1 What is the Actual State of CSR in the EU-10? Summary of experiences on the situation of CSR in the EU-10 Pavel Franc Programme GARDE The Environmental Law Service

2 CSR in the EU 10 Post - communist countries have no social background that would be supportive of CSR. CSR is driven by multinationals coming to the New EU Member States.

3 CSR as a concept is driven by large foreign investors (corporations) Every year around USD 25 billion in Foreign Direct Investment flows into the CEE region. The share of foreign affiliates in each host- country is very high in the EU -10 (e.g., in Hungary - more than 50%, Czech Republic 40%). FDI changes social structures, the physical landscape, and the whole economic climate (there were greenfield FDIs during in the EU – 10). Source: UNCTAD World Investment Report 2005.

4 Investors don’t take CSR seriously Holistic approach is missing. “CSR is not an optional "add-on" to business core activities - but about the way in which businesses are managed. Businesses need to integrate the economic, social, and environmental impact in their operations.” Communication from the Commission, COM(2002) 347 final

5 Investors don’t take CSR seriously Business solutions come first CAUSE: Securing investments is investors' only priority. Environmental and social aspects do not warrant sufficient importance during decision-making. EFFECTS: Conflicts with the public interest Frequent illegalities during approval procedures Corruption Irresponsible demands towards governments

6 Investors don’t take CSR seriously CSR becomes a part of corporate governance only after the investment is secured. CAUSE: Superficial implementation of companies' CSR policies. EFFECTS: Multinationals don't inform the public about their CSR policies. CSR used only for PR purposes. Local management not properly trained to understand CSR: - Illegalities and breaches of companies' CSR policies. - Philanthropy only. No open dialogue exists between multinationals and civil society or other stakeholders.

7 Societal ignorance of CSR CAUSE Societal ignorance of CSR - > No expectations towards corporations. EFFECTS: Political representatives pander to investors. Corporations' CSR policies are not being monitored by the public. The only active NGOs are the "BINGO organizations" (Business Oriented NGOs). Relationships between the various stakeholders and the corporations are deficient. Trade unions do not use collective bargaining to promote CSR.

8 Conclusions Corporations still have a problem with integrating responsibility for their economic, social, and environmental impact into their operations. Too often, corporations do not comply with their own CSR policies. Very often CSR is viewed as a sophisticated kind of Public Relations.

9 Recommendations Legal framework for CSR a) Transparency: Companies should have to prove they are complying with their own voluntarily declared CSR obligations. b) Companies which abuse CSR for PR purposes without implementing real actions should be liable.

10 Recommendations Policies supporting CSR activities Raising public awareness of CSR. Public procurement standards should favour companies which can prove they meet higher CSR standards than their competitors. Tax allowances.

11 Recommendations Legal framework for better law enforcement Better access to justice for victims of corporate abuses. Legal liability for subsidiaries’ activities. Criminal liability of legal persons. Legal duty to incorporate management system standards that would secure integration of environmental and social standards into the decision-making of transnational corporations.

12 CSR becomes a part of corporate governance only after the investment is secured.

13 Local management not properly trained to understand CSR.

14 Superficial implementation of companies' CSR policies Local management doesn't respect existing CSR policies. –Philanthrophy only. –Greenwashing and bluewashing.

15 Multinationals don't inform the public about their CSR policies.

16 No open dialogue exists between multinationals and civil society or other stakeholders.

17 Societal ignorance of CSR.

18 NO EXPECTATIONS TOWARDS CORPORATIONS Political representatives pander to investors. –Race to the bottom among the EU-10 states. Civil society organisations are not well informed about CSR. –The only active NGOs are the "BINGO organisations" (Business Oriented NGOs). –Trade unions don't use collective bargaining to promote CSR. –Watchdog organisations are not focused on CSR. Corporations' CSR policies are not being monitored by the public.

19 NO EXPECTATIONS TOWARDS CORPORATIONS (2) There is no active relationship between the different stakeholders and corporations.