CORPORATE SOCIAL RESPONSIBILITYAN INTRODUCTION FROM THE ENVIRONMENTAL PERSPECTIVE

Imprint

Publisher: Federal Ministry for the Environment, Nature Conservation and Nuclear Safety

Public Relations Division

D-11055 Berlin

E-mail: service@bmu.bund.de

Internet: www.bmu.de

Project advisors: Peter Franz, Dr. Stefanie Pfahl

Federal Ministry for the Environment, Nature Conservation and Nuclear Safety

Editors: Sabine Braun

future e.V.

Ickstattstrasse 26

D-80469 München

E-mail: muenchen@future-ev.de

Internet: www.future-ev.de

Thomas Loew

Institute 4 Sustainability

Ystader Str. 11

D-10437 Berlin

E-mail: loew@4sustainability.org

Internet: www.4sustainability.org

Design: Artelier, München

Printing: Denkmayr Druck & Design, Holzkirchen

Photos: Cover: Falk Heller, München

Page 8, 9, 15: Photocase.com

Date: March 2006

Business affects all areasof life in society. Howcompanies act has anenormous influence notjust on the prospects ofthe individual, but alsoon the ability of society asa whole to realize itspotential and shape abrighter future. Accord-ingly, entrepreneurialactivity has always bornea pronounced responsi-bility for social develop-

ment. There is more to this responsibility, however,than shareholder value: companies are a part of socie-ty, and their conduct must address the totality of chal-lenges with which society finds itself confronted.Expectations are growing as the public at large and,increasingly, the financial markets want to know notjust what a company does with its profits, but also howit earns them.

A company that takes measures such as introducingenvironmental and sustainability management andregular sustainability reporting shows that it is readyto face up to these challenges. The future belongs tothose companies that contribute actively to ethicaland sustainable business leadership both in theirhome country and at their international sites: organi-zations fit for the future demonstrate sustainabilityleadership.

Corporate social responsibility (CSR) provides an intelli-gent way to combine economically viable develop-ment, social responsibility and conservation of naturalresources. I encourage companies to embrace theirresponsibilities to society and the environment and toincorporate CSR into their business activities on a vol-untary basis. Not only is this important for social cohe-sion, it is also good for business. After all, integratingCSR indisputably boosts acceptance of a company’soperations and enhances its international reputation,and can also help it to open up fresh market opportuni-ties, strengthen its innovative and competitive edgeand create new jobs.

The German Federal Ministry for the Environment,Nature Conservation and Nuclear Safety has conducteda dialogue on CSR with representatives of companies inthe major sectors, labour unions, consumers, tradeassociations and non-governmental organizations inorder to build a common understanding about howCSR strategies can be implemented and what societyexpects to see achieved. CSR, it emerged, has equallyimportant social and ecological facets and can make asignificant contribution to sustainable development.

This brochure is intended to put the case for a moreambitious interpretation of CSR and also to build abridge between this more demanding concept and thefamiliar existing measures for operational and prod-uct-related environmental protection – an area inwhich German business in many cases serves as a rolemodel. It highlights the issues companies have toaddress, from operational environmental protection tothe consideration of employee interests and responsi-bility for the supply chain, if they wish to integrate CSRinto their core business. Examples already exist of howcompanies might like to tackle CSR and how it can beintegrated into corporate organizations. The brochurecontains practical guidance based on the strategiesalready used by companies today to show how thisbroad spectrum of challenges can be managed effi-ciently. It is hoped that these models will inspire othersto tread the same path.

I am convinced that rigorous CSR deserves a place inany good corporate management system and that infuture companies will have to learn to manage theirperformance in this area systematically simply in orderto remain competitive. Finally, if the political sphereand society as a whole are to have confidence in theachievements reported, a company must ensure thatwhatever steps it takes to manage CSR are transparentand verifiable.

Sigmar GabrielGerman Federal Minister for the Environment, NatureConservation and Nuclear Safety

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DEAR READER,

3 SOCIAL RESPONSIBILITY OF COMPANIES AND THE ROLE OF ENVIRONMENTAL MANAGEMENT......................................................................................................................................05Roots of CSREnvironmental protection and sustainability European view of CSR CSR in GermanyAreas of action for companies Sharing responsibilities, creating obligations

3 OBSERVING STRINGENT PRINCIPLES ...................................................................................................................................................................09The OECD Guidelines for Multinational Enterprises A binding and reliable framework A practical aid for CSR management The OECD Guidelines as a minimum standard

3 DESIGNING CSR MANAGEMENT .................................................................................................................................................................................11Establishment within the organisation Creating principles and a program Organising CSR and involving employee representatives

3 OPERATING RESPONSIBLY ALONG THE SUPPLY CHAIN..................................................................................................................................12Codes of conduct and their limitations The advantage of sector-specific solutions Making a contribution to global governance

3 BUILDING TRUST THROUGH COMMUNICATION .................................................................................................................................................13Dialog with stakeholders Reporting requirements Capital market – a key target group Presenting achievements and providing transparency

3 CONCLUSIONS ................................................................................................................................................................................................................14

CONTENTS

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SOCIAL RESPONSIBILITY OF COMPANIES AND THE ROLE OF ENVIRONMENTAL MANAGEMENT

One of the many effects of globalisation on nationaleconomic and social systems and the public at large israised expectations in the area of responsible businesspractices. Customers and consumers, investors, employ-ees, the authorities, business partners, non-governmen-tal organisations and other stakeholders now demandthat companies take responsibility for the consequencesof their actions.

As well as meeting the expectations of their stakehold-ers, companies that make real achievements in protect-ing the environment, ensuring the wellbeing of theiremployees and helping our society to develop sustain-ably are also serving their own immediate vital inter-ests. They make themselves fit for the challenges of thefuture. Rapid change is the only constant in today’sbusiness environment. Key factors such as sales andprocurement markets and population characteristicsare evolving continuously. Companies that adjust tothese developments and the associated expectations intheir operating environment at an early stage promoteacceptance of their actions, gain new competitiveadvantages and reduce their risk exposure. All this ulti-mately helps to safeguard their continued existence.

Hence a company’s performance in sustainability mat-ters has a material impact on its prospects for long-termcommercial success. Today expectations of companymanagement are much higher than they were 10 to 15years ago. A poor assessment of sustainability perform-ance is increasingly seen as evidence that managementis indifferent to “non-financial issues” and thereforemore susceptible to potential commercial risks.

Mindful of these changes, the financial markets too arebeginning to pay more attention to concepts such ascorporate social responsibility (CSR), sustainability andsocially responsible investment (SRI). Also the outper-formance of a number of SRI indexes is encouragingmore and more conventional investors to also considersocial and ecological company assessments as a way offurther reducing their investment risk.

Roots of CSRThe notion of CSR originates essentially from the volun-tary actions taken by concerned company owners inthe industrialised world from the end of the 19th centu-ry. They reacted to social abuses and the associateddemands of labour movements. Forward-looking indus-

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, ABOVE-AVERAGE PERFORMANCE OF THE DOW JONES SUSTAINABILITY INDEX

330

280

230

180

130

80

12/93 8/94 4/95 12/95 8/96 4/97 12/97 8/98 4/99 12/99 8/00 4/01 12/01 8/02 4/03 12/03 8/04 4/05 12/05

MSCI World (in US-Dollar)DJSI World (in US-Dollar)

trialists built homes and hospitals to improve the livingconditions of their workers, in the process promotingmotivation and reducing employee turnover.

In the 1980s companies in the UK began to introducevoluntary social measures following the rapid rise inunemployment triggered by the initial effects of theThatcher government’s economic policy. Rioting amongunemployed youths in British cities led companies totake a closer interest in the country’s social stability andto become involved in improving living conditions intheir local area. Today British companies pay closeattention to the needs and demands of the various different groups in society when considering theirresponsibilities and exploring ways to generate trustand acceptance.

Environmental protection and sustainabilityProtecting the environment began to emerge as one of the most pressing matters of concern to society as awhole in Germany at the end of the 1970s. The businesscommunity’s response really picked up at the start ofthe 1990s, with large companies in particular begin-ning to publish voluntary environmental reports andlife cycle assessments in an attempt to meet society’srising expectations.

During the 1990s more then 3000 German companiesset up an environmental management system based on the European Eco-Management and Audit System(EMAS). Soon many of the country’s more environmen-tally committed companies were attracted to the prin-ciples of sustainability as a strategy for conservingresources and safeguarding their future prospects.

European view of CSRRecognising that for some of the world’s most pressingecological and social problems regulation is an ineffi-cient or even wholly ineffective tool, the EuropeanCommission has increasingly sought to promote volun-tary business initiative. The Commission thereforeincorporated CSR into a formal new policy approach.The Commission describes CSR in its Green Paper of2001 as a concept, “Whereby companies integratesocial and environmental concerns in their businessoperations and in their interaction with their stake-holders on a voluntary basis”.

The European Commission’s view of CSR encompassesall voluntary actions through which companies con-tribute to sustainable development in their core busi-ness (see figure). These include first and foremost activi-ties over and above legal requirements in the areas of

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, CSR AND SUSTAINABLE DEVELOPMENT

Macro level:society as a whole

Micro level:business

Sustainable Development

Contribution of the company

Corporate SustainabilityCorporate Citizenship

Source: Loew et. al 2004

Corporate Social

Responsibility

working conditions and environmental protection. Inbusiness praxis CSR thus amounts to essentially thesame thing as sustainability management. CSR alsoincludes charitable giving, sponsorship, support fornot-for-profit foundations and releasing employees forvoluntary work in community and social projects. Suchactivities, usually referred to as corporate citizenship,are part but not the core of CSR.

CSR in GermanyThe German Federal Government, the majority of Ger-man trade associations and the country’s trade unionsessentially agree with the European Commission’s defi-nition of CSR. The way that companies implement andcommunicate CSR in practice, however, indicates thatactual understandings of the concept vary, and compa-nies often take a selective approach that emphasisesjust charitable activities or working conditions in thesupply chain.

This is somewhat surprising, as German companiesactually measure up particularly well against the com-prehensive CSR concept. Environmental protection andthe country’s comparatively demanding social legisla-tion have always been key drivers of continuousimprovement processes at German companies. Theseprocesses focus on the requirements of stakeholdersand legislators alike. As a consequence most Germancompanies already have the foundations for imple-menting a comprehensive CSR concept in place. Andindeed many have already made exemplary progress.

The environmental management systems alreadyestablished give companies an ideal platform fromwhich to take up the CSR approach and integrate it intotheir corporate strategy. Seizing this opportunity offersa chance to stand out in the competitive internationalmarketplace as an especially trustworthy and innova-tive partner.

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, AREAS OF ACTION FOR CSR

Governance andmanagement systems

Vision and strategy

Operational environmental protection

Environmental protection in the supply chain

Ecological product responsibility/integrated product policy

Interests ofemployees

Working conditions and humanrights in the supply chain

Consumer protection andcustomer interests

Communication with internal and external stakeholders

Environmental management Management of the social areas of action of CSR

Areas of CSR activity in central business processes

Areas of CSR activity outside central business processes

Commitment to the community:charitable giving, sponsorship,

employee release for volunteering, etc.

Involvement in shaping the regulatory framework (including lobbying),

combating corruption

Areas of action for companiesThe ultimate purpose of a corporate CSR policy is todevelop innovative, economically viable and precau-tionary solutions within core business processes toimprove environmental protection and working condi-tions. In order to satisfy the expectations of society andto be truly credible the company-specific CSR policymust cover all areas and functions of the company.Strategic consideration of the societal role of compa-nies can facilitate and simplify the necessary enhance-ments to core business processes. CSR consists essen-tially of

• operational environmental protection,• taking account of employee interests,• addressing environmental protection and

humane working conditions in the supply chain,• an integrated product policy, and• consumer protection (see figure).

Companies may also exercise responsibility for theirsocial and natural environment beyond their core busi-ness processes. This wider responsibility can includenot just charitable and social commitments, but alsocontributions in the public interest to the regulatoryframework, for example through constructive collabo-ration with the authorities on the development of lawsand standards, or rigorous measures to prevent corrup-tion and bribery.

Effective sustainable corporate management requiresthat the activities undertaken in the various areas ofaction be managed and coordinated systematically.The long-established environmental management sys-tems, such as EMAS already provide a solid platform forthis task in the area of environmental protection.

Therefore it is often the environmental departmentthat is entrusted with coordinating CSR in a company.Some companies, on the other hand, have chosen toapproach CSR from the social angle and have placedoverall responsibility for coordination in the hands ofthe human resources department or the diversity man-agement team.

Sharing responsibilities, creating obligationsThe ongoing process of economic globalisation and the emergence of new commercial and technologicalcapabilities have shifted the balance between govern-ments and business. Individual nation states havebecome less able to shape developments in the world ofbusiness, whereas companies now have more influencethan ever.

Hand in hand with this new influence come new obli-gations. Companies now face growing pressure to com-mit explicitly to voluntary measures for the environ-ment and society on top of legal requirements. They arerequired to accept their responsibilities beyond the fac-tory gate and the frontiers of their home country. Onlyby embracing these wider responsibilities can compa-nies help to construct a sound footing for the joint busi-ness/state activities needed to bring about the sustain-able future economic and social development soessential to business and society alike.

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Further information:

3 European Multistakeholder Forum on CSR (ed.):Final Results and Recommendations (download):http://europa.eu.int/comm/employment_social/soc-dial/csr/

3 European Commission (ed.):Implementing the Partnership for Growth and Jobs:Making Europe a Pole of Excellence on Corporate Social Responsibility (download):http://europa.eu.int/comm/enterprise/csr/policy.htm

3 Loew. T.; Ankele, K.; Braun, S.; Clausen, J.: Significance of the CSR Debate for Sustainability andthe Requirements for Companies, Berlin, Münster (download): www.4sustainability.org

Companies wishing to sign up to a set of principles orguidelines for societal responsibility already have quitea few options, including the ten principles of the UNGlobal Compact and the Global Sullivan Principles.Recognition under these two agreements is open toany company worldwide. There are also sector- or coun-try-specific principles such as the chemical industry’sResponsible Care principles and the CSR guidelines ofthe Austrian business community.

The OECD Guidelines for Multinational EnterprisesThe most elaborated and comprehensive set of princi-ples available are the Guidelines for MultinationalEnterprises published by the Organization for Econom-ic Co-operation and Development (OECD). Updated in2000, the Guidelines contain recommendations con-cerning companies’ central areas of responsibility.

A binding and reliable frameworkThe OECD Guidelines differ from other specificationssuch as the Global Compact principles in that they pro-vide significantly more detail and include suggestionsregarding practical implementation. Recognised by all30 OECD member states and by – at the last count –nine non-member states, the OECD Guidelines repre-sent the only comprehensive multilateral code of con-duct for responsible business. Germany, in commonwith the other OECD states, has given a formal under-taking to support and promote the Guidelines.

Official recognition at government level and the possi-bility of recourse to national contact points in the eventof infringements make the Guidelines considerablymore authoritative than most other sets of principles.The national contact points, in most countries based inthe ministry responsible for economic policy, provideimpartial mediation in conflicts between business andnon-governmental organisations.

A practical aid for CSR managementNo company has any obligation to sign up to the OECDGuidelines, and their explicit emphasis on multination-al enterprises means that they are still largely unknownamong small and midsize enterprises and companies

OBSERVING STRINGENT PRINCIPLES

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Content of the OECD Guidelines forMultinational Enterprises

3 General policies: sustainable development, respect for human rights,encouragement of local capacity building, etc.

3 Disclosure: publication of an annual report, disclosure of informa-tion about social and environmental issues, etc.

3 Employment and industrial relations: compliance with the principal standards for workingconditions issued by the International Labour Organi-zation (ILO), etc.

3 Environment: establishment of environmental management sys-tems, assured transparent environmental reporting,adoption of a precautionary approach, etc.

3 Combating bribery: rejection of bribes, transparency concerning measuresto combat bribery, etc.

3 Consumer interests: ensuring fair business, marketing and advertisingpractices and the safety and quality of goods and serv-ices, etc.

3 Science and technology: protection of intellectual property rights, transfer ofknow-how

3 Competition: compliance with the rules of fair competition, avoid-ance of anti-competitive agreements, etc.

3 Taxation: contribution to the public finances of host countries,compliance with tax law, etc. (download):www.oecd.org/env/investment

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, RECOGNITION OF THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES

All OECD member states Non-member states which have recognized them

Further information:

3 Global Compact: www.globalcompact.org 3 Global Sullivan Principles:

www.globalsullivanprinciples.org3 Chemical industry Responsible Care initiative:

www.responsiblecare.org3 CSR guidelines of the Austrian business community:

www.respact.at3 Environment and the OECD Guidelines for

Multinational Enterprises: www.oecd.org/daf/investment/guidelines

3 OECD: Environment and the OECD Guidelines forMultinational Enterprises: Corporate Tools andApproaches (download): www.oecd.org/env/investment

that focus on the domestic market. Nevertheless theycan be useful to smaller companies wishing to intro-duce CSR strategies. Many such companies will findthat they already meet the demanding but entirelyrealistic requirements: after all, preventing discrimina-tion, corruption and anticompetitive practices, settingup a rigorous environmental management system,such as EMAS, and reducing environmental impact arecornerstones of responsible management.

The OECD Guidelines as a minimum standardCompanies that take their social responsibilities seri-ously ought to adopt the OECD Guidelines as the mini-mum standard for their operations and make this com-mitment clear to their stakeholders. This in no waylimits companies in setting their own priorities whendeveloping their specific approach to CSR.

DESIGNING CSR MANAGEMENT

The clear and lasting commitment of senior manage-ment is essential for a demanding CSR performance. Itscommitment also determines how consistently the nec-essary organisational structure is realised.

Establishment within the organisationCSR is a genuinely interdisciplinary issue with implica-tions for a number of different areas of action andhence for a range of different corporate organisationalunits (human resources, purchasing, production, etc.).This means that it can only be integrated into a compa-ny’s core business processes effectively if the units con-cerned support and endorse the measures planned.Responsibility for the central coordination of CSR tasksusually rests with a CSR (or sustainability) departmentand an interdisciplinary body (for example a sustain-ability council or CR committee) staffed by representa-tives from different parts of the company and/or sub-sidiary companies. Coordination will be most efficientif a specific contact person is clearly nominated foreach area of the company and, where applicable, eachsubsidiary company. The existing environmental man-agement system should be incorporated as a centralpillar of the coordinating structure.

The most reliable way to establish CSR firmly in themanagement of large companies is to assign overallresponsibility for CSR to a single member of the board.This provides the coordinating CSR department withdirect access to the company’s senior management andspeeds up operational decision-making.

Creating principles and a programA company must integrate specific and binding envi-ronmental, social and ethical values into its strategyand objectives if it is to achieve anything beyond imagepolishing and reputation management. These valuesare best integrated by drawing up a corresponding setof principles or adding them to the company’s existingcorporate principles. This act helps to establish CSR inthe organisation, as the process of agreeing company-specific CSR values usually triggers intensive discussionacross the relevant levels of management and raisesawareness among all of those involved.

A CSR program with concrete objectives and measuresis an essential precursor to the initiation and mainte-nance of continuous improvement processes. An agreedprogram serves as an important coordination tool forthe company’s CSR managers. It also helps to ensureright across the organisation that good intentions arenot snuffed out by the pressures of day to day business.

An ambitious CSR program, moreover, sends thestrongest possible message to employees, shareholders,customers and critical stakeholder groups that thecompany takes its duties to the environment and socie-ty seriously. Once the CSR principles and program arein place, a suitable monitoring system needs to beestablished to make sure they are implemented asenvisaged. This voluntary approach to self- and externalsupervision has proved to be effective in practice andalso encourages organisational learning processes.

Organising CSR and involving employee representativesIdeally, socially and environmentally responsible deci-sion-making should be integrated into businessprocesses in a way that allows the company not only toavoid risks, but also to seize the available opportunitiesfor sustainable development, and this means manag-ing CSR requirements systematically. It is not enoughsimply to put the relevant organisational workflows inplace: companies must be prepared to provide the nec-essary personnel and resources as well.

Environmental management fulfils a similar interdisci-plinary function to CSR, so developing a CSR organisa-tion out of the existing environmental managementsystem can be a good option for companies with corre-sponding environmental concerns. The European Eco-Management and Audit Scheme (EMAS) is a particular-ly suitable vehicle for this.

The employment conditions of a company’s own work-force and, increasingly, of their suppliers’ workers, rep-resent one of the most important areas of CSR activity.Along with specialists from the human resourcesdepartments, employee representatives are the “natu-ral” experts in this field, and should thus be broughtinto employee-related CSR projects.

Further information:

3 Loew, T.; Braun, S.: Organisatorische Umsetzung vonCSR. Vom Umweltmanagementsystem zur SustainableCorporate Governance? (Organisational implementation of CSR: From envi-ronmental management system to Sustainable Corpo-rate Governance?) (download): www.4sustainability.org

3 VDI Guideline: Sustainable management in small andmedium-sized enterprises; Guidance notes for sustain-able management Available for purchase from: www.vdi.de

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Ecologically and socially reprehensible practices in thesupply chains of the retail sector and major industrialcompanies are nothing new: the use of child labour inrug manufacturing, unsustainable logging of ecologi-cally valuable forests and unfair pay in tea, coffee andcocoa production and the clothing industry, for exam-ple, have all been acknowledged for some time.

But the intense competition triggered by the globalisa-tion of markets has placed companies under greatercommercial pressure than ever. Concerned at theprospect of companies trying to improve their own out-look at the expense of those least able to defend them-selves, non-governmental organisations and criticalcustomers have responded by urging large corpora-tions in particular to recognise their responsibilitiesthroughout the supply chain. Accordingly companiesare increasingly expected to ensure that working con-ditions for employees or sub-contractors are humaneand that no serious harm is caused to the environment.Progress has been made in a number of sectors includ-ing the textile and paper products industries, usuallytriggered by the campaigns of non-governmentalorganisations. These sectors have now adoptedapproaches to improve working conditions and envi-ronmental protection in the supply chain.

The profile of supply chain management as a businessconcept has risen steadily over the same period. Com-panies, especially the major branded goods manufac-turers, now recognise the potential threat to their repu-tation posed by campaigns of non-governmentalorganisations. Therefore they are beginning to analysetheir supply chains for ethical and environmentalshortcomings and protect themselves by extendingtheir responsible approach to suppliers. Significantly,these activities can help to avert traditional businessrisks such as supplier and financial risks.

Codes of conduct and their limitationsAt the heart of most CSR solutions sits a code of con-duct. Some companies first developed their own codeof conduct to be applied within their own operations.They later extended it to their suppliers. In some sectorscodes of conduct specifically for application to the sup-ply chain are developed. The Round Table Codes of Con-duct initiated by the German Federal Ministry for Eco-nomic Cooperation and Development (BMZ) haselaborated a guideline to help business to draft suppli-er codes of conduct. It is not sufficient, however, merelyto publish a code of conduct: implementation of thecode over the long term must be assured if it is to prove

OPERATING RESPONSIBLY ALONG THE SUPPLY CHAIN

effective. Some companies integrate requirementsrelating to the code of conduct into their standard sup-plier quality audits. Others have set up separate auditteams especially for this purpose or engage externalauditors.

The first really cogent business model was developed bythe Foreign Trade Association of German Retailers (AVE)in collaboration with a number of companies from thesector. The model is based on a common code of con-duct, and compliance has been verified since 2003 byjointly funded teams of auditors. The AVE’s solution hasbeen proved to be efficient in a number of respects.Therefore it has now been transformed into the inter-national Business Social Compliance Initiative (BSCI).

The advantage of sector solutionsSimilar effective solutions developed to meet the specif-ic requirements of a particular business ought also tobe sought in other sectors. However this should not dis-suade a company from developing its own approach ifthere is no sign of agreement in its sector.

Making a contribution to global governanceCompliance with the conditions defined by the ILO andwith environmental standards is of course primarily theresponsibility of the individual suppliers in the coun-tries concerned. Corresponding laws already exist in agreat many cases, but the relevant authorities often failto provide adequate enforcement. This creates an intol-erable situation for international companies, not leastbecause of the risks to which it exposes them. Thereforethey should have a strong incentive to push, togetherwith governments and international institutions likethe United Nations, for improvements such as more rig-orous compliance and improved law enforcement inthe countries concerned.

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Further information:

3 Round Table Codes of Conduct (ed.): Codes of Conduct on Social Standards (download): www.coc-runder-tisch.de

3 Loew, T.: CSR in der Supply Chain. Herausforderungenund Ansatzpunkte für Unternehmen (CSR in the Supply Chain: Challenges and Starting-Points for Companies)(download): www.4sustainability.org

3 Business Social Compliance Initiative: www.bsci-eu.org

BUILDING TRUST THROUGH COMMUNICATION

A host of large companies publish regular reportsabout their impact on the environment and society andtheir associated activities to improve performance. Thetitles given to these publications vary. Some call them“sustainability report”, some “corporate responsibilityreport” and some “environmental” or “social report”.But they all serve essentially the same purpose, namelyto enhance public confidence in the business activitiesof the company by providing a regular supply of com-prehensive and transparent information. Even somesmall and medium sized companies publish regularenvironmental statements or sometimes full sustain-ability reports.

Dialog with stakeholdersA company’s stakeholders have high expectationsregarding its ecological and social responsibilities.Hence CSR management must provide consistentprocesses to bring business operations in line with bothexternal requirements and its internal policies. Thepurpose of reporting is to make the consistency ofmeasures and their results transparent to the stake-holder groups. To achieve credibility, reporting mustbe of a high standard and must tackle the primary areasof concern of the relevant stakeholders.

Clearly a company must understand the concerns of itsstakeholders if it is to produce satisfactory reports. Thismeans entering into a more intensive dialog with stake-holders. Companies should canvass and evaluate stake-holder requirements regularly to identify any areas inneed of attention. Increased awareness of external per-spectives when refining the corporate strategy can helpa company to recognise risks and opportunities at anearly stage too. A similar effect occurs when writing areport: the necessary analysis of the CSR performanceusually highlights shortcomings and inspires improve-ments.

Reporting requirementsThe Global Reporting Initiative (GRI) has developedguidelines for the preparation of CSR and sustainabilityreports that have already been used by numerousmajor companies around the world. Germany’s futuree.V. and Institute for Ecological Economy Research(IÖW) have also set out requirements for good CSR andsustainability reports. Their requirements are used forcompiling report rankings. Both sets of requirementsconstitute a recognised and necessary yardstick forreporting. They cover large parts of the OECD Guide-lines as well as the CSR areas of action introduced in thefirst chapter. Companies that draw up their reports in

line with these two sets of requirements achievegreater credibility in the public eye, and, thanks to thedemanding and systematic procedure involved, alsorealise internal improvements for their organisation.

Capital market – a key target groupAnalysts and investors have become an important tar-get group and now demand detailed information fromcompanies concerning their performance on sustain-ability matters. They have recognised that sustainabili-ty management can do much to minimise risks andincreasingly refer to ecological, social and ethical fac-tors when issuing investment recommendations. Com-panies that have integrated CSR systematically in theirmanagement and that can rely on their well developedsustainability reporting system are able to respondfaster and more impressively when such queries arereceived by their investor relations department.

Presenting achievements and providing transparencyAlmost two thirds of Germany’s 150 largest companiesstill provide no information about their environmentaland social footprint. However, if a large company withthousands of employees, numerous sites and a highthroughput of resources wants to take its responsibilityto the environment and society seriously it shouldmake its CSR performance transparent and not fearcomparisons with others. Regular, comprehensive andthorough sustainability reports are the core of seriousCSR communication.

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Further information:

3 Global Reporting Initiative (ed.): G3 Sustainability Reporting Guidelines (download): www.globalreporting.org

3 future e.V., IÖW (eds.): Kriterien und Bewertungsskalazur Beurteilung von Nachhaltigkeitsberichten (Criteria and rating scales for use in evaluating sustain-ability reports) (download): www.ranking-nachhaltigkeitsberichte.de

Globalisation has increased the influence of companieson the development of national economies while at thesame time the capacity of national governments toshape development is declining. Therefore, public pres-sure on companies to ensure that they act in a responsi-ble manner is increasing.

The political community sees the CSR concept as a wayto encourage and assist business to take on this chal-lenge. CSR, furthermore, can do much to help a compa-ny boost its long-term competitiveness and already is avital element of “good corporate governance”.

In principle, embracing CSR does not necessarily entailnew or additional duties for companies, as CSR essen-tially builds on existing concepts of responsible busi-ness behaviour such as sustainability management,environmental management and integrated productpolicy.

The key factors are as follows:• Although CSR centres on voluntary measures, this

does not mean that it is arbitrary and aimless –indeed it is very much in the company’s own inter-ests to make sure that its CSR policy is credible andeffective.

• CSR needs to be established strategically within theorganisation and incorporated into a systematicmanagement regime so that opportunities can beexploited and risks avoided.

• Companies must realise that it is in their own inter-est to establish a CSR system that tackles the ecologi-cal and social issues in their core business processesand helps to generate solutions.

CONCLUSIONS

Even though the discussion of the CSR concept is cur-rently limited predominantly to large companies it alsohas much to offer small and medium-sized companies.They can consider the ideas and suggestions put for-ward by CSR concepts and adjust them to their ownrequirements.

The European Eco-Management and Audit Scheme(EMAS) can serve as a suitable platform for systematicCSR management. Systematic programs with targetsand measures, guidelines and internal and externalaudits are becoming increasingly significant whenjudging the efficiency and credibility of commercialactivities.

All companies are recommended to pay more attentionto the OECD Guidelines. These principles, which unfor-tunately are neglected all too often in the businesscommunity at the moment, provide a reliable and valu-able framework for thorough CSR management.

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Contact:Federal Ministry for the Environment, Nature Conservation and Nuclear SafetyPublic Relations DivisionD-11055 BerlinFax: +49 (1888) 3 05 - 20 44E-mail: service@bmu.bund.deInternet: www.bmu.de