Corporate Social Responsibility in Denmark: The Role of Public Policy By Jette Steen Knudsen The Copenhagen Centre - for Corporate Responsibility Presentation to the conference on Corporate Social Responsibility organized by Fundación Carolina and Fundación Euroamérica November 3, 2005

The Copenhagen Centre - for Corporate Responsibility >>Independent think tank founded by the Danish government with a focus on the changing role of business in society and corporate social responsibility (CSR) initiatives. Independent board of directors >>Secretariat for the Danish National Network of Business Leaders >>Target group: key decision-makers in business and government (CSR as sustainable business and governance)

The Copenhagen Centre Mission >> Generate knowledge, stimulate public debate and raise awareness about the changing role of business in society How we work >> Applied research : the Centre undertakes research and practical studies, often in collaboration with external partners >> Outreach activities : the Centre regularly convenes seminars and workshops, and continuously engages decision-makers and the media in dialogue and debate >> Consultancy : the Centre seeks to develop and share its expertise through consultancy and teaching

Partners and collaborators >> Government Ministries, EU Commission (DG Enterprise + DG Employment and Social Affairs, UN Global Compact, the World Bank >> Business associations CSR Europe and European Academy for Business in Society (EABiS) >> Companies PricewaterhouseCoopers, Hewlett Packard, Novozymes, the Danish National Network of Business Leaders >> Academia Ashridge Business School, UK, Columbia Law School, US, Copenhagen Business School, DK

Academic Advisory Board Jagdish Bhagwati, Columbia University Mette Morsing, Copenhagen Business School Chuck Sabel, Columbia Law School Gunnar Trumbull, Harvard Business School

Focus Areas 1) Employment trends: the Danish understanding of CSR Globalization and outsourcing: impact on vulnerable groups National Network of Business Leaders: new forms of social employment due to 1) globalization; 2) juvenile crime 2) Risk management SMEs and ethical supplier standards Non-financial reporting Corporate image and CSR initiatives Institutional investors and social initiatives

Implicit Assumptions of the CSR Agenda focusing on Employment Economic burden-sharing perceived as necessary for maintaining social welfare Business included in problem-solving in order to solve problems from the ”bottom up” rather than ”top down”

New Labour Market Initiatives during the 1990s The Danish National Network of Business Leaders (1996) + Regional Networks / “Inspirators” (2000) Tools employed: Different kinds of subsidised employment programmes (i.e. ”sheltered” jobs) The Network Award for Social Inclusion - initiatives that ”make a difference in every day life to employees, the company and to society”

Types of CSR Initiatives 1) Integration of employees excluded from the labor market (training, sheltered jobs, working capacity tests) 2) Pre-emptive measures (Reducing absence due to illness, improving physical and psychological working environment, sheltered jobs for employees etc.)

The ”Golden Triangle” of Flexicurity: CSR Initiatives Strengthened by Labor Shortage Flexicurity Generous welfare systems Active LMP Flexible labour market

Risk Management: Changes in the Business Environment Structural Changes have made companies increasingly international Companies are increasingly held responsible for growing socio- economic inequality within societies and between rich and poor countries, environmental conditions and upholding human rights conventions Governance Gap: welfare state provisioning by firms in LDCs and securing adherence to soft law

Risk Management: Changes in the Business Environment International brands make MNCs more vulnerable to NGO (non- governmental organization) criticism

Risk Management: Does CSR Pay? It can be dangerous for a business to ignore new trends and new social expectations But these new problems and issues also raise new business opportunities. –demand for healthy food –demand for generic pharmaceutical products –demand for cleaner environment (wind mills)

Example of Risk Management Sustainable Competitiveness in Global Value Chains -a small business perspective (a study undertaken by The Copenhagen Centre)

Globalization and CSR from a Small Business Perspective - two trends 1.B2B markets for semi-manufactured goods are becoming more global 2.Suppliers in global value chains face new sustainability requirements Are these conflicting or reconcilable trends?

GLOBALIZATION - Demise of the factory gate Specialisation and (offshore) outsourcing are increasing Risk exposure in terms of supplier failure: –Risks to cost, quality and delivery times… –…but also to reputation Governance of global production networks is becoming a key driver of value creation: –Where do the products come from? –Whose responsibility is it?

Survey of 300 Small Danish Businesses ( employees)

A small business perspective on sustainable competitiveness in global value chains The challenge: to reconcile sustainability requirements with cost-competitiveness in a global production and sourcing scenario The question: does sustainable supply chain management underpin or undermine competitiveness for suppliers in global value chains?  What are the drivers?  What are the barriers?  What are the opportunities?

DRIVERS I Value chain governance constitutes quality assurance. ”CSR is an area we can use to strengthen our professional image as a serious supplier, and justify slightly higher prices. We deliver quality in all areas and to us CSR in the supply chain is an area where we can expand the concept of quality.” –Danish company in the textile industry – 40 employees

DRIVERS II Value chain governance constitutes quality control ” So CSR is going to be part of our quality control as an extended concept of quality. It may not be profitable as such, but it’s just something we need to do in order to avoid health and safety problems landing on our desk.” –Sourcing company in the furniture industry – 30 employees

BARRIERS I The customer is always right. ”…take a cement plant, which is a typical customer for us. They’re not going to look at where our tiny damper comes from. Those who buy the cement – the contractors and the craftsmen - couldn’t care less.” –Company in the metal industry – 100 employees

BARRIERS II A lack of transparency (”Potemkin facade”). ”Even if you get access to the supplier’s facilities, there’s no guarantee that the product actually comes from those facilities. Unless you’ve monitored the entire process, there’s no way you can know from where they get their sub-supplies.” –Company in the metal industry – 80 employees

OPPORTUNITIES Cooperation may enable “governance”. ” It’s impossible for a company of our size to monitor suppliers in the Far East. We don’t have an office out there. But some of our customers have a lot of people in those areas. In principle they could audit the suppliers for us. In fact I think they would if we asked them to.” –Company in the painting industry – 35 employees

Conclusion and challenges? Denmark is doing well according to most surveys: inclusive labor market initiatives Danish companies could do more to ”pick the low-hanging fruits” i.e. market that 5% of all non-financial reports are from Danish companies Challenges: 1.Changing demographics (fewer young, more pensioners) 2.Integration of immigrants problematic 3.Need for skill-upgrading 4.Internationalization expands “the corporate sphere of influence”: how to reconcile domestic and international concerns