1. The Hellenic Network for CSR, 28. February 2011 “Doing Business Socially 2011” -------------- CSR and Regulation – basic assumptions of CSR and the role of government By Ole Kirkelund Danish Government Centre for CSR Danish Commerce and Companies Agency Ministry of Economic and Business Affairs

2. 2 February 2011 Ole Kirkelund Plan of the presentation 1.About the Danish Government Centre for CSR. 2.The present Danish Action Plan for CSR I - and the next Action Plan II (in the pipeline). 3.Defining CSR – the concept of ”strategic” / ”business driven” CSR (Porter / Kramer). 4.State (government) responsibility – the case of SRI. 5.Questions and discussion.

3. 3 February 2011 Ole Kirkelund 1. The Danish Government Center for CSR 3 Ministry of Economic and Business Affairs Danish Commerce And Companies Agency Danish Gov. Center for CSR

4. 4 February 2011 Ole Kirkelund The Role of the Danish Government Centre for CSR We are responsible for unfolding the initiatives of the Action Plan for CSR Dissemination of knowledge Supporting Danish businesses in using CSR as a business opportunity Coordination of governmental initiatives Dialogue with stakeholders (EU, companies, organizations) To act as a secretariat for the Danish Council for CSR

5. 5 February 2011 Ole Kirkelund Initiatives of the present Action Plan for CSR? 30 initiatives within four action areas: 1.Propagating business-driven social responsibility 2.Promoting corporate social responsibility through Government activities 3.Corporate sector’s climate responsibility 4.Marketing Denmark for responsible growth

6. 6 February 2011 Ole Kirkelund Initiatives – some examples Encouraging businesses to take up CSR as a strategic activity Integration of Global Compact/ PRI in state activities Conference on Socially Responsible Investing at Princeton University (November 2008) Mandatory reporting on CSR for large companies and investors (December 2008) Setting up of a national Council for CSR (August 2009) Improving communication and developing web tools 6

7. 7 February 2011 Ole Kirkelund Action Plan for CSR II (In the ”pipeline”) Focus areas recommended by the Danish Council on Corporate Social Responsibility: 1.Strategic embedding and global frontrunners. 2.Respect for international principles. 3.Communicating and reporting. 4.An enabling environment for CSR.

8. 8 February 2011 Ole Kirkelund Definition of CSR by the Danish Council on CSR ”The company demonstrates corporate social responsibility and creates value for both business and society by entering into dialogue with its stakeholders to address social, environmental and ethical challenges in accordance with internationally recognised principles”

9. 9 February 2011 Ole Kirkelund Basic Assumptions of Action Plan I + II 1. CSR should be business-driven (and applied strategically): We do not accept the premise that there is always a trade-off between corporate social performance (CSP) and corporate financial performance (CFP). Where trade-offs are inherent, regulation and economic measures are (still) appropriate. 2. The approach is international: We refer to the UN Principles for CSR For businesses in general: UN Global Compact. For investors: PRI (UN backed Principles for Responsible Investment).

10. 10 February 2011 Ole Kirkelund A: Defining CSR – Strategic (business driven) CSR The concept of CSR: ”…. we propose a new way to look at the relationship between business and society that does not treat corporate success and social welfare as a zero- sum game”. And, further: ”Strategic CSR also unlocks shared value by investing in social aspects of context that strenghten company competitiveness. A symbiotic relationship develops: The success of the company and the success of the community become mutually reinforcing”. (Michael E. Porter and Mark R. Kramer, Harvard Business Review, December 2006).

11. 11 February 2011 Ole Kirkelund B: Defining CSR – Strategic (business driven) CSR ” No business can solve all of society’s problems or bear the cost of doing so. Instead, each company must select issues that intersect with its particular business”. And…: ”The essential test that should guide CSR is not whether a cause is worthy but whether is it presents an opportunity to create shared value – that is, a meaningful benefit for society that is also valuable to the business” (Michael E. Porter and Mark R. Kramer, Harvard Business Review, December 2006)

12. 12 February 2011 Ole Kirkelund Strategic CSR – summing up Creating synergy between business’ demands and society’s needs. Integrating CSR into the companys core business concept (i.e. CSR is a very individual challenge to any company). Balancing the companys chain of values against the competitive context to benefit society and the company the most. Goal: To gain competitive advantage by going beyond best practice, differentiating from rivals and attracting customers while serving society. (Porter & Kramer, 2006) 12

13. 13 February 2011 Ole Kirkelund Creating shared value (Porter & Kramer, Harvard Business Review, Jan-Feb. 2011) ”Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success” As for the role of government: “…..government must learn how to regulate in ways that enable shared value rather than work against it”

14. 14 February 2011 Ole Kirkelund 4. Responsible Investments - the Case of the Financial Sector Goldman Sachs study (2005): Companies in selected industries that apply strategic CSR outperformed the general market by 25% outperformed their peers by no less than 72%. McKinsey / Carbon Trust (2008) – on risks and opportunities of climate change: Companies in some sectors risk loosing market value by up to 65% (e.g. aluminium and automobiles) Companies in other sectors could increase market value by up to 80% (e.g. building sector) Conclusion: What applies to companies also applies to investors.

15. 15 February 2011 Ole Kirkelund Responsible Investment strategies in Danish Pension Funds Source: The Danish Insurance Association Has SRI-guidelines Etical considerations, but no guidelines Deselection of SRI-guidelines No information available

16. 16 February 2011 Ole Kirkelund How to be a responsible investor The Principles for Responsible Investments (PRI): 1.We will incorporate ESG issues into investment analysis and decision-making processes. 2.We will be active owners and incorporate ESG issues into our ownership policies and practices. 3.We will seek appropriate disclosure on ESG issues by the entities in which we invest. 4.We will promote acceptance and implementation of the Principles within the investment industry. 5.We will work together to enhance our effectiveness in implementing the Principles. 6.We will each report on our activities and progress towards implementing the Principles.

17. 17 February 2011 Ole Kirkelund Active ownership is central to SRI The Principle (2) of ”Active Ownership” Rules: Possible actions: Develop and disclose an active ownership policy consistent with the Principles. Exercise voting rights or monitor compliance with voting policy (if outsourced). Develop an engagement capability (either directly or through outsourcing). Participate in the development of policy, regulation, and standard setting (such as promoting and protecting shareholder rights). File shareholder resolutions consistent with long-term ESG considerations. Engage with companies on ESG issues. Participate in collaborative engagement initiatives. Ask investment managers to undertake and report on ESG-related engagement.

18. 18 February 2011 Ole Kirkelund Banning investments – the case of cluster munitions The ”Convention on Cluster Munitions” (2008): What are the implications for investments? Article 1: 1. Each State Party undertakes never under any circumstances to: –Use cluster munitions; –Develop, produce, otherwise acquire, stockpile, retain or transfer to anyone, directly or indirectly, cluster munitions; –Assist, encourage or induce anyone to engage in any activity prohibited to a State Party under this Convention.

19. 19 February 2011 Ole Kirkelund Questions for discussion Will institutional investors adopt the Principles for Responsible Investment (PRI)? Will governments do the same (if not, why)?

20. 20 February 2011 Ole Kirkelund Thank you Info and tools: http://www.csrgov.dkhttp://www.csrgov.dk Blog on CSR: http://blog.csrgov.dkhttp://blog.csrgov.dk CONTACT: Government Centre for CSR: csrgov@eogs.dkcsrgov@eogs.dk 20