CSR : The rose and its thorn (2)

09 February 2023
Jacques Perotto and Maxime Hermes

The aim of social and environmental performance confronted with economic performance

Far from being an oxymoron, this title exposes two aims, one of which has tended to take place at the expense of the other or, at best, one before the other.

Even if it is true that a company with more wealth will always be in a better position to share it with its employees than the reverse, it is still true that it would hardly be rational to require a CEO to take care of the environmental impact of his company’s activities before its economic performance.

Back to the past

Once we look past this cliché, the fact remains that this has always been emphasised when adopting major international standards in labor law.

The International Labor Organization was built around a double postulate:

  • Social progress should be subject to state action in order to adopt specific labor law standards (international conventions, recommendations, etc.);
  • But taking into account the fact that this action in favor of social progress should be left to the voluntary intervention of States through the ratification of conventions by each country benefiting from sufficient economic progress to have the means to achieve it.

To date, no economic integration or free trade treaty has provided common social standards; the objective has only been to seek a convergence of standards.

At European level, the harmonization of social standards is carried out according to two processes:

  • either by the European regulation which is integrated directly into the legal framework of each Member State and is the subject of an exclusive interpretation by the Court of Justice of the EU;
  • or by the directive which, to be applicable, must be transposed into domestic law, under the control of the Court which verifies the quality of the transposition.

This harmonization process is carried out through the adoption of common minimum standards contributing to the creation of a common basis for the protection of employees.

The objective is also to fight against social dumping based on the reduction of costs linked to weak protection of the health and safety of employees within the Union and thus avoid distortions of competition.

Back to the future

The exponential development of CSR for the last fifteen years is intended to respond to this challenge: faced with the inability of States to establish new coercive social standards, companies have designed their own self-regulation standards considered as ‘soft law’.

Whatever one’s opinion of these debatable standards, their transnational application, for example via codes of conduct or other ethical charters, has made it possible to introduce new guarantees in countries where social protection rules are not provided by local legislation.

The normative value of CSR commitments as a real issue

The central question remains the binding value of the commitment made in terms of CSR by the company and its responsibility in this regard.

  • The prerequisite of integration and compliance with domestic legislation

To be both socially and legally relevant, these commitments must first and foremost integrate local regulations as a fundamental starting point; the voluntary standards that the company imposes on itself must be integrated into the national or international legal order and therefore respect the local  legal order in.

  • The need for transparency

To date, no certification appears to have the legitimate authority to declare a particular company globally, socially and environmentally responsible.

Thus, the very nature of the standard to which the company agrees to submit via a charter, a label or a specific certification resulted from a selective choice, which relativized its scope as a global standard.

However, only the implementation of a global assessment and reporting process allows effective control of the sustainable commitments made on a qualitative and quantitative level.

Also, the very title of the new European Directive of December 16, 2022 (Corporate Sustainability Reporting Directive) is far from insignificant: such a commitment made according to the selective goodwill of the company will no longer be enough to become virtuous; a real impact analysis of the company’s activities will have to be carried out, which will be accompanied by reporting whose nature is no longer only declarative but will lead to concrete achievements.

In conclusion, if many agree to maintain that the commitments made by companies in terms of sustainability are vectors of growth, employers will still have to learn to manage these new constraints inducing the implementation of evaluation processes and reporting allowing the effective qualitative and quantitative control of their commitments with their economic performance objectives.

Jacques Perotto, Partner and Maxime Hermes, Associate