goernane. #t proi)es A

/ulti-)i/ensional ie o* orporate responsiilityentre) on stakehol)er orientation an) soial apital.

The 4CR strategi *ra/eork is eing )eelope) y Athens ,niersity o* &ono/is an) usiness in ollaoration ith

"-$&T A an) #$%&C'( %t) utilising their initial researh ork in the CRuest proet.

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Table of contents

1. C'RP'RAT& R&P'$##%#T+ C'$C&PT A$! PR#$C#P%&...........................................41.1 Corporate responsiility an) isionary o/panies.....................................................51.2 Theoretial akgroun) on orporate responsiilities.................................................6

&arly theoretial ies......................................................................................................6&arly orporate soial responsiility /o)els..........................................................................9

The soietal )i/ension o* strategi /anage/ent...................................................................:'erie o* theoretial perspeties...................................................................................:

1.; Corporate responsiility goals an) priniples...........................................................10CR relate) initiaties.......................................................................................................10

Corporate responsiility goals an) priniples su//ary.........................................................10

2 C'RP'RAT& 'C#A% R&P'$##%#T+ CR.................................................................122.1 akgroun)........................................................................................................122.2 CR )e*initions...................................................................................................1;

2.; ;.; Corporate ustainaility )e*inition.........................................................................1>;.4 Corporate sustainaility hallenges........................................................................1:

?ealth relate) hallenges.................................................................................................20&niron/ent relate) hallenges........................................................................................20?u/an rights relate) hallenges.......................................................................................21A ay *orar)................................................................................................................22

;.5 An integrate) perspetie eteen gloal sustainale )eelop/ent an) orporatesustainaility...........................................................................................................2;;.6 The role o* @oern/ents in Corporate ustainaility................................................2;

;.9 ustainale )eelop/ent /ilestones.....................................................................254 C'RP'RAT& @'4.4 Corporate @oernane Tren)s...............................................................................2>

oar) relate) hanges.....................................................................................................2>oar) o//ittees...........................................................................................................2>

5 C'RP'RAT& R&P'$##%#T+ !R#

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9.2 The 4CR stakehol)er oriente) orporate responsiility taEono/y..............................42

9.; takehol)er /anage/ent an) soial apital...........................................................4;The stakehol)er perspetie.............................................................................................4;Classi*iation o* stakehol)ers............................................................................................49takehol)er /anage/ent *ra/eorks...............................................................................4:takehol)er alue...........................................................................................................52oial apital..................................................................................................................5;

9.4 4CR relate) onepts...........................................................................................55Reputation risks.............................................................................................................55oial innoation an) /arketing.......................................................................................55Regulation an) o/petitie poliy.....................................................................................56&o-e**iieny.................................................................................................................56Fair gloalisation............................................................................................................59Per*or/ane instaility....................................................................................................5>

9.5 The 4CR Corporate Responsiility (ap...................................................................5:

9.6 The ten 4CR priniples *or stakehol)er oriente) strategi /anage/ent......................61

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A multi-dimensional view of corporate responsibility

1. Corporate responsibility concepts and principles

#n /arket eono/ies3 the pri/ary purpose o* o/panies is to /aEi/ise sharehol)er alue e.g.eono/i pro*it3 share prie an) )ii)en)sD ithin the oun)aries o* legalGregulatory oligations hih

a))ress spei*i soial an) eniron/ental issues. For this3 o/panies pursue o/petitie strategies

hih rely upon an) )eelop relationships eteen the orporation an) its stakehol)ers.

!espite the e/phasis gien y orporate theory an) pratie on *inanial an) legal responsiilities3 the

ie that orporations hae also soial responsiilities has een aroun) *or a long ti/e. This is ei)ent

oth in literature assoiate) ith the theory o* the *ir/ an) in the praties o* a *e isionary

o/panies that a)opte) soial responsiility priniples as *ar ak as the eighteenth entury. #n)ee) it

an e argue) that the original /eaning o* o/panies as loser relate) to soial aspets rather thaneono/i ones gien the )eriation o* the or) o/pany *ro/ the %atin companioo/panionD *ro/

cum an)panis hih an e interprete) as aking rea) together.

ine the early 1::0Bs3 orporate responsiility issues inlu)ing the soial oligations o* orporations

hae attaine) pro/inene in politial an) usiness )eate. This is /ainly in response to orporate

san)als ut also )ue to the realisation that )eelop/ent entre) only on eono/i groth para)ig/s is

unsustainale an) there*ore there is a nee) *or a /ore pro-atie role y states3 o/panies an)

o//unities in a )eelop/ent proess ai/e) at alaning eono/i groth ith eniron/ental

sustainaility an) soial ohesion. This )eate has /otiate) the *olloing three interlinked movements

in the orporate orl)H

CR Corporate oial ResponsiilityDI

Corporate sustainailityI

Wol) i)e re*or/s on orporate goernane.

CR an) orporate sustainaility represent the ay o/panies ahiee enhane) ethial stan)ar)s an)

a alane o* eono/i3 eniron/ental an) soial i/peraties a))ressing the onerns an) eEpetations

o* their stakehol)ers. Corporate goernane re*lets the ay o/panies a))ress legal responsiilitiesan) there*ore proi)es the *oun)ations upon hih CR an) orporate sustainaility praties an e

uilt to enhane responsile usiness operations.

We )istinguish eteen to interrelate) )i/ensions *or CR an) orporate sustainailityH

orporate responsiility an) sustainaility as part o* a ne ision *or the orl) ase) on a gloal

partnership *or sustainale )eelop/entI

orporate responsiility an) sustainaility as a usiness /anage/ent approah that shoul) proi)e

in the long run etter alue *or sharehol)ers as ell as *or other stakehol)ers.

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#t shoul) e pointe) out that CR an) orporate sustainaility are oerlapping /oe/ents. oth ter/s

are eoling an) there are neither stan)ar) )e*initions nor a *ully reognise) set o* riteria to )eter/ine

suess*ul appliation y o/panies or usines netorks. Further/ore3 the ter/s are o//only use)

interhangealy an) o/panies pratiing CR o*ten a))ress sustainaility issues an) ie ersa.

?oeer there are )i**erent /otiations ehin) the to /oe/ents hih gie rise to )i**erent priorities

an) pratie harateristis as ill e lari*ie) in later setions.

CR3 orporate sustainaility an) orporate goernane olletiely are shaping the i)entity o*

organisations an) are there*ore inreasingly integrate) into the usiness strategy o* suess*ul

orporations. Conseuently3 the *iel) o* responsile usiness strategy is eo/ing one o* the /ost

)yna/i an) hallenging suets orporate lea)ers are *aing to)ay an) possily one o* the /ost

i/portant ones *or shaping the *uture o* our orl).

1.1 Corporate responsibility and visionary companies

&arly roots o* orporate soial responsiility an e *oun) in the atual usiness praties o* suess*ul

o/panies sine the eighteenth entury. A notale eEa/ple is the Ca)ury hoolate /akers in the ,"

that prospere) in the 1>90s an) /oe) in 1>9: to a green *iel) site hih a/e to e alle) ournille

illage *or the ene*it o* its ork*ore. The Ca)ury *a/ily intro)ue) soial responsiility praties

inlu)ing orks o//ittees3 a /e)ial )epart/ent3 pension *un)s an) e)uation an) training *or

e/ployees. #n the 1:00s they uilt a successful business in a successful communityK.

Arie )e @eus3 in his ook The %iing Co/panyK 1::9D3 uestions hether the purpose o* orporations

is solely to /aEi/ise sharehol)er alue y eEa/ining the history o* great orporate suess stories suh

as "o)ak3 !u Pont3 (itsuishi an) u/ito/o. Taking as eEa/ple an the "o)ak ase3 the *oun)er @eorge

&ast/an is renone) *or his re/arkale *oresight into the uil)ing o* his usiness. #n 1:1:3 &ast/an

gae one-thir) o* his on hol)ings o* o/pany to his e/ployees an) later *ul*ille) hat he *elt as a

responsiility to e/ployees ith the estalish/ent o* retire/ent annuity3 li*e insurane3 an) )isaility

ene*it plans. ?e *ostere) /usi3 en)oe) learning3 siene researh an) teahing3 pro/ote) health3

helpe) the nee)y an) /a)e his on ity a entre o* the arts.

Another notale eEa/ple o* isionary CR o/panies is ?elett Pakar). !ae Pakar)3 o-*oun)er o*

the o/pany3 )elare) in 1:;:1H# think /any people assu/e3 rongly3 that a o/pany eEists si/ply to

/ake /oney. While this is an i/portant result o* a o/panyBs eEistene3 e hae to go )eeper an) *in)

the real reasons *or our eing. As e inestigate this3 e ineitaly o/e to the onlusion that a group

o* people get together an) eEist as an institution that e all a o/pany so that they are ale to

ao/plish so/ething olletiely that they oul) not ao/plish separately L they /ake a contribution

to society3 a phrase hih soun)s trite ut is *un)a/ental.K

A o/pany that )e/onstrates ho priniples o* orporate responsiility ere put in pratie oer 65

years hilst per*or/ing onsistently as ell as any o* its pro*it-/aEi/isingK rials is Johnson 8 Johnson

J8JD. #n the 1:40s J8J pulishe) its Cre)o2 announing that its primary stakeholders were its

customers, employees and the communities it operated in in that order and explicitly ahead of its

1Charles ?an)y3 20023 WhatBs a usiness ForMB ?arar) usiness Reie3 !ee/er 2002.2.n.o/

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stockholders. The Cre)o en)s y a**ir/ing3 'ur *inal responsiility is to our stokhol)ers.NWhen e

operate aor)ing to these priniples3 the stokhol)ers shoul) realise a *air returnK.

A little /ore reently3 in 1:9:3 Chair o* Tata teel #n)iaBs largest integrate) priate setor steel

o/panyD aske) their au)it o//ittee to report on hether an) the eEtent to hih the o/pany has

*ul*ille) their oetiesNregar)ing the soial an) /oral responsiilitiesK.

1.2 Theoretical bacground on corporate responsibilities

!i**erent theories onerning the purpose o* orporations )e*ine the relations an) responsiilities a

o/pany has ith partiipants in its eono/i atiities an) ith regulators.

!arly theoretical views

As early as 1:163 J. (. Clark e/phasise) the i/portane o* transpareny in usiness )ealings3 riting in

the Journal o* Politial &ono/y HOi* /en are responsile *or the knon results o* their ations3 usiness

responsiilities /ust inlu)e the knon results o* usiness )ealings3 hether these hae een

reognise) y la or notO.

#n the early 1:;0s3 Pro*essor Theo)ore "reps intro)ue) the suet o* usiness an) oial Wel*are to

tan*or) an) use) the ter/ soial au)itK *or the *irst ti/e in relation to o/panies reporting on their

soial responsiilities.

Peter !ruker argue) in 1:42 that o/panies hae a soial )i/ension as ell as an eono/i purpose in

his seon) ook The Future o* #n)ustrial (anK hih a))resse) pri/arily responsiility an)

preseration o* *ree)o/.

Corporate soial responsiilities ere )e*ine) in 1:5; y oen

;

as Othe oligations o* usiness/en topursue those poliies3 to /ake those )eisions3 or to *ollo those lines o* ation hih are desirable in

terms of the objectives and values of our society.O At the ti/e3 orporate soial oligation as linke) to

the poer that usiness hol)s in soiety. This point as stresse) y " !ais ho in 1:60 4)esrie)

usiness soial responsiilities as Othe usiness/ans )eisions an) ations taken *or reasons at least

partially eyon) the *ir/s )iret eono/i or tehnial interestN hih nee) to e o//ensurate ith

the o/panyBs soial poer.O

The earliest re*erene a))ressing spei*ially soial au)iting as aroun) the early 1:60s in a ook y @

@oy)er alle) OThe Responsile Co/panyO 1:613 @oy)er re*erre) to arious atiities in the /i) an)late 1:50s an) suggeste) that soial au)it oul) proi)e a /anage/ent tool an) oul) o**er

stakeholders a platform for challenging and influencing companies.

'pposition to the notion that o/panies hae soial responsiilities has een prealent on the groun)s

that it ill )iert attention *or/ the pri/ary eono/i oeties. #n 1:62 (ilton Frie)/an state) that

Fe tren)s oul) so thoroughly un)er/ine the ery *oun)ations o* our *ree soiety as the aeptane

y orporate o**iials o* a soial responsiility other than to /ake as /uh /oney *or their stokhol)ers

as possileK5.

;oen3 ?oar). oial Responsiilities o* the usiness/an. $e +orkH ?arper an) Ro3 1:5;4!ais3 "eith3 OCan usiness A**or) to #gnore oial ResponsiilitiesMO Cali*ornia (anage/ent Reie3 pring 1:605(ilton Frie)/an3 1:62. Capitalis/ an) Free)o/3 ChiagoH ,niersity o* Chiago Press.

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A alane) ie o* CR is eEpresse) y !

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#n 1::13 Carroll presente) his CR /o)el as a pyra/i) an) suggeste) that3 although the o/ponents

are not /utually eElusie3 it helps the /anager to see that the )i**erent types o* oligations are in

onstant tension ith one anotherK.

CarrollBs /o)el has een ali)ate):an) a su//ary o* the e/pirial ei)ene is gien in AnneE 1.

Aupperle3 ?at*iel) 8 Carroll 1:>5I 1:>;D per*or/e) the *irst e/pirial test o* the *our tier CR /o)el

y sureying 241 Fores 500 liste) C&'s using 191 state/ents aout CR. The statistial analysis

on*ir/e) that there are *our e/pirially interrelate) ut oneptually in)epen)ent o/ponents o* CR

an) proi)e) tentatie support to the relatie eightings assigne) y Carroll to eah o* the *our

o/ponents.

Pinkston 8 Carroll 1::4D per*or/e) a si/ilar surey a/ong top /anagers in 5:1 ,.. susi)iaries o*

/ultinational he/ial o/panies ith hea)uarters in &nglan)3 Frane3 @er/any3 Japan3 e)en3

it=erlan) an) the ,.. Aggregate *in)ings one again on*ir/e) CarrollBs *our tier eighte) /o)el ut

interestingly shoe) @er/any an) e)en to e eEeptions3 here legal responsiilities ere ranke)

the highest priority *olloe) y eono/i3 ethial3 an) philanthropi aspets respetiely.

Co/parison ith the Aupperle3 ?at*iel) 8 CarrollBs 1:>5D *in)ings also shoe) that in the interening

ten years the gap in the relatie i/portane eteen eono/i an) legal responsiilities ha) )erease)3

hile the i/portane o* ethial responsiilities appeare) to e inreasing an) that o* philanthropi

responsiilities to e )ereasing Pinkston 8 Carroll3 1::6D.

The societal dimension of strategic management

#n 1:9:3 aroun) the ti/e Carroll pulishe) his CR /o)el3 the societal dimension of strategic

managementas eEplore) y #gor Anso** in The Changing hape o* the trategi Prole/K10. ?e

propose) that an enterprise strategyK3 )esriing the interation o* a *ir/ ith its eniron/ent3 shoul)

e a))e) to the orporate3 usiness an) *untional leels o* strategi /anage/ent. Aor)ing to Anso**3

an enterprise strategy as nee)e) in or)er to enhane a o/panyBs societal legitimacyan) to a))ress

ne ariales in strategi /anage/ent suh as ne onsu/er attitu)es3 ne )i/ensions o* soial

ontrol an) aoe all3 a questioning of the firms role in societyK. These i)eas are to)ay at the heart o*

stakehol)er approahes to strategi /anage/ent.

The stakehol)er theory3 e/phasising a roa) set o* soial responsiilities *or usiness as estalishe)

y R Free/an in 1:>4 through the groun) reaking ork pulishe) in his ook trategi /anage/entH

A stakehol)er approahK11hih e**etiely estalishe) the *iel) o* Business !ociety. Free/an )e*ine)

: Pinkston3 T. .3 8 Carroll3 A. . 1::6. A Retrospetie &Ea/ination o* CR 'rientationsH ?ae They Change)M

Journal o* usiness &this3 152D.10 ?. #gor Anso**3 1:9: OThe Changing hape o* the trategi Prole/.O in hen)el an) ?o*er3 trategi(anage/ent.11Free/an3 &. R.3 1:>43 trategi /anage/entH A stakehol)er approah3 Pit/an3 oston.

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stakehol)ers as any group or in)ii)ual ho is a**ete) y or an a**et the ahiee/ent o* an

organisationBs oetiesK.

Aor)ing to Free/an3 the use o* the ter/ stakehol)er gre out o* the pioneering i)eas at tan*or)

Researh #nstitute no R# #nternationalD in the 1:60Bs hih ere *urther )eelope) through the ork

o* #gor Anso** an) others. The asi R# onept as that /anagers nee)e) to un)erstan) the

onerns o* sharehol)ers3 e/ployees3 usto/ers3 suppliers3 len)ers an) soiety3 in or)er to )eelop

objectives that stakeholders would support. This support as )ee/e) neessary *or long ter/ suess

an) there*ore /anage/ent shoul) atiely eEplore its relationships ith all stakehol)ers in or)er to

)eelop usiness strategies.K

takehol)er approahes to strategi /anage/ent proi)e the *oun)ations *or the 4CR /etho)ology an)

are )esrie) in so/e )etail in setion 9.;

"verview of theoretical perspectives

A su//ary o* the theoretial strea/s )esrie) aoe is presente) in the *olloing )iagra/.

We an )istinguish to /ain theoretial strea/s assoiate) ith orporate responsiility. The *irst

strea/ represents the CR perspetie e/phasising ethial issues an) soial au)it. The seon) strea/

represents the soial )i/ension o* strategi /anage/ent ase) on stakehol)er approahes. #t shoul) e

note) that sustainaility relate) responsiilities )o not *eature in the )esrie) theoretial *ra/eork.

?oeer orporate sustainaility issues are relate) to eniron/ental eono/is estalishe) also in the

90s->0s to a))ress eniron/ent as a sare resoure an) to ensure that the osts an) the ene*its o*

eniron/ental /easures are ell alane).

1.# Corporate responsibility goals and principles

CR related initiatives

The in*luential initiaties that are shaping the goals an) priniples un)erpinning the *iel) o* orporate

responsiility areH

the "lobal #ompact initiate) y the ,$ eretary -@eneral in 1::: as a netork inoling

goern/ents3 ho )e*ine) the priniples on hih the initiatie is ase)I hun)re)s o* o/panies

*ro/ all regions o* the orl)3 hose ations it seeks to in*lueneI laour3 in hose han)s the

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onrete proess o* gloal pro)ution takes plaeI iil soiety organisations representing the i)er

o//unity o* stakehol)ers an) the ,nite) $ationsK.

the $illennium %evelopment "oalsrepresenting a roa) /ap *or (illenniu/ !elaration unani/ously

a)opte) in epte/er 2000 y the /e/er states o* the ,nite) $ations.

the &'nited (ations (orms on the )esponsibilities of *ransnational #orporations and other business

enterprises with )egard to +uman )ights&proi)ing the aseline *or hu/an rights priniples. The

usiness %ea)ers #nitiatie on ?u/an Rights %#?RD eEten)s this aseline y /apping issues *ro/

the ,$ $or/s to essential3 eEpete) an) )esirale usiness ationsI

the orld #ommission on the !ocial %imension of "lobali-ationas estalishe) y the #nternational

%aour 'rgani=ation #%'D in Feruary 2002 an) proi)e) a *inal report in Feruary 2004

o/ple/enting the (illenniu/ !eelop/ent @oals an) reating a /aor ontriution Oto

international )ialogue toar)s a *ully inlusie an) euitale gloali=ationO.

A histori reie o* /ilestones assoiate) ith orporate soial responsiility an) sustainaility is gien

in AnneE 2.

Corporate responsibility goals and principles summary

The *un)a/ental CR3 sustainaility an) goernane goals an) priniples are su//arise) in the

*olloing tale ase) on the initiaties outline) aoe.

The areas a))resse) areH

aD ?u/an Rights

D %aour tan)ar)s

D &niron/ent)D ?ealth

eD Anti-Corruption

*D &ono/i responsiility

gD Corporate @oernane


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Corporate Responsibility and $ustainability %oals and &rinciples

@loal Co/patThe (illenniu/ )eelop/ent@oals

The ,nite) $ations $or/s on?u/an Rights

?u/an

Rights

Priniple 1Husinesses shoul)support an) respet the protetion o*internationally prolai/e) hu/anrightsI

Priniple 2H(ake sure that they arenot o/pliit in hu/an rights

auses.

@oal 1 &ra)iate eEtre/epoerty an) hungerI@oal 2 Ahiee uniersalpri/ary e)uationI

@oal ; Pro/ote gen)ereuality an) e/poer o/en.

. Right to eual opportunityan) non-)isri/inatorytreat/entIC. Right to seurity o* personsI

&. Respet *or nationalsoereignty an) hu/an rights.

%aourtan)ar)s

Priniple ;H usinesses shoul)uphol) the *ree)o/ o* assoiationan) the e**etie reognition o* theright to olletie argainingIPriniple 4H The eli/ination o* all*or/s o* *ore) an) o/pulsorylaourI

Priniple 5H The e**etie aolition o*hil) laourI

Priniple 6H The eli/ination o*e/ploy/ent )isri/ination.

!. Rights o* orkers.

&niron/ent

Priniple 9H usinesses shoul)support a preautionary approah toeniron/ental hallengesIPriniple >H ,n)ertake initiaties topro/ote greater eniron/entalresponsiilityI

Priniple :H &nourage the)eelop/ent an) )i**usion o*eniron/entally *rien)lytehnologies.

@oal 9H &nsure eniron/entalsustainaility.

@. 'ligations ith regar) toeniron/ental protetion.

Anti-Corruption

Priniple 10H usinesses shoul) orkagainst all *or/s o* orruption3inlu)ing eEtortion an) riery.

?ealth

@oal 4 Re)ue hil) /ortalityI

@oal 5 #/proe /aternalhealthI@oal 6 Co/at ?# !eelop a gloalpartnership *or )eelop/ent.

F. 'ligations ith regar) toonsu/er protetion.

"!C' &rinciples of Corporate %overnance - 2((4

&nsuring the asis *or an &**etie Corporate @oernane Fra/eorkThe Rights o* harehol)ers an) "ey 'nership FuntionsThe &uitale Treat/ent o* harehol)ersThe Role o* takehol)ers in Corporate @oernane!islosure an) Transpareny

The Responsiilities o* the oar)


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2 Corporate $ocial Responsibility C$R

2.1 )acground

#n the 1::0s3 the Corporate oial Responsiility CRD /oe/ent gaine) pro/inene in the politial-eono/i )eate an) in the strategies o* lea)ing usiness organisations. CR stresse) corporate self

regulation assoiate) ith ethial issues3 hu/an rights3 health an) sa*ety3 eniron/ental protetion an)

soial an) eniron/ental reporting an) voluntary initiatives inoling support *or o//unity proets

an) philanthropy.

The un)erlying priniples o* the CR /oe/ent are represente) y the @loal Co/pat priniples *or

responsile orporate iti=enship.

#n /arh 20003 the &uropean Counil /eeting in %ison plae) Corporate oial Responsiility in the&uropean oial Progra/. The Co//ission pulishe) the @reen Paper entitle) Pro/oting a &uropean

Fra/eork *or Corporate oial Responsiility in July 2001. The ai/s o* this )ou/ent ere to launh a

puli )eate in &uropean3 national an) international leel3 aout the onept o* CR an) to i)enti*y

ho to uil) a partnership *or the )eelop/ent o* a &uropean *ra/eork *or the pro/otion o* CR. #t

as *olloe) eteen 2002 an) 205 y the Co//uniation Corporate the &uropean oial

ResponsiilityH a usiness ontriution to ustainale !eelop/ent hih set up a &uropean

(ultistakehol)er Foru/ on CR3 to e use) as a plat*or/ to pro/ote transpareny an) onergene o*

CR praties an) instru/ents. #n its ontriution to the (arh 2005 pring Counil3 the Co//ission

reognise) that CR an play a key role in ontriuting to sustainale )eelop/ent hile enhaning

&uropeBs innoatie potential an) o/petitienessK12.#n the oial Agen)a1;3the Co//ission announe)

that it oul)3 in o-operation ith (e/er tates an) stakehol)ers3 present initiaties to *urther

enhane the )eelop/ent an) transpareny o* CR. #n the reise) ustainale !eelop/ent trategy143

the Co//ission alle) on the usiness lea)ers an) other key stakehol)ers o* &urope to engage in

urgent re*letion ith politial lea)ers on the /e)iu/- an) long-ter/ poliies nee)e) *or sustainaility

an) propose a/itious usiness responses hih go eyon) eEisting /ini/u/ legal reuire/entsK.

#n 2006the Co//ission an) usiness representaties hae launhe) a &uropean Alliane *or CR. To

inspire /ore &uropean enterprises to go eyon) their /ini/u/ legal oligations in *aour o* soiety an)

sustainale )eelop/ent an) to /oilise the apaities o* &uropean enterprises in or)er to /ake &uropea pole o* eEellene on CR Corporate oial ResponsiilityD.

A /aor *ore in the CR /oe/ent is CR &urope estalishe) in January 1::6 y a group o* 59

&uropean o/panies ith the /ission to help o/panies integrate CR into the ay they )o usiness.

CR &urope reahes out to 1400 o/panies through 1> $ational Partner 'rganisations.

2.2 C$R definitions

12C'(2005D 24.

1;C'(2005D ;;.

14C'(2005D 65>.


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CR is generally un)erstoo) to e the ay a o/pany alanes the eono/i3 eniron/ental an) soial

aspets o* its operation3 a))ressing the eEpetations o* its stakehol)ers.

CR )e*initions hae proli*erate) in the literature partiularly sine the 1:>0s. $eertheless3 o//on

groun) eteen CR onepts an) )e*initions is i)ely aknole)ge) an) ei)ent *ro/ the

representatie )e*initions gien elo.

CR is a o/panyBs positie i/pat on soiety an) the eniron/ent through its operations3 pro)uts or

series an) through its interation ith key stakehol)ers suh as e/ployees3 usto/ers3 inestors3

o//unities an) suppliersK - Business in the #ommunity.

CR /eans open an) transparent usiness praties that are ase) on ethial alues an) respet *or

e/ployees3 o//unities an) the eniron/entK #!) /orum.

CR is aout ho o/panies /anage the usiness proesses to pro)ue an oerall positie i/pat on

soietyK- $allen Baker.

Corporate oial Responsiility is the ontinuing o//it/ent y usiness to ehae ethially an)

ontriute to eono/i )eelop/ent hile i/proing the uality o* li*e o* the ork*ore an) their

*a/ilies as ell as o* the loal o//unity an) soiety at largeK - orld Business #ouncil for !ustainable

%evelopment.

CR is )e*ine) as a onept herey o/panies integrate soial an) eniron/ental onerns in their

usiness operations an) in their interation ith their stakehol)ers on a oluntary asisB as they are

inreasingly aare that responsile ehaiour lea)s to sustainale usiness suessK - 0' "reen paper

on #!).

CR is )e*ine) as operating a usiness in a /anner that /eets or eEee)s the ethial3 legal3

o//erial an) puli eEpetations that soiety has o* usiness. CR is seen y lea)ership o/panies

as /ore than a olletion o* )isrete praties or oasional gestures3 or initiaties /otiate) y

/arketing3 puli relations or other usiness ene*its. Rather3 it is iee) as a o/prehensie set o*

poliies3 praties an) progra/s that are integrate) throughout usiness operations3 an) )eision-

/aking proesses an) are supporte) an) rear)e) y top /anage/entK - Business for !ocial

)esponsibility..

Corporate oial Responsiility inoles the on)ut o* a usiness so that it is eono/ially pro*itale3

la ai)ing3 ethial an) soially supportie. To e soially responsile then /eans that pro*itaility an)

oe)iene to the la are *ore/ost on)itions hen )isussing the *ir/Bs ethis an) the eEtent to hih

it supports the soiety in hih it eEists ith ontriutions o* /oney3 ti/e an) talentK- Carroll 1:>;D

To su//arise3 a CR pratising orporation shoul) strie to oey the la3 /ake a pro*it3be ethical and

provide societal value and accountability.

2.# *iews for and against C$R

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To o/plete the piture o* hat CR s aout representatie ies *or an) against CR are gien in the

*olloing tale.

oial

responsiility is

ust a PR tool

*or usinesses3

says reportB

A report *ro/ Christian Ai) arns that usinesses are using orporate soial

responsiility as a shiel) to hi)e ehin) to a/paign against eniron/ental

an) hu/an rights regulations3 reports Terry (aalister. The report lai/s

CR is in so/e ases ounter-pro)utie3 orsening relations eteen

usiness an) loal o//unities. The report is alle) ehin) the (askH The

Real Fae o* Corporate oial Responsiility an) alls *or ne international

gui)elines to goern o/pany ehaiour.

T (aalister3

The @uar)ian

21st January

2004

To-*ae)

apitalis/B

Corporate soial responsiility is all the rage. !oes it3 an) shoul) it3 /ake

any )i**erene to the ay *ir/s ehaeM

The &ono/ist

22n) January

2004

A risis o*

legiti/ay

!espite the rallying eono/y3 )espite /anage/ent shake-ups3 re*or/s an)

)iersity progra//es3 the i)ea persists that o/panies are inherently

sel*ish entities3 intent only on /aEi/ising their pro*its. There is septiis/

aout orporate responsiility3 an) in partiular3 the *loo) o* sel*-

pro/otional /aterial that o/panies aroun) the orl) hae egun to

pro)ue - the glossy puliations3 the soial an) eniron/ental reports3 the

)elarations o* goo) intentions an) est pratie. Corporate lea)ers shoul)

/ake sure that state/ents an) reports pro)ue) are not ust pretty or)s

an) phrases ut are ake) up y real ation.

!ai)

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an) /anaging properly its i/ple/entation. Researh shos that there is a gap eteen the eEistene

o* o/pany o)es o* ethis an) the e/e))ing o* its sustane in the organisationBs loo) strea/B15K.

The aranes-'Eley At in the ,A an) &uropean ,nion )ireties ontinue to raise the ar *or

orporate ethis an) o/pliane progra/s. ?oeer3 en*ore/ent is also )i**iult at the leel o*

goern/ent agenies an) is likely to re/ain so.

Possily3 real solutions an only e ahiee) y i/proe) transpareny syste/s at o/pany leel

ouple) ith stronger e**orts y a)/inistrations.

@oo) usiness ethis praties inlu)eH

pulishing a Co)e o* Con)utG&thisI

proi)ing eEa/ples o* usiness ethis )ile//asI

)e*ining ethial tests that an e use) y sta** to *ailitate )eision-/akingI

/aking the o/panyBs on*lit o* interest gui)elines pulily aailale to inestors an) other

stakehol)ers3 as appropriateI

)esignating an &thisGCo/pliane '**ier easily aessile y releant stakehol)er groupsI

o//uniating the o)es an) proe)ures to all e/ployees3 agents an) other appropriate

stakehol)ersI

estalishing syste/s *or /onitoring an) oerseeing the ations o* the organisation3 its e/ployees3

agents an) other ritial stakehol)ers an) )eteting G preenting unethial an)Gor illegal atiitiesI

gathering releant )ata an) reporting on a regular asis those harge) ith ethial oersightI

proi)ing o)e en*ore/ent /ehanis/sI

spei*ying appropriate o**ene responsesI

proi)ing an easy ethis o/plaint sel*-)islosing proess.

2.+ Corporate citi,enship

Corporate iti=enship e/phasises the ontriution a o/pany /akes to soiety through its ore usiness

atiities3 its soial inest/ent an) engage/ent in goo) auses.

@oo) orporate iti=ens are o/panies ehaing aor)ing to alues that soiety eEpets the/ to hol)

or /ore spei*ially aor)ing to hat is eEpete) *ro/ a goo)B o/pany *ro/ its stakehol)ers. The

e/phasis is there*ore on stakehol)er engage/ent3 aountaility3 trust an) reputation /anage/ent.

The Center *or Corporate Citi=enship at oston College i)enti*ies *our ore priniples that )e*ine the

essene o* orporate iti=enshipH

$inimi-e harm1 /ini/i=e the negatie onseuenes o* usiness atiities an) )eisions on

stakehol)ers3 inlu)ing e/ployees3 usto/ers3 o//unities3 eosyste/s3 sharehol)ers3 an) suppliersI

15(ore3 &.3 8 Weley3 . 200;D. !oes usiness &this PayMI %on)onH #nstitute o* usiness &this


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$aximi-e benefit1ontriute to soietal an) eono/i ell-eing y inesting resoures in atiities that

ene*it sharehol)ers as ell as roa)er stakehol)ersI

Be accountable and responsive to key stakeholders1uil) relationships o* trust that inole eo/ing

/ore transparent an) open aout the progress an) setaks usinesses eEperiene in an e**ort to

operate ethiallyI

!upport strong financial results1the responsiility o* a o/pany to return a pro*it to sharehol)ers /ust

alays e onsi)ere) as part o* its oligation to soiety.

2. $ocial accountability

oial aountaility is pri/arily onerne) ith the /anage/ent an) reporting o* uantitatie an)

ualitatie aspets o* soial3 ethial an) eniron/ental per*or/ane to oth internal an) eEternal

stakehol)ers.

A nu/er o* initiatiesGorganisations are pro/oting soial aountaility inlu)ingH

aD The 2nstitute of !ocial and 0thical3ccount3bility estalishe) in 1::5 topro/ote aountaility *or

sustainale )eelop/ent y proi)ing tools an) stan)ar)s AA1000 eriesDI

D The !ocial 3ccountability 2nternational A#D )e)iate) to pro/oting hu/an rights *or orkers

aroun) the orl) an) est knon *or the A>000 stan)ar)s *or /anaging ethial orkplae

on)itions throughout gloal supply hainsI

D The Business !ocial #ompliance 2nitiative C# is the &uropean approah to i/proe soial

per*or/ane in supplier ountries through a o//on /onitoring syste/ si/pli*ying an)

stan)ar)ising the reuire/ents an) in)ii)ual /onitoring proe)ures.


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# Corporate $ustainability

#.1 )acground

Corporate ustainaility is relate) to the roa)er onept o* sustainale )eelop/ent hih originate)

ith the 1:>9 report 'ur Co//on FutureB y the Worl) Co//ission on &niron/ent an) !eelop/entknon as the run)lan) Co//issionD. ustainale )eelop/ent re*ers to 4meeting the needs of the

present without compromising the ability of future generations to meet their own needs5.

ustainale )eelop/ent e/phasise intergenerational responsiilities an) the nee) *or /ulti-

stakehol)er oalitions to reate the on)itions *or etter uality o* li*e *or eeryone3 no an) *or *uture

generations

The *irst on*erene on sustainale )eelop/ent as hel) in tokhol/ in 1:92 here 11; nations an)

500 non goern/ental organisations atten)e). #t as the *irst ti/e that attention as )ran to the

nee) to presere natural haitats to pro)ue a sustaine) i/proe/ent in liing on)itions *or all3 an)the nee) *or international ooperation to ahiee thisK. The e/phasis as on soling eniron/ental

prole/s ut ithout ignoring soial3 eono/i an) )eelop/ent *ators.

The Worl) Conseration trategy o* 1:>0 lari*ie) the i)eas o* sustainale )eelop/ent )e*ine) as

)eelop/ent i/proing the uality o* hu/an li*e hile liing ithin the carrying capacityo* supporting

eo-syste/sK 5*his is the kind of development that provides real improvements in the quality of human

life and at the same time conserves the vitality and diversity of the 0arth. *he goal is development that

will be sustainable. *oday it may seem visionary but it is attainable. *o more and more people it also

appears our only rational option5. The Worl) Conseration trategy3 #,C$3 ,$&P3 WWF 1:>0D.

The run)lan) Report in 1:>9 proi)e) a )etaile) analysis o* sustainale )eelop/ent an) alerte) the

orl) to the urgeny o* /aking progress toar) eono/i )eelop/ent that oul) e sustaine) ithout

the )estrution o* natural resoures or the har/ing o* the eniron/ent. The report highlighte) three

/ain o/ponents to sustainale )eelop/entH

eniron/ental protetionI

eono/i grothI

soial euity.

#n 1::2 The &arth u//it ,$ Con*erene on &niron/ent an) !eelop/entD in Rio )e Janeiro agree)

the Rio !elaration setting out 29 priniples supporting sustainale )eelop/ent3 a plan o* ation

Agen)a 21D an) a reo//en)ation that all ountries shoul) pro)ue national sustainale )eelop/ent

strategies .

Closely linke) ith the sustainaility /oe/ent is the (illenniu/ !eelop/ent @oals pro/oting hu/an

)eelop/ent as the key to sustaining soial an) eono/i progress in all ountries an) reognising the

i/portane o* reating a gloal partnership *or )eelop/ent.

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The @loal Reporting #nitiatie @R#D that gre out o* the Coalition *or &niron/entally Responsile

&ono/ies C&R&D an) the ,nite) $ations &niron/ent Progra//e ,$&PD pro)ue)3 in June 20003

the @R# ustainaility Reporting @ui)elines ith reporting priniples an) spei*i ontent in)iators to

gui)e the preparation o* organisation-leel sustainaility reports.

#.2 The need for sustainable development

The reuire/ents *or sustainale )eelop/ent o/e *ro/ the realisation that )eelop/ent3 entre)

only on eono/i groth para)ig/s is unsustainale an) there is a nee) *or a /ore pro-atie role y

states3 o/panies an) o//unities in the )eelop/ent proess. Creating a sustainale *uture3

eono/ially3 soially an) eniron/entally reuires goern/ents3 soiety3 orporations an) in)ii)uals

to rethink their eEpetations3 their responsiilities an) their interations.

A entral onept in orporate sustainaility is partiipation in the estalish/ent an) eEpansion o*

international institutions *or o-operation to on*ront o//on onerns *or sustainale )eelop/ent

suh as li/ate hange3 energy an) poerty issues.

y 20503 >5Q o* the orl)Bs population o* so/e nine illion people ill e in )eeloping ountries. #*

these people are not y then engage) in the /arket plae3 usiness annot prosper an) the ene*its o*

a gloal /arket ill not eEist. Clearly it is in our /utual interest to help soieties shi*t to a /ore

sustainale path.K B#!%s !ustainable 6ivelihoods 7roject

There is inreasing reognition that e are all part o* a o/pleE )yna/i syste/ hose sustainale

)eelop/ent is )epen)ant on estalishing aresponsile gloal partnership eteen people3 o/panies

an) goern/ents. uh a global partnership should strive towards growth with equity whilst preserving

the integrity of the environment and natural resources for future generations. This /an)ates a

ollaoration proess in hih the use o* natural resoures3 the )ireting o* inest/ents at national an)

orporate leels3 the orientation o* tehnologial )eelop/ents an) international o-operation /ust

onerge to reate on)itions *or etter satis*ying hu/an nee)s an) aspirations no an) in the *uture.

ustainale )eelop/ent is possily3 in the *irst plae3 a priority *or goern/ents that nee) to set

poliies an) strategies to /oilise the reuire) ations. ?oeer it is reognise) that sustainale

)eelop/ent poses a hallenge to the alane o* responsiilities eteen o/panies3 goern/ents3 non

goern/ent organisations an) in)ii)uals. #n the ne or)er o* gloal goernane it is not unreasonale

to assu/e that o/panies ill hae to play a /ore proatie role to get things /oing.

#.# Corporate $ustainability definition

Corporate ustainaility an e regar)e) as the orporate response to sustainale )eelop/ent

represente) y strategies an) praties that a))ress the key issues *or the orl)Bs sustainale

)eelop/ent. ustainale )eelop/ent is aout reating the on)itions *or etter uality o* li*e *or

eeryone3 no an) in the *uture3 ase) on eo-e**iieny an) innoatie solutions *or engaging eeryone

an) partiularly the )eeloping ountries in the gloal eono/y.

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Corporate sustainaility /eans that your serie or pro)ut )oes not o/pete in the /arketplae only

in ter/s o* its superior i/age3 poer3 spee)3 pakaging3 et. A))itionally3 your usiness /ust )elier

pro)uts or series to the usto/er in a ay that re)ues onsu/ption3 energy use3 )istriution osts3

eono/i onentration3 soil erosion3 at/ospheri pollution3 an) other *or/s o* eniron/ental )a/age.K

*he 0cology of #ommerce 89::;D

PrieaterhouseCoopers no )e*ine orporate sustainaility as aligning an organisation&s products and

services with stakeholder expectations, thereby adding economic, environmental and social value.

Aor)ing to !o Jones ustainaility #n)eE.3 Corporate ustainaility is a usiness approah that

reates long-ter/ sharehol)er alue y e/raing opportunities an) /anaging risks )eriing *ro/

eono/i3 eniron/ental an) soial )eelop/entsK.

The orporate sustainaility /oe/ent is aout o/panies ontriuting e**etiely to a gloal

partnership *or sustainale )eelop/ent. #t is aout o/panies )eliering i)e soietal alue inlu)ing

support *or health an) hu/an rights i/proe/ents3 regional )eelop/ent an) *air gloalisation an)

respeting the eniron/ent y pro/oting tehnologies to re)ue the e/ission o* greenhouse gases an)

y i/ple/enting e**etie eniron/ental risk /anage/ent syste/s. #t is also aout o/panies that

/ake long ter/ per*or/ane staility a top priority in orporate strategy.

#.4 Corporate sustainability challenges

ustainaility is aout liing an) orking in ays that /eet an) integrate eEisting eniron/ental3

eono/i an) soial nee)s ithout o/pro/ising the ell-eing o* *uture generationsK. Relate) aspets

are the &niron/ental Justiean) onte/porary international la )ealing ith #ntergenerational &uity

un)er eniron/ental protetion3 hu/an rights an) eono/i )eelop/ent.

The Worl) &ono/i Foru/16 has repeate)ly e/phasise) that poerty3 li/ate hange3 e)uation3

euitale gloalisation an) goo) gloal goernane is the responsiility o* all soiety. #n the 2005 losing

session3 usiness3 goern/ent3 aa)e/i an) iil soiety lea)ers urge) a)option o* tehnology to

re)ue the e/ission o* greenhouse gases3 the reation o* a *un) to aelerate *inanial ai) to the

poorest nations an) the re/oal o* tra)e arriers that )eprie )eeloping ountries o* the )ii)en)s o*

gloal eono/i groth. #n 1::6 the all is ery si/ilar3 een though )isaster relie* takes pro/inene3

an) using the Oreatie i/peratieO is suggeste) as a ay o* /aking progress.

Aor)ing to ?aken 1::;193 reating a restoratie eono/y /eans rethinking the *un)a/ental purpose

o* usiness an) reating a ery )i**erent kin) o* eono/y3 one that an restore eosyste/s an) protet

the eniron/ent hile ringing *orth innoation3 prosperity3 /eaning*ul ork an) true seurityK. For

this3 o/panies /ust /ini/ise har/*ul eEploitation o* natural resoures3 generation o* eEessie

a/ounts o* toEins3 pollutants an) aste.

16httpHGG.e*oru/.orgG19Paul ?aken31::;. The &ology o* Co//erea !elaration o* ustainailityI ?arperCollins

7P. 8 +. "atsoulakos 1: 12thJuly 2006
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We oul) su//arise that the /ain orporate hallenges in supporting sustainale )eelop/ent lie along

to interrelate) )i/ensionsH

aelerating the pae o* i/proing orporate sustainaility per*or/aneI

partiipating atiely in partnerships an) netorks that an reate the apaity *or sustainale

)eelop/ent.

Co/panies nee) to aept a ne proatie role in shaping the *uture o* the orl) y supporting an)

)eeloping the soial )i/ension o* gloalisation an) taking hen neessary a lea)ing role inH

organising responsile supply hainsI

inesting in innoatie health3 energy an) eniron/ental pro)utsI

estalishing usiness /o)els that ill ork in poorer ountriesI

trans*erring knole)ge an) i/proing on)itions an) in*rastruture in )eeloping ountries.

partnerships an) )yna/i oalitions to strengthen the orl)Bs sustainaility apaity.

pei*i issues assoiate) ith health3 eniron/ent an) hu/an rights are outline) in the *olloing

susetions.

ealth related challenges

,npree)ente) eono/i hange an) inrease) gloal instailities oer the last )ea)e hae reate)

aute ne hallenges *or health. Persistent poerty3 aelerate) y population groth an) large sale

/igration3 has a large i/pat on health issues. $early hal* o* the orl)Bs population hae ina)euateaess to /e)iine an) health are3 )iseases assu/e) to hae een onuere) are re-e/erging an)

oesity an) stress relate) prole/s are eo/ing ne health hallenges. A))itionally3 the ?# /illion people orl)i)e hae een in*ete) ith ?#< an) 2.5 /illion hae )ie) o* A#!. :0Q o*ne in*etions are in )eeloping ountriesI

A#! is no the lea)ing ause o* )eath *or a)ults un)er the age o* 45 in &urope an) $orth A/eria.

A ruial *ator in suess*ully a))ressing the health hallenges is the e**etie )eelop/ent o*

partnerships eteen usiness organisations3 the Worl) ?ealth 'rganisation W?'D an) health

authorities. Corporate partiipation in health pro/otion is i/portant either through ore usiness

atiities3 /anage/ent eEpertise3 training3 health an) sa*ety poliies or through soial inest/ents an)

engage/ent in health pro/oting initiaties.

!nvironment related challenges


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(anage/ent o* eniron/ental issues has reahe) relatie /aturity o/pare) to other orporate

responsiility an) sustainaility issues as /any organisations hae een reporting on eniron/ental

per*or/ane *or so/e 10 years an) in so/e setors o/pliane to eniron/ental stan)ar)s is

/an)atory. This has een helpe) y the #' 14000 eniron/ental /anage/ent stan)ar).

Co/panies are noa)ays eEpete) to integrate eniron/ental responsiility at all leels o* their

operationsI to *in) sustainale solutions *or natural resoures use in or)er to re)ue o/panyBs i/pat

on the eniron/entI to /anage eniron/ental risks ensuring re)ution in aste3 pollution an)

e/issionsI to /aEi/ise the e**iieny an) pro)utiity o* all assets an) resoures inlu)ing

i/proe/ents in the /anage/ent o* ater3 energy an) /aterials.

Corporate eniron/ental per*or/ane shoul) e /easure) against eoling eniron/ental priorities an)

targets *or/ulate) olletiely y stakehol)ers inlu)ing goern/ents3 eniron/ent support

organisations3 setor assoiations an) usinesses. Co/panies the/seles shoul) e ai/ing at i/proing

ele/ents o* their eniron/ental progra/s inlu)ing roa)er partiipation in o/ating ritial

eniron/ental prole/s3 orking ith loal authorities to uil) apaity an) enhane their

organisational aility to )eelop integrate) approahes to eniron/ental /anage/ent.

@loal e**orts to re)ue the greenhouse gas e/issions *ro/ hu/an atiities that threaten the orl)Bs

li/ate are eginning to /ake an i/pat. The "yoto Protool is no legally in)ing3 an) the &uropean

,nion has intro)ue) its pioneering &/issions Tra)ing he/e. !isussions hae starte) on the gloal

*ra/eork eyon) "yoto.

!espite the suess in un)erstan)ing the eniron/ental issues an) a))ressing eniron/ental risks in

usiness proesses there is ertainly sustantial roo/ *or i/proe/ent. The /ain hallenge is to reate

a gloal partiipatie netork that raises the stan)ar)s an) /onitors an) respon)s to eniron/ental

hallenges. The ruial goal is the )eelop/ent o* responsieness apailities an) a)aptie apaity to

re)ue ulneraility *ro/ li/ate hange an) other eniron/ental risks partiularly in the high risk

in)ustrial setors an) ulnerale regions.

The @loal &niron/ent 'utlook @&'D3 pulishe) perio)ially y the ,nite) $ations &niron/ent

Progra//e ,$&PD1>3 proi)es an assess/ent on the state an) tren)s o* eniron/ental para/eters

aross the orl). The assess/ent tries to anser the *olloing uestionsH

What is happening to the orl)s eniron/entM

Why is it happeningM

What are e )oing to a))ress the prole/sM

?o oul) alternatie )eisions a**et the *utureM

uman rights related challenges

1>httpHGG.unep.orgGgeoGyearookGy2006G


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A/i)st an inreasing li/ate o* /istrust aroun) the orl) *uelle) y terroris/ threat an) on*lit3

alaning hu/an rights issues an) seurity onerns is a /aor ?u/an Rights hallenge.

The role o* usiness organisations on hu/an rights is o/pleE. The ,nite) $ations @loal Co/pat *irst

to priniples are thatH Ousinesses shoul) support an) respet the protetion o* internationally

prolai/e) hu/an rights ithin their sphere o* in*lueneI an) /ake sure that they are not o/pliit in

hu/an rights auses.O

The asi orporate oligation o* ensuring eual opportunities *or all e/ployees an) taking a)euate

/easures to assure that suppliers also hae proper poliies an) proesses on hu/an rights is a /atter

reahing relatie /aturity. ?oeer3 gien the inreasing in*luene o* orporations in the gloal

eono/y a /ore proatie role in the guar)ianship o* hu/an rights is possily the ne hallenge.

For/er ,$ ?igh Co//issioner *or ?u/an Rights3 (ary Roinson3 has stresse) the nee) to *in) o//on

groun) aout the role o* the priate setor in ontriuting to the realisation o* hu/an rights 1:. This

/eans usinesses aoi)ing poliies an) praties that lea) to rights iolations. ut it also /eans

*ul*illing appropriate responsiilities *or positie ations hih pro/ote greater respet *or *un)a/ental

rights aroun) the orl) as eEtre/e poerty is the single iggest hu/an rights hallenge *aing the

orl) to)ay.K uoting statistis suh as the 6.; /illion hil)ren that )ie eah year o* hunger an) the

/ore than ;03000 hil)ren that )ie eery )ay *ro/ preentale )iseases3 (ary Roinson argue) that

poerty on this sale translates into a )enial o* *un)a/ental rights to li*e3 to a)euate *oo)3 healthare

an) e)uation on a /assie sale.

A way forwardThe outline) orporate sustainaility hallenge represents a tall or)er *or the usiness orl) that is

austo/e) to orry aout the neEt ontrat an) the annual *inanial per*or/ane rather than li/ate

hange3 eosyste/ apaity an) poerty issues. The e/erging reuire/ents *or orporate support to

sustainale )eelop/ent proaly represent a ultural shok that ill take ti/e to sink in the usiness

ay o* thinking an) orking. Pratially an) realistially only the ery suess*ul o/panies oul) take

up the hallenge an) hope*ully ill estalish the reuire) ne sustainaility oun) usiness /o)els that

an e *olloe) /ore i)ely in the *uture.

1:The ?u/an Rights an) the Priate etor y/posiu/3 $oartisI asel3 it=erlan)3 29 $oe/er 200;


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#.+ An integrated perspective between global sustainable development and

corporate sustainability

!espite the oious interrelationship eteen sustainaility issues at gloalGnationalGsetor leel an)

orporate leel3 as yet3 there are no serious atte/pts to link the to together. This e**etiely

un)er/ines oth the national sustainaility poliies an) strategies an) re)ues the potential i/pat o*

the orporate sustainaility /oe/ent.

An integrate) perspetie eteen sustainale )eelop/ent an) orporate sustainaility is shon in the

*olloing )iagra/.

The approah highlights the *olloing aspetsH

har/onisation o* orporate strategies ith national sustainaility strategiesI

har/onisation o* sustainaility in)iators /easuring the i/pat o* national an) international poliies

ith orporate sustainaility riteriaI

estalishing *ee)ak loops *ro/ orporate sustainaility per*or/ane an) est praties to

orporate strategy an) to the roa)er sustainale )eelop/ent goals an) ation plans at national

an) international leels.

#. The role of %overnments in Corporate $ustainability

Chapter > o* the Agen)a 21 Rio )elarationD alls on ountries to a)opt national strategies *or

sustainale )eelop/ent that shoul) uil) upon an) har/oni=e the arious setoral eono/i3 soial

an) eniron/ental poliies an) plans that are operating in the ountry.K

#n 20023 the Worl) u//it *or ustainale !eelop/ent W!D urge) tates not only to take

i//e)iate steps to /ake progress in the *or/ulation an) elaoration o* national strategies *or

sustainale )eelop/entK ut also to egin their i/ple/entation y 2005.K

7P. 8 +. "atsoulakos 2; 12thJuly 2006

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#n a))ition3 integrating the priniples o* sustainale )eelop/ent into ountry poliies an) progra//es

is one o* the targets ontaine) in the ,nite) $ations (illenniu/ !elaration to reah the goal o*

eniron/ental sustainaility.

@oern/ents are eEpete) to *or/ulate *isal3 energy3 transport3 uran )eelop/ent an) other poliies

supporting sustainale )eelop/ent3 to inest in in*rastruture that sti/ulates sustainale groth an)

to reate aareness an) transpareny on sustainaility issues3 pro/oting knole)ge sharing an)

innoation.

@oern/ental o//it/ent to sustainale )eelop/ent is re*lete) in the rati*iation o* the "yoto

Protool an) the &uropean &niron/ental %iaility !iretie 2004G;5G&C an) &/issions Tra)ing he/e

&, &TD. The &niron/ental %iaility !iretie 2004G;5G&C20 relating to &, poliy on the eniron/ent is

Obased on the precautionary principle and on the principles that preventive action should be taken, that

environmental damage should as a priority be rectified at source and that the polluter should payO.

@oern/ent sustainaility strategies hae een *or/ulate) in /any ountries to a))ress sustainaility

issues inlu)ing li/ate hange *ousing on high i/pat setors suh as poer generation an)

transport.

The &, oerall sustainale )eelop/ent strategy inlu)es eono/i poliy an) pro)ution hanges that

in*luene )e/an) *or transport3 uran poliies an) energy poliies.

'* partiular interest are the transport poliies that e/phasise OPutting ,sers at the ?eart o* Transport

PoliyK y proi)ing a syste/ that /eets their nee)s an) eEpetations. Propose) ations inlu)eH

i/proe roa) sa*etyI

re*or/ legislation on harging *or the use o* transport in*rastrutureI

)eelop proposals on *uel taEationI

proi)e easier inter/o)al trael *or peopleI

enhane ohesion.

An eEa/ple o* a goern/ental response to sustainale )eelop/ents is the ," @oern/entBs strategy3

hih is ase) on the *olloing *our oetiesH

aD soial progress hih reognises the nee)s o* eeryoneI

D e**etie protetion o* the eniron/entI

D pru)ent use o* natural resouresI

)D /aintaining high an) stale leels o* eono/i groth an) e/ploy/ent.

usiness shoul) align their strategies ith national strategies as outline) in the preious setion an)

atiate sustainale solutions applying hen neessary innoatie usiness /o)els in ollaoration ith

$@'s an) other stakehol)ers.

20!iretie 2004G;5G&C o* the &uropean Parlia/ent on eniron/ental liaility ith regar) to the preention an)

re/e)ying o* eniron/ental )a/age has een pulishe) in the '**iial Journal % 14; o* ;0 April 2004.


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#./ $ustainable development milestones

oureH ustainale !eelop/ent the ," Approah3,$ Co//ission *or ustainale !eelop/ent

ine 1:>9 the progress ahiee) in Osustainale )eelop/entO an e trae) y the *olloing

lan)/arks represente) y poliies an) initiatie y the ,$ an) arious goern/ents

1:>9 The Worl) Co//ission on &niron/ent an) !eelop/ent haire) y the Pri/e (inister o* $oray3 (rs @ro

?arle/ runtlan)3 pulishes a report 'ur Co//on Future The runtlan) ReportD hih rings the onept

o* sustainale )eelop/ent onto the international agen)a.

1::2 $early 1>0 ountries /eet at the &arth u//it ,$ Con*erene on &niron/ent an) !eelop/entD in Rio

)e Janeiro to )isuss ho to ahiee sustainale )eelop/ent. The u//it agrees the Rio !elaration on

&niron/ent an) !eelop/ent hih sets out 29 priniples supporting sustainale )eelop/ent. Also

agree) is a plan o* ation3 Agen)a 213 an) a reo//en)ation that all ountries shoul) pro)ue national

sustainale )eelop/ent strategies.

The &arth u//it also estalishes the ,$ Co//ission on ustainale !eelop/ent3 hih /eets eery

year3 as ell as i/portant ,$ o)ies - the Fra/eork Conention on Cli/ate Change an) the Conentionon iologial !iersity.

Toar)s ustainaility3 the Fi*th &niron/ental Ation Progra//e o* the &uropean ,nion is a)opte)

1::9 A speial ,$ on*erene is hel) to reie the i/ple/entation o* Agen)a 21 Rio5D. This repeats the all

*or all ountries to hae sustainale )eelop/ent strategies in plae - in partiular y the ti/e o* the neEt

reie o* Agen)a 21 in 2002 Rio10D.

#n &urope3 hanges to Artiles 2 to 6 o* the Treaty estalishing the &uropean Co//unity are agree) in the

Treaty o* A/ster)a/3 gie sustainale )eelop/ent a /uh greater pro/inene.

1::: #n (ay3 the ," @oern/ent launhes its ne strategy3 A etter uality o* li*e - A strategy *or sustainale

)eelop/ent *or the ,". #n !ee/er3 uality o* li*e ounts - #n)iators *or a strategy *or sustainale

)eelop/ent *or the ,nite) "ing)o/H a aseline assess/ent is pulishe).

2000 The ," @oern/ent pulishes its *irst reie o* progress toar)s sustainale )eelop/ent3 Ahieing aetter uality o* li*e3 @oern/ent annual report 2000.

2002 The Worl) u//it on ustainale !eelop/ent L Johannesurg 26 August - 4 epte/er 20023 in the

*ae o* groing poerty an) inreasing eniron/ental )egra)ation3 suee)e) in generating a sense o*

urgeny3 o//it/ents *or ation3 an) partnerships to ahiee /easurale results. (ore than 220

partnerships3 representing S2;5 /illion in resoures3 ere i)enti*ie) )uring the u//it proess to

o/ple/ent the goern/ent o//it/ents. Report o* the Worl) u//it on ustainale !eelop/ent.

200; The Co//ission on ustainale !eelop/ent3 11th ession3 $e +ork3 2> April - : (ay 200;3 a)opts

ne ork progra//e *or the Co//ission on ustainale !eelop/ent C!D3 ase) on to-year yles

ith a lear set o* the/ati issues3 proi)es the gloal o//unity ith a uniue opportunity to *ous in-

)epth attention on spei*i issues. uil)ing on the outo/es o* the tel*th session o* C!Bs C!-12D *ous

on ater3 sanitation an) hu/an settle/ents3 the thirteenth session o* C! C!-1;D ill strie to e

*orar) looking an) ation orient

2006 C!-14 egins the seon) yleo* the Co//issionBs ne ork progra//e. he)ule) *or 1 to 12 (ay

20063 the Co//ission ill reie progress in the *olloing areasH &nergy *or ustainale !eelop/entI

#n)ustrial !eelop/entI Air pollutionGAt/osphereI an) Cli/ate Change

http://www.csrquest.net/http://www.un.org/esa/sustdev/csd/review.htmhttp://www.un.org/esa/sustdev/csd/csd11/CSD_mulityear_prog_work.htmhttp://www.un.org/esa/sustdev/csd/review.htmhttp://www.un.org/esa/sustdev/csd/csd11/CSD_mulityear_prog_work.htmhttp://www.csrquest.net/

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4 Corporate %overnance

4.1 )acground

Corporate goernane )enotes the entire range o* /ehanis/s an) arrange/ents that )eter/ine the

ay key )eisions are /a)e in orporations inlu)ing poliies an) praties that sharehol)ers an)oar)s o* )iretors use to /anage the/seles an) to *ul*il their responsiilities to inestors an) other

stakehol)ers. As orporations are hartere) institutions regulate) y state orporation la3

*un)a/entally orporate goernane is aout aountaility o* )eision /aking an) on*or/ane ith

appliale las.

Folloing the *inanial aounting san)als an) )isontent oer stok /arket losses in reent years3

i/proe) orporate goernane praties hae eo/e ritial to orl)i)e e**orts to protet inestors

an) to stailise an) strengthen gloal apital /arkets.

Corporate goernane re*or/s are ourring in ountries aroun) the orl) an) representatie outputs

inlu)eH

the '&C! Priniples o* Corporate @oernane *irst issue) in 1::: outline) in setion 1.4DI

the aranes-'Eley At o* 2002 in the ,AI

the Ation Plan O(o)ernising Co/pany %a an) &nhaning Corporate @oernane in the &uropean

,nion L A Plan to (oe Forar)O3 a)opte) y the &uropean Co//ission on 21 (ay 200;.

#n )eeloping ountries re*or/s are ai/e) at pro/oting )eelop/entK an) eono/i gloalisation. #nthis onteEt3 orporate goernane re*or/s in o/ination ith lieralising re*or/s3 in e**et3 represent

a ne )eelop/ent strategy *or thir) orl) ountries.21

There are /any styles o* orporate goernane3 inlu)ing ,..3 &uropean3 an) Asian styles3 or /arket-

ase)3 stakehol)er oriente) an) state oriente) syste/s.

The /arket approah *olloe) in the ,nite) tates3 ,"3 Cana)a an) Australia stress the pri/ay o*

onership3 property rights an) /aEi/ising sharehol)er alue.

The stakehol)er oriente) approah *olloe) in Western &urope an) spei*ially @er/any3 Frane3 the

$etherlan)s an) the an)inaian ountries3 e/phasise soietys eEpetations o* goernane syste/san) espeially the interests o* e/ployees an) other stakehol)ers.

!espite the )i**erenes eteen )i**erent national styles o* orporate goernane there is onergene

on the i/portane o*H

transpareny

integrity

aountaility

21!arryl Ree) 20023 Corporate @oernane Re*or/s in !eeloping Countries

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Corporate @oernane looks at the institutional an) poliy *ra/eork *or orporations inlu)ing

goernane strutures3 o/pany la3 priatisation an) /arket eEit. @oo) Corporate @oernane enales

orporations to realise their orporate oeties3 protet sharehol)er rights3 /eet legal reuire/ents

an) reate transpareny *or all stakehol)ers an) the puli on ho they are on)uting their usiness.

Corporate @oernane is a key instru/ent in the ahiee/ent o* CR an) orporate sustainaility

oeties oth eause it proi)es the /eans o* enhane) transpareny on CR onerns an) eause

it highlights through gui)elines hat is eEpete) *ro/ soially responsile usinesses. A key uestion

hoeer is hether there is roo/ *or onergene eteen the /arkets oriente) goernane syste/

an) stakehol)er-oriente) orporate goernane.

Will responsileK orporate goernane trigger an inrease) leel o* stakehol)er orientationM

4.2 Corporate %overnance definitions

Corporate goernane re*ers to the ay a orporation is )irete) un)er appliale las an) nor/s. #t

inlu)es the las goerning the *or/ation o* *ir/s3 the ylas estalishe) y the *ir/ itsel* an) the

organisational struture o* the *ir/. #ssues o* *i)uiary )uty an) aountaility are ithin the *ra/eork

o* orporate goernane.

The *olloing )e*initions lari*y the oeties an) sope o* Corporate @oernane.

Corporate goernane ensures that the oar) o* )iretors is aountale *or the pursuit o* orporate

oeties an) that the orporation itsel* on*or/s to the la an) regulations.K The #nternational

Cha/er o* Co//ere.

The *olloing )e*inition highlights the i/portane o* lear responsiilities an) rules in /aking an)

/onitoring )eisions.

OCorporate goernane is the syste/ y hih usiness orporations are )irete) an) ontrolle). The

orporate goernane struture spei*ies the )istriution o* rights an) responsiilities a/ong )i**erent

partiipants in the orporation3 suh as3 the oar)3 /anagers3 sharehol)ers an) other stakehol)ers an)

spells out the rules an) proe)ures *or /aking )eisions on orporate a**airs. y )oing this3 it also

proi)es the struture through hih the o/pany oeties are set an) the /eans o* attaining those

oeties an) /onitoring per*or/aneO3 =0#% 3pril 9:::.

The ruial )i/ension o* transpareny is e/phasise) in the *olloing )e*inition.

OCorporate goernane is aout pro/oting orporate *airness3 transpareny an) aountailityO22.

Corporate @oernane syste/s shoul) ensure thatH

aountany stan)ar)s are eyon) reproahI

au)it uality is sa*eguar)e)I

the oar) o* )iretors is e**etie an) properly onstitute)I

goernane strutures are *ostering e**iieny an) o/petitieness o* usinessI

22J. Wol*ensohn3 Wor) ank3 artile in /inancial *imes3 June 213 1:::


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)islosure an) transpareny is enhane) to satis*y all key stakehol)ersI

the interests o* sharehol)ers an) other key stakehol)ers are protete)I

orporate risks are properly /anage).

4.# Codes and standards on corporate governance

There are hun)re)s o* o)es an) stan)ar)s on orporate goernane re*leting )i**ering legal tra)itions

an) national praties. @ien the ariety o* onership strutures3 ultural )i**erenes an) the hanging

nature o* apital /arkets an) legal eniron/ents3 there is no est goernane struture *or all.

#n*or/ation on the )i**erent orporate goernane o)es per ountry are proi)e) y the #nternational

Cha/er o* Co//ere.

Failure to a)here to the stan)ar)s o* orporate goernane an hae seere onseuenes *or the

in)ii)uals inole) as ell as *or the o/panies they /anage. a) goernane praties )a/age

inestor on*i)ene3 hereas the a)option o* goo) orporate goernane praties an enhane a

o/panyBs share pries. This has gien rise to orporate goernane re*or/s outline) earlier an) /ore

rigorous assess/ent o* o/panies y /arket analysts.

Aross the orl)3 all o)es o* orporate goernane reognise that the )iretors o* a o/pany /ust take

responsiility *or

un)erstan)ing an) a))ressing the risks a o/pany *aesI

un)erstan) usiness opportunities an) take /easures to enhane per*or/aneI

proi)ing aountaility to oth the o/pany an) the sharehol)ersI

proi)ing roa)3 ti/ely an) aurate )islosure o* in*or/ation aout *inanial an) operating

per*or/aneI

in*or/ing the outsi)e orl) on /atters that i/pat eEternal stakehol)ers.

4.4 Corporate %overnance Trends

ine the en) o* 2001 orporate goernane re*or/s in /any ountries are ai/e) to i/proe au)itor

in)epen)ene3 orporate responsiility3 *inanial )islosure3 an) orporate aountaility hile guar)ing

against on*lits o* interest.

)oard related changes

The /ain hanges assoiate) ith oar)s areH

/ore non-eEeuties )iretors possily haing the /aority to strengthen the in)epen)ent oie in the

oar)roo/I

in)epen)ent hairpersons separating the roles o* hairpersons an) C&'I

appointing a senior non-eEeutie )iretor to represent the interests o* sharehol)ers.

)oard committees

A nu/er o* oar) o//ittees are suggeste) to proi)e inrease) transpareny on sensitie issues

suh as the au)it proess3 no/inations an) re/uneration o* )iretors.

7P. 8 +. "atsoulakos 2> 12thJuly 2006

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Audit Committee

The pri/ary role is to ensure the integrity o* *inanial reporting an) the au)it proess. The purpose is

not to /anage the preparation o* *inanial state/ents or to on)ut the *inanial au)it ut to oersee

the *inanial ontrol syste/ an) the au)it *untion. #t is i/portant to ear in /in) that the )iretors areresponsile *or pro)uing orret *inanial state/ents an) the au)itors hae a legal an) pro*essional

oligation to ensure the aounts o/ply ith appliale stan)ar)s presrie) y arious goerning

o)ies. The role an) responsiilities o* the o//ittee shoul) e aailale on reuest an) pre*eraly

pulishe) on the o/panyBs e site.

0ominations Committee

The role o* the $o/inations Co//ittee is to reie the alane an) the e**etieness o* the oar) an)

help ensure that the o/pany has the est possile oar). The $o/inations Co//ittee also proi)es a

*or/al *untion *or reruit/ent o* )iretors.

Remunerations Committee

The purpose is to ensure that re/uneration o* eEeutie )iretors is properly /onitore) an) is usti*ie).

Co/panies pro)ue a !iretors Re/uneration Report to ensure transpareny.

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+ Corporate responsibility drivers

+.1 An overview of corporate responsibility drivers

The /ain )riing *ores *or orporate responsiility are inestor an) onsu/er )e/an)s an)

goern/ental an) puli pressures as shon in the *olloing )iagra/.

@oern/ents are tightening orporate goernane an) setoral o/pulsory stan)ar)s /aking sel*-

regulation an appealing option *or /ost usinesses.

The loss o* puli on*i)ene in the orporate or) )ries the /arkets )on an) there*ore has a

signi*iant i/pat on the alue an) groth potential *or /any o/panies. As a onseuene3 puli

eEpetations on orporate integrity an) ethial operations are partiularly i/portant )riers *or

orporate responsiility.

Consu/ers are inreasingly eEerising their green uying poer eEerting pressure on o/panies to

a))ress their eniron/ent i/pat an) to inest in eniron/entally *rien)ly pro)utsB.

The Co)e o* Pratie *or Transnational Corporations initiate) y the ,$ in the early 1:90Bs3 in

ollaoration ith /any organisations inlu)ing Consu/er #nternational3 )e*ine) hat onsu/ers eEpet

*ro/ usinesses in ter/s o* ethis3 pro)ut stan)ar)s3 o/petition3 /arketing an) )islosure o*

in*or/ation.

Finally the groth o* a strong oially Responsile #nest/ent /oe/ent gies )istint a)antages to

o/panies per*or/ing ell on sustainaility riteria an) there*ore proi)es a key )riing *ore *or

i/proe) orporate responsiility praties.

The inreasing interest in soial responsiilities an e assoiate) ith arious *ators *ro/ stailising

/arkets to aoi)ing inrease) regulation3 to taking a)antage o* greenB onsu/er pre*erenes an) to

)oing the right thingB to strengthen orporate reputation.

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?oeer3 potentially the strongest )riing *ore is the reognition y an inreasing nu/er o* people

that it is time for a fundamental change in the role of businesses in a world that has to develop in a

sustainable manner. This strengthens the /otiation *or o/panies to oin the relatiely *e o/panies

that hae a)opte) orporate responsiility an) sustainaility as a usiness philosophy.

+.2 The evolution of corporate regulation

usiness organisations are estalishe) to pursue pro*it /ainly y selling pro)utsGseries that a))ress

/arket )e/an) in spei*i areas. This inarialy inoles the use o* arious types o* resoures in

usiness proesses. #n so/e ases3 espeially hen the oetie is short-run pro*it /aEi/isation3 there

are auses o* resoures an) )isregar) o* the i/pat o* usiness proesses or pro)uts in soial an)

eniron/ental *ators. Further3 the pursuit o* pro*it /aEi/isation o*ten inoles the use o*

/onopolisation an)Gor un*air praties at the eEpense o* other *ir/s an) onsu/ers.

To restrain usiness /iss-on)ut3 legislation an) regulation has een use) y national goern/ents

presriing rules un)er hih o/panies are olige) to operate. @oern/ental agenies hae een set

up to /anage orporate legislation inlu)ing registration an) reporting oligations an) tra)ing3 health

an) sa*ety3 hu/an rights3 onsu/er an) eniron/ental protetion stan)ar)s. Further3 a nu/er o*

international organisations hae een estalishe) to superise the i/ple/entation o* /an)atory setor

stan)ar)s. #n this onteEt the *inanial setor is a goo) eEa/ple o* the ay regulatory stan)ar)s hae

een applie). First3 rules an) regulations ere estalishe) to goern ho shares an) other *inanial

instru/ents are tra)e). Co//erial anks then ea/e heaily regulate) to raise puli on*i)ene.

(ore reently the asel gloal superisory stan)ar)s a/e in *ore regulating the apital a)euay o*

internationally atie anks. Another goo) eEa/ple is shipping sa*ety regulations superise) y #('3

the #nternational (ariti/e 'rganisation3 hih /an)ate) sine the :0s the #( o)e *or sa*ety

/anage/ent an) eniron/ental protetion.

oio-legal researh in the late 1:90s raise) /any uestions regar)ing the e**etieness o* strit

regulation an) o* the assoiate) o//an)-ontrol approahes. This supporte) the neo-lieral )isourse

o* the 1:>0s3 hih e/phasi=e) )eregulation an) orporate rights. The orporate orl) respon)e)

positiely y oluntarily a)opting /anage/ent stan)ar)s hih3 in the /ain ere )eelope) y the

#nternational 'rganisation *or tan)ar)isation #'D. #' :000 ea/e an international re*erene *or

uality /anage/ent reuire/ents in usiness-to-usiness )ealings an) #' 14000 has een i)ely

use) y organisations to /eet their eniron/ental hallenges.

ine the 1::0s3 the Corporate oial Responsiility CRD is seen as a ay *or corporate self

regulation inoling3 o)es o* on)ut3 i/proe/ents in oupational health an) sa*ety3 eniron/ental

protetion an) soial an) eniron/ental reporting3 Aor)ing to the ,$ Researh #nstitute on oial

!eelop/ent3 the CR approah to regulation is noa)ays eoling to puli-priate partnerships an)

/ulti-stakehol)er initiaties *or stan)ar) setting3 reporting3 /onitoring3 au)iting an) erti*iation.

+.# %reen buying and environmentally friendly products

Puli onern on eniron/ental issues has een translate) in onsu/er pre*erenes *orgreen products3hih are eo/ing an e**etie CR )riing *ore. @oern/ents are *urther inreasing the i/pat o*


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this tren) through green proure/ent poliies. The net result is that /any o/panies are o//itting to

green pro)ut poliies an) are using eniron/ental per*or/ane in)iators as ritial suess *ators.

The )eelop/ent o* eniron/entally *rien)ly pro)utsB is also supporte) y goern/ental poliies

eEe/pli*ie) y the &uropean Co//issionBs #ntegrate) Pro)ut Poliy #PPD. #PP is ai/e) at reating

on)itions in hih eniron/ent-*rien)ly pro)uts3 or those ith a re)ue) i/pat on the eniron/ent3

ill gain i)esprea) aeptane a/ong the &uropean ,nions /e/er states an) onsu/ers. The

)eelop/ent o* #PP goes ak to 1::93 ul/inating in the Feruary 2001 @reen Paper on the rationale

*or )eeloping pro)ut-relate) eniron/ental poliies an) its i/ple/entationin 200;2;.

@enerally3 eniron/entally *rien)ly pro)uts ill nee) to use *eer resoures3 hae loer i/pats an)

risks in the eniron/ent an) preent aste generation. To support suh pro)uts3 #PP suggeste) the

*olloing three strategiesH

priingI

pro/oting green onsu/er )e/an)I

sti/ulating the supply o* greener pro)uts through eo-)esign gui)elines3 stan)ar)isation3

regulation an) prole/ soling pro)ut panels.

+.4 $ocially Responsible 3nvestment $R35

oially responsile inesting R#D is an inest/ent proess that onsi)ers the soial an)

eniron/ental onseuenes o* inest/ents3 oth positie an) negatie3 in a))ition to the nor/al

*inanial analysis. #n other or)s3 inest/ent /anagers o*ten oerlay a ualitatie analysis o*

orporate poliies3 praties3 an) i/pats onto the tra)itional uantitatie analysis o* pro*it potentialK.

This lea)s to the i)enti*iation o* o/panies that /eet ertain stan)ar)s o* orporate soial

responsiility an) sustainaility *or inest/ent purposes.

R# as originally pro/ote) y hurh relate) an) pension *un)s. The Christian hurh *ro/ 1:90

a)opte) poliies *or *inanial inest/ent pro/oting orporate responsiilityH 52nvestors should seek the

best investment opportunities on financial grounds and then work from within to alter corporate

practices that are at variance with social concerns of the church>.

R# *un)s to)ay hae a signi*iant position in the apital /arkets haing gron )uring the last )ea)e

to represent lose to 10Q o* aailale resoures. R# has estalishe) a nu/er o* sustainaility in)eEes

assessing an) ranking o/panies aor)ing to sustainaility riteria hih proi)es aluale

enh/arking )ata an) hae reate) a )riing *ore toar)s i/proe) sustainaility per*or/ane.

oially responsile inest/ent R#D assets gre *aster than the entire unierse o* /anage) assets in

the ,nite) tates )uring the last 10 years3 aor)ing to the oial #nest/ent Foru/Bs *i*th iennial

report on R# tren)s Washington3 !.C. 24th January3 2006D.

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Aor)ing to teen !. %y)energ243hie* inest/ent o**ier o* !o/ini oial #nest/ents3 &uropean

institutional inestors are lea)ing the ay ith $ational pension *un)s in e)en an) !en/ark using

soial an) eniron/ental sreensI to large pension *un)s in the $etherlan)s haing pilot inest/ent

progra/s ith eniron/ental sreens3 an) Franes state pension resere *un) inorporating soial an)

eniron/ental issues in so/e inest/ents.

$R3 strategies

Three R# strategies hae eole) oer the yearsH reening3 harehol)er A)oay3 an) Co//unity

#nesting. These are )e*ine) as *ollosH

!creening1 the pratie o* inlu)ing or eElu)ing pulily tra)e) seurities *ro/ inest/ent

port*olios or /utual *un)s ase) on soial an)Gor eniron/ental riteria. oially onerne)

inestors generally seek to inest in pro*itale o/panies ith respetale e/ployee relations3 goo)

eniron/ental per*or/ane3 respet *or hu/an rights aroun) the orl)3 an) sa*e an) use*ul

pro)uts. A speial ategory o* sreening strategy is the !ocial ?enture #apital supporting

o/panies reating innoatie solutions to soial an) eniron/ental prole/s.

!hareholder 3dvocacy1 )esries the e**orts o* soially onerne) inestors to in*luene the

ehaiour o* a o/pany. This strategy gaine) pro/inene )uring the oyotts o* o/panies )oing

usiness in outh A*ria )uring aparthei). There are )i**erent types o* sharehol)er atiis/H oting

proEies on soial an) eniron/ental issues at annual /eetings3 initiating )ialogue ith o/pany

/anage/ent3 sponsoring shareoner resolutions an) )iest/ent.

#ommunity 2nvestingH represents the *lo o* apital *ro/ inestors to o//unities that are

un)ersere) y tra)itional *inanial series. #t proi)es aess to re)it3 euity3 apital an) asi

anking pro)uts. Assets hel) an) ineste) loally y o//unity )eelop/ent *inanial institutionsC!F#sD ase) in the ,nite) tates totalle) S14 illion in 200;3 up *ro/ S9.6 illion in 2001.

Comparative performance of $R3 funds

The key uestion is )o soially responsile inest/ents )elier o/parale returns to their inestors as

non-in)ing onesMK

#t is lear that alues an) ethis hae attaine) higher priority ith so/e inestors than getting est

possile returns. !espite this *at3 the per*or/ane o* R# *un)s )e

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