The Duties of the Board and Corporate Social Responsibility (CSR)

Abstract

While the exact impact of run-away climate change, continued biodiversity destruction and unchecked social impacts of the current financial challenges we see is unknown, we know one thing for certain: Business as usual is not an alternative. To shift over to a sustainable path, we need companies to contribute. Clearly, our governments, even if they were brave and progressive enough, cannot single-handedly adopt sustainability. The contribution of business is needed. And if business shifts in the right direction, customers, employees and indeed whole societies may shift with them.

The pressing question then is whether CSR is an answer. Some interesting developments, including the paradigm shift in the EU Commission’s definition of CSR, open up for a revisit of the potential of the CSR concept. We put forward that CSR can play an important part in facilitating such a necessary contribution from companies, if the following three conditions are met: Firstly, the promotion of CSR must encompass both the level of legal compliance and of action beyond compliance. The well-known business capture of CSR that we have seen as voluntary, as a case of ‘don’t regulate us and we can talk about how we behave’ does not suffice. This tends to lead to delimitation against legal obligations and an unwarranted Corporate Governance/CSR dichotomy.

The implicit support of shareholder primacy entails that sustainable business, in the environmental and social sense, quickly will hit a ceiling. Secondly, CSR must be true or core CSR, dealing with the business of the company, how that is conducted and the impacts of that business. Thirdly, CSR must entail an integration of environmental and social concerns in the decision-making of the company in such a way as to lead to an internalisation of externalities.

In the second section of this chapter, we discuss the role of the board in a CSR context, while the third section investigates the recent developments at EU level, where we find that despite a paradigm shift in the definition of CSR, little is done to integrate CSR concerns into the duties of the board. The fourth section therefore poses the question what role the EU has in this context, concluding that the contribution of the EU most likely is a necessary prerequisite to achieving the shift away from business as usual and onto a sustainable path.