1.2.3 Voluntary or binding?

The discourse on the legal aspects of CSR often narrows itself down to the question whether CSR is voluntary or binding.

In 2001, the Commission published a Green Paper on CSR, in which it also emphasised the importance of companies voluntarily' taking on commitments. On the other hand, the European Parliament (EP) has always been a clear advocate of mandatory CSR regulation rather than voluntary rules. Many resolutions have been adopted over the last decade instructing the Commission to include clauses on mandatory social and environmental reporting in the Accounting Directives, i.e. to oblige businesses to include in their annual reports information on the environmental standards they observe outside the EU. The EP also called upon the Commission to include additional obligations regarding the disclosure of corporate information on CSR in its Prospective Directive.

In 2000, in keeping up with the business community stance of rejecting binding rules, the SER advised the Dutch Cabinet to exercise caution when it came to the role of the Dutch government in this matter. Over the course of the last decade, the Dutch government position has evolved to its position today namely, that CSR is voluntary but not noncommittal'.1 Moreover, the current Dutch corporate governance code prescribes that directors should formulate a CSR policy, submit it for approval to the supervisory board and report on it to the general meeting of shareholders.

Not an accepted scientific source of information, but illustrative of the confusion that governs the general debate about the binding or non-binding character of CSR, is the definition provided by Wikipedia:

Clearly, the definition causes confusion by placing emphasis on self-regulation, but at the same time referring to compliance with laws and international norms.

Firstly, according to the author, the fact that CSR comprises so many themes makes it difficult to determine in a general manner whether or not CSR' as a whole is, or should be, included in law. Some CSR themes are already regulated by law, such as the prohibition on paying bribes and the prohibition on discriminating between employees on the basis of gender or race. Other themes are more difficult to capture in uniform legislation, e.g. how much water a company may extract from a river or an aquifer. This particular issue could for instance be regulated by way of imposing the requirement on each company to obtain a licence for water use. This has indeed been done in many jurisdictions. Each licence can then be different in order to balance public watershed protection goals and the company's needs. Compliance with the licence falls within the legal arena. However, in a year of extreme drought, civil society may expect a water-using company to use less water than legally permitted by the licence.3 Today, CSR even seems to evolve into the situation in which society looks forward to seeing that business assist in keeping water sources healthy, because water is an ecosystem service on which everyone depends.4 One best practice example is that companies pay communities upstream for not logging the forest which is essential for the water sourcing downstream.5 In that case, the corporate motive to do so is based on a long-term business plan rather than being incentivised by strictly legal means. This could change however, meaning that future laws might well institute such payment obligations for companies in order to safeguard future water provision. Other issues are not at all suitable for mandatory rules. For example, a company cannot be forced to collaborate with a government of an African State, e.g. to jointly establish a public-private partnership (PPP) aimed at contributing to the Millennium Development Goals (MDG; MDG-PPP).6 However, if a pharmaceutical company chooses to enter a new market in Africa, it can be advantageous to start that business project with an MDG-PPP aimed for instance at combating HIV. In that way, the company obtains knowledge about the local market, establishes relationships with relevant actors, creates opportunities for new R&D, and the PPP can add a positive boost to its reputation.

Secondly, merely judging CSR along the legal compass limits the capacity to observe. CSR is a concept that has legal aspects, ethical aspects, economic aspects, operational aspects, marketing aspects, and sociological and cultural aspects. These dimensions interrelate and mutually influence each other. For instance, although a pharmaceutical company cannot be forced in any legal way to enter into an MDG-PPP, if it does decide to do so such a partnership can have such a positive effect on the company's reputation that - from a marketing perspective - it will be difficult to terminate the partnership. In certain situations, a legal argument can probably also be made, i.e. that the company has created expectations with its local partners and would not act carefully by suddenly terminating the project. Moreover, when the decision has been taken to set up the partnership, legal commitments will very likely form part of the partnership structure, which will then also be enforceable when tried before a court of law. Hence, a theoretical discussion about CSR being voluntary or mandatory has little value. In contrast, examining real developments in the world may bring forward very interesting new legal issues to deliberate on as well as ideas that may ground the direction of future legislation and case law. In that respect, an analysis of best practices and new developments in the legal field can contribute to the public policy perspective and provide suggestions on how to approach private actors. At the same time, it can inspire private actors and assist them in framing and implementing CSR.

For these reasons, the study contained in this book will consider CSR from a legal perspective but does not stop there, as the broader perspective of assessing best practices and new developments also brings forward very interesting new solutions and dilemmas. Occasionally, the question will be posed whether a legal approach would be preferable when compared to other available alternatives.