Corporate Social Responsibility

by Becky Toal and Veronica Broomes

Legislation and regulations relevant to CSR

When it comes to legislation and regulation, there is sometimes an overlap concerning requirements for CSR and those for corporate governance. Corporate governance refers to the system by which companies are operated and controlled; this is supported by legislation, regulations and defined codes of conduct. CSR, in contrast, is a voluntary initiative for which no legislation has been enacted.

However, companies applying a Triple Bottom Line approach to CSR can be guided by legislation concerned with the social and environmental aspects of their business operations, in addition to the requirements outlined in the Companies Act (2006). Examples of such legislation in the UK include:

  • Working Time (Amendment) Regulations 2001
  • Race Relations Act (Statutory Duties) Order 2001
  • Disability Discrimination Act 1995 (2005)
  • Maternity and Parental Leave (amendment) Regulations 2001
  • Employment Act 2002
  • Health and Safety at Work Act 1974
  • Companies Act 2006 (among other things, this states that directors need to understand the environmental and community impacts of their business operations)
  • Accounts Modernisation Directive, which requires that large PLC companies now have to report publically on environmentally significant matters.

This list is not exhaustive and, no doubt, will grow over time. Of course, if some CSR advocates have their way, legislation will be enacted to make CSR mandatory for all businesses – large and small.

In considering whether or not CSR should be made mandatory, it should be recognised that legislation could remove a key CSR driver: for businesses to increase their competitiveness through raised brand value and be seen as responsible corporate citizens. Voluntary CSR allows companies to demonstrate best practice and, critically, raise their own criteria for such best practice.

In setting out its position on mandatory versus voluntary CSR, the CBI, UK businesses’ top lobbying organisation, has given its position in the following statement:

The CBI believes that if CSR is to develop successfully, it should remain voluntary and market-driven. Companies must be allowed to define CSR according to their own activities and context. We are therefore extremely concerned that some individuals and interest groups favour the idea of legislating on companies’ CSR activities.

We don’t believe it is possible to raise standards through standardisation, as this would remove the competitive incentive driving forward CSR activity and would place an unmanageable burden on SMEs. Public authorities should adopt a carrot-led rather than a stick-driven approach to CSR. Legislation in this area would simply constrain business activity and reduce CSR to a lowest common denominator.