Tag Archives: OECD CSR Policy
Laudable corporate responsibility practices often involve the development of network relations, as both private and government actors are increasingly investing their discretionary resources in social capital. Societal governance is intrinsically based on a set of increasingly complex and interdependent relationships. Several governments are stepping in with their commitment for corporate governance as they are setting their social and environmental responsibility agenda through different policies and frameworks.
Many countries are following the guidelines of the International Labour Organisation (ILO) and the Organisation for Economic Cooperation and Development (OECD) as these organisations have provided highly recognised international benchmarks for transparent and accountable practices. However, there are other pertinent actors within the local levels of society, which may include civil organisations and industry practitioners. There may be different expectations and perceptions within each stakeholder relationship, which have to be addressed successfully to develop appropriate CSR policies. Essentially, such relational approaches are based on the idea that recent changes and patterns affecting the economic and political structure may transform the roles and capacities of various social agents.
The corporations’ political role has inevitably raised the need for further transparency and accountability of practices. Apparently, the so called ‘standards’ represent voluntary predefined norms and procedures for organisational behaviour with regards to social and environmental issues and are often valid on a global level. There are several well-known examples of such standards, which may contain considerable differences. These standards help corporations to be accountable to the consequences of their actions. Organisations are encouraged to assess and communicate their responsible activities (and impacts) on sustainable issues to their stakeholders.
Yet, it may seem that to date there is still no formal model which can be used as a yardstick to evaluate the standards’ strengths and weaknesses. The accountability standards reflect a shift towards a ‘quasi-regulation’ which is based on a substantive (outcome-based) and reflexive (process-based) law approaches. A ‘substantive’ law approach is regulated by prescribing predefined outcomes, whereas a ‘reflexive’ law approach is regulated by prescribing procedures to determine outcomes in a discursive way. Since most accountability standards are addressing corporations all over the world, their macro-level norms may appear to be quite generic and broad in their content.
According to the EU Commission Expert Group (2012), non-financial reporting enables investors to contribute to a more efficient allocation of capital, and to better achieve longer-term investment goals. It can also help to make enterprises more accountable and contribute to higher levels of citizen trust in business. Several experts have supported the idea of a principles-based approach, rather than a detailed, rules-based one. The EU Commission Expert Group suggested that their framework on non-financial reporting has given flexibility to the companies to decide the topics to report on. The European Union’s experts (hailing from the Directorate General of the Internal Market and Services) came up with an innovative approach, which incentivised the companies to report their non-financial information. Of course, materiality is considered a key concern by audit experts. The experts stressed that improving materiality of reports is useful to address the comparability issues. They advocated that the companies’ boards should have ownership on reporting, in order to make it relevant and effective.
Clearly, the experts did recognise that there were significant differences in national cultural contexts as well as in their respective reporting mechanisms. Some experts have indicated their concern about the consequences of adopting more detailed reporting requirements (including specific key performance indicators) into EU legislation. On the other hand, they did not reject the idea of proposing a list of topics which could be covered by any company when reporting its responsible practices. The current EU framework still does not provide a specific reference framework as to the expected quality of the disclosure of the non-financial reports.
For the time being, the instruments for sustainable reporting are not compulsory, although a wide array of CSR tools and standards have already been developed. The voluntary nature of private non-financial reporting can be a valid reason why governments and businesses did not take a hands-on approach in the development of CSR policy. The governments could possibly play a more pro-active role by setting the regulatory social and environmental standards. The introduction of standards, phase-in periods and use of innovative technologies can possibly bring operational efficiencies and cost savings to the businesses themselves. Such measures may improve the environment, and increase the organisations’ competitiveness. Adequate regulation can possibly contribute to the wider societal and environmental objectives.
Mark Camilleri recently completed his PhD (Management) degree at the University of Edinburgh