3.1 Introduction

The last decade can be characterised by the emergence of an increasing awareness about the limits to growth. Many voices have been heard pointing to the fact that the planet does not support unlimited economic growth and increasing consumption patterns by more and more people.1 The world seems to be flat in the sense that globalisation has made the world smaller: People in Europe eat shrimp from Thailand, that are peeled in Morocco; Moroccans move to Europe to live a modern West-European life; in Costa Rica, roses are grown in areas that used to be tropical mountain forests, for the export to China and Europe; Chinese are constructing roads in Congo to facilitate the extraction of minerals and timber; and Europeans travel to Thailand for holidays, and Chinese the other way to Europe. The large-scale materialisation of these 'extreme' economic patterns has become transparent thanks to the internet. In today's business models large parts of the production processes are outsourced. International supply models consist of many chains. Practically every ingredient comes from another part of the world, implying multilevel and opaque decision making structures. Other features connected to the global style of consuming, packaging and dealing with waste include the fact that fish in the oceans have incorporated plastic in their body tissue2 and that many fish caught by the fishing industry no longer reach reproductive age.3 These global patterns combined with high consumerism have brought us into a situation where natural resources are being depleted, severe shortages of food and fresh water and biodiversity crises are pending on a nearby horizon.4 Apparently, people in general, including the decision-makers in business and politics, tend to have short-term horizons.

The last decade has also seen the emergence of CSR as a concept.5 Companies, governments and civil society have embraced the idea that the business sector has an important role to play in 'saving' the planet. CSR promotes paying attention to People, Planet and Profit when doing business, creating transparency and accountability on Environmental, Social and Governance (ESG) aspects of business activities, designing consultation processes to manage the participation of stakeholders in decision-making processes, formulating a long-term strategy, and attributing value to natural assets such as ecosystem services and biodiversity, thereby internalising external costs.6 CSR appears to have gained recognition among society s watchdogs, corporate boards, legal practitioners and public regulators:7 carbon emission trading has been introduced, institutional investors have endorsed the UN Principles of Responsible Investment (PRI), banks have adopted the Equator Principles, and the mining industry has agreed to sector codes of conduct.8 William McDonough and Michael Braungart introduced the ' cradle-to-cradle concept (C2C; 'Cradle to Cradle - Remaking the Way We Make Things' , 2002). MNCs the likes of the Netherlands-based chemical giant AkzoNobel and the brewery Heineken have developed strategies to be careful with fresh water in their worldwide industrial activities, and the UK-based pharmaceutical company GlaxoSmithKline participates in programmes to combat AIDS in Africa.9 In 2009, the chocolate giant Mars announced that it will in future only purchase sustainably produced chocolate.10 At the beginning of 2010, the Dutch retailer Ahold published its decision to no longer source pork from the bio-industry as of 2011.11 FSC has developed the sustainably harvested timber certification, and WNF - together with the Dutch food and personal care giant, Unilever -has introduced the MSC certificate for sustainably caught fish.12 On the subject of human rights and business, Professor Ruggie delineated the complementary responsibilities of governments and business. He called upon industry to carry out due diligence investigations to assure that corporate activities do not violate human rights. His policy framework has been widely endorsed.13

Given that many international and industry codes of conduct have been drafted and accepted over the last decade, and that the ' Third Generation Sustainability Reporting Guidelines issued in 2006 by the GRI (GRI G3) have been put into practice by companies all over the world,14 one could say that CSR has at last been seriously acknowledged. Some countries have incorporated CSR as a concept in their legislation.15 Others have imposed a duty on companies to publish an annual sustainability report.16 Since 2009, the Netherlands has recognised CSR in the revised Dutch corporate governance code for listed companies (the Frijns Code).17 This Code stipulates that the directors must adopt a policy on those CSR subjects which are material to the company s business. This implies that CSR is considered as belonging to the core of corporate strategy. The UK has included similar requirements in the directors duties description in the Company Code (section 172). On paper, the progress seems enormous. Many a legal scholar, Ministry of Economic Affairs official and company CEO has cheered the progress demonstrated in sustain-ability reports and private regulation. The question concerning implementation is, however, still a compelling one. The logical next step is to imbed CSR in a company s activities, and to make its employees aware of what is expected of them from the perspective of making the company s activities sustainable. Corporate governance is very instrumental in this respect, and constitutes a powerful instrument.

How will good corporate governance based both on CSR and with a longterm view be achieved? Three approaches are always mentioned: transparency in respect of corporate policies and conduct, accountability for behaviour, and participation of stakeholders. These should ideally be mingled with the triple P approach: value creation for Planet, People and Profit. Corporate law professor Charlotte Villiers of Bristol University insists that it is through law, possibly a combination of soft law and hard law, that the triple-bottom-line basis of CSR will be made reality. Although she acknowledges the success of UN initiatives and concedes that there have been improvements on the part of many companies, she points out that there is still no consistency in responsible behaviour.18

As a case study, the Dutch corporate governance model - a combination of hard law and soft law - will be examined in this chapter 3. The model was established in 2003-2004 by the Tabaksblat Code and accompanying legislative amendments to the DCC. Section 3.2 will briefly describe the model s theoretical foundations. It was designed to promote corporate transparency and accountability, and to bestow new instruments upon shareholders. The model was revised in 2009 by the Frijns Code and supplemented by new corporate law revisions. The Frijns Code makes CSR part of a board s policy and stresses that boards have to balance all stakeholders interests, both outside and in-company stakeholders. Sections 3.3 and 3.4 analyse how CSR elements are reflected in the Frijns Code, thereby also communicating new insights gained from relevant reports and new legislative proposals in this field. Section 3.5 will elaborate upon the role of shareholders. In the Netherlands, institutional investors have traditionally held large shareholdings in listed companies. One of the subjects of the discussion is the decision not to include a CSR-related obligation for institutional investors in the Frijns Code. In section 3.6, commentaries regarding the introduction of the Frijns Code and subsequent (legislative) developments will be evaluated. Section 3.7 contains an overview of the 2010 Dutch status quo on corporate governance linked with CSR. This chapter 7 ends with a conclusion, analysing the findings as to how CSR values can effectively become part of corporate governance. The perspective in this chapter will be the Dutch corporate governance code and corporate law. The research method is theoretical.