Legal Enforcement of Corporate Social Responsibility Within the EU

8 Colum. J. Eur. L. 529 (2002)

Pall A. Davidsson. LL.M. Columbia University School of Law, 2002.

Recent economic globalization and trade liberalization have given multinational enterprises (MNEs) considerable economic power, matching and often surpassing that of states. As an example, consider that the collective sales of four of the largest MNEs in the world exceed the gross domestic product of the whole of Africa. MNEs dominate t he global economy, accounting for two thirds of global trade in goods and services.

While states are subject to various international and internal mechanisms designed to prevent them from abusing their powers, MNEs are traditionally bound by national laws of limited geographical scope. In the global market, where legislation tends to vary considerably from one country to another, little exists in terms of universal standards applicable to NINEs.

Europe is home to more of the top 100 MNEs in the world than any other continent and to the most efficient international human rights mechanism in the world. In the year 2000 alone, the European Court of Human Rights found over 400 violations of the European Convention on Human Rights, which is legally binding upon its signatories. Throughout the 42 years of the court’s existence, states have shown remarkable compliance with its judgments. Almost without exception, states have granted injured parties compensation and undertaken legislative, administrative and judicial measures to avoid repetition of violations identified by the court. The scope of this mechanism is, however, limited to violations committed by state actors. Victims of violations committed by private entities such as MNEs cannot seek remedy before the court unless some kind of state involvement is implicated.

The European Union (EU) is a unique forum within which to evaluate corporate social responsibility (CSR) because it unites the large European economy with Europe’s commitment to human rights and social values. Although the initial goal of European integration was to create a common market, the European Court of Justice stressed early that respect for human rights forms an integral part of the general principles of Community law. This vision was strengthened with the Maastricht Treaty, which states that the goals of the EU include promoting “economic and social progress” while developing “the Union as an area of freedom, security and justice’ and that the EU “is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms.” As a result, the EU does not see the creation of common markets and enhanced protection of human rights as mutually exclusive. Rather, the EU believes that one cannot be achieved without the other. Economic freedoms “are not absolute, but must be viewed in relation to their social function” and with due regard for human rights.” Economic efficiency must be pursued together with democratic legitimacy and social justice. The EU is therefore not only concerned with the promotion of human rights by their inclusion in the creation of common markets but also with the added value human rights provide to economic and social welfare.

This note will first examine the concept of corporate social responsibility and how that notion ties in with, and even promotes, the goals of profit-oriented businesses. In order to illustrate the growing awareness of corporate behavior, Section III then traces the private and governmental initiatives taken in Europe to set out human rights standards with respect to businesses and to introduce tools to measure social conduct. This interest at the national level has also been evident in Brussels, which-through a series of small steps and declarations discussed in Section IV-is moving toward making concrete proposals for measures to ensure the ethical conduct of corporations. The latest step was taken in July 2001 when the European Commission issued a green paper to promote a framework for corporate social responsibility. Section V will discuss the principal contents of the Green Paper, with a focus on the means proposed to promote CSR. A critical stance is taken in Section VI with respect to the Commission’s decision to preclude enforcement of corporate social responsibility through law. A number of arguments in favor of and against such legally binding norms are analyzed in particular fromthe viewpoint of efficiency and specific EU objectives such as economic integration and governance. It will also be argued that legal and voluntary codes of conduct can be applied side by side in a beneficial manner. This discussion will be followed by suggestions of alternative or complementary methods of legal enforcement in Section VII.