1 Introduction

1.1 Why do we need a white paper on corporate social responsibility?

Profitable companies make important contributions to society. They create jobs and help finance the general welfare of the population. The main task of companies is to create value and generate financial results within the legislative framework of the society in which they operate. But companies are not just operating in a market. They are also operating within a culture, a local community and a political system. The debate surrounding corporate social responsibility (CSR) is concerned with the role companies play in this broader social context.

Companies have an impact on social development where they operate. They therefore have a responsibility that extends beyond value creation. CSR is a matter of clarifying exactly what this responsibility entails and how it can best be fulfilled. There are examples of companies that are profitable in financial terms, but whose activities may be harmful to both employees and the local community. The task of politics is to change situations of this kind, in close dialogue with business actors and the social partners. In a globalised world, many challenges can only be met through active cooperation with leading economic actors. An important aim of politics is to take advantage of these opportunities for cooperation.

The ethical aspects of CSR have become more apparent as a result of globalisation. To a greater extent than previously, Norwegian companies are engaged in countries with poor human rights records or where human rights are challenged, where working conditions are unacceptable, or where child labour is used. They also operate in areas where there is little concern for the environmental impact of production processes. Legislation and its enforcement vary from country to country. The scale of corruption also varies. To an increasing extent, companies are being questioned about what acceptable business practice is and whether or not the company’s responsibility extends beyond simply complying with the law in the country in which they are operating.

The ethical basis for CSR derives from the inviolability of human dignity. Just as politics is not an end in itself, but a means of promoting social change for the benefit of the people and the environment, a company’s profits or activities are not goals that can be viewed in isolation from other considerations. Economic activities also require an ethical foundation that puts people, the environment and broader social considerations centre stage. In recent years, there have been a number of cases that have shown the importance of CSR, as well as the negative consequences for individuals, society and the environment when companies do not conduct their operations in a responsible manner.

For a number of years, leading Norwegian companies and the social partners have given high priority to CSR efforts. The social partners have played an active role in promoting decent working conditions and the right to organise, also in developing countries, and NGOs have played a leading role in mobilising companies to prioritise social responsibility. Many companies have integrated CSR into their operations and their decision-making processes. This is very positive. Those who have been actively involved in the debate, and in developing rules and norms relating to CSR, should be commended for their efforts. But although a number of companies and organisations have made considerable progress in integrating social responsibility into their business practice, there is still a need for increased awareness, greater knowledge and broader involvement.

These issues form the backdrop for the Government’s decision to submit a report to the Storting on corporate social responsibility, the first of its kind. The purpose of this white paper is to raise awareness about social responsibility in both the private and the public sectors. The Government has a positive impression of Norwegian companies’ ability and willingness to contribute in this area, and the white paper is intended to strengthen this commitment. The Government’s aim is to clarify the authorities’ expectations of the private sector, and to discuss the respective roles and responsibilities of the authorities, the private sector and other actors. It is also designed to boost Norwegian companies’ motivation and ability to exercise social responsibility, by strengthening guidance and advisory measures, and increasing openness, dialogue and exchange of experience between the authorities and the private sector. The Government will play an active role in international processes aimed at further developing the CSR framework.

This white paper stresses the importance of companies’ conduct abroad. To an increasing extent, Norwegian companies are engaging in commercial activities in, and trade with, countries that are affected by political instability, widespread poverty or corruption. It is particularly with regard to involvement in these markets that companies may need greater awareness and expertise. However, social responsibility is relevant irrespective of the market the company is operating in, and also applies to activities in Norway.

Many Norwegian companies and branches are experiencing the effects of the global financial crisis. An active policy is needed to reverse the economic downturn. Unstable times give rise to questions as to whether companies have the time and resources to exercise social responsibility. In the Government’s view, CSR efforts are important regardless of the economic situation. Furthermore, companies can strengthen their long-term competitiveness and position by having a responsible relationship to employees, consumers, owners and other interested parties. In this way, CSR does not involve a conflict of interests, but is a community of interest that brings together companies, the authorities and other actors.

1.2 What is corporate social responsibility?

Over the years there have been different views of the role and responsibilities of business in society. Some have argued that «the business of business is business», and that the private sector benefits society best by concentrating on increasing its profitability within a clear legal framework. The rationale here is that companies operating in a well-functioning market contribute to achieving broader social goals such as employment, general development and welfare, thereby making their contribution to society.

In recent years, CSR has come to encompass more. This relates to the increasing influence of the private sector as a result of globalisation, and the opportunities and challenges associated with this. Corporate social responsibility, with its attendant norms and standards, is evolving constantly as new knowledge is acquired.

At the core of the concept lies the responsibility of companies towards people, society and the environment that are affected by their activities.

Companies that deal with their social responsibility in a forward-looking manner ensure that becomes an integral aspect of their corporate governance. CSR must be clearly established as a line management responsibility, and followed up on an ongoing basis by the company’s senior management and board.

There are various strategic approaches to CSR. Some emphasise risk management, for instance through reputation management. Others advocate a more proactive approach to CSR, where finding solutions to social problems becomes part of the company’s business strategy, thereby providing access to important markets. Quite apart from the company’s contribution to society through job creation, taxation and generating economic spillover effects, the company can develop products, services, production methods and business practices that promote development. Examples of this include microcredit, mobile telecommunica­tions, solar power and water supply.

The substance and understanding of the concept of CSR are dynamic. The focal issues vary according to the area of activity in question, and change over time. Philanthropy, or donating to good causes, has traditionally been perceived as an expression of a company’s commitment to corporate social responsibility. Many companies continue to view CSR in terms of charity and support to the local community. However, there is a growing tendency to see the core area for practising social responsibility as the company’s own operations and supply chain.

1.3 The concept of CSR as used in this white paper

The Government views the following areas as central when it comes to corporate social responsibility in international operations: respecting human rights; upholding core labour standards and ensuring decent working conditions; taking environmental concerns into account; combating corruption; and maximising transparency.

All companies operating abroad are expected to comply with the host country’s laws and regulations, as well as with Norwegian legislation insofar as it applies to activities or operations carried out abroad. CSR extends beyond a company’s statutory obligation to comply with national legislation. It may also be a matter of complying with legislation that is not properly enforced by the local authorities.

Many developing countries have inadequate legislation, weak governance, widespread poverty and corruption. In countries such as these, the way companies do business and demonstrate responsibility is of particular importance. This does not mean that companies should automatically assume responsibility for matters that are the province of the authorities in the countries concerned. It would be unreasonable to expect this of companies, and it would not necessarily promote long-term development.

The concept of responsibility used in this white paper is linked to companies’ ethical standards, and is used in the sense of «moral responsibility» unless otherwise indicated. When a company fails to comply with these standards, the result may be that it is seen as failing to meet its own business objectives, or not living up to the expectations of consumers, investors or the local community. The concept of responsibility can also be invoked if companies, through their business conduct, contribute to human rights violations or other breaches of international law, or to violations of other international standards on which there is general agreement. If a company breaches environmental standards, for instance, it may risk negative sanctions. For example, a decision may be made to exclude a company from the investment universe or to discontinue project funding. «Responsibility» may also be used in the sense of «legal liability», for example criminal responsibility or liability for damages under local legislation, Norwegian law or the legislation of a third country where legal proceedings could be initiated against the company.

The Government’s position is that CSR involves companies integrating social and environmental concerns into their day-to-day operations, as well as in their dealings with stakeholders. CSR means what companies do on a voluntary basis beyond complying with existing legislation and rules in the country in which they are operating.Companies should promote positive social development through value creation and responsible business conduct, and by taking the local community and other stakeholders into consideration.

1.4 Corporate attitudes and practices

Norwegian companies that invest or operate abroad have varying degrees of knowledge and practices with regard to CSR. A survey that was carried out for the Ministry of Foreign Affairs in 2008 measured the attitudes and practices of internationally oriented Norwegian companies in relation to CSR. 1 Interviews were conducted with the general manager or staff member in charge of operations abroad in 300 companies with more than 50 employees.

The results of the survey give the impression that a number of company representatives have a somewhat vague understanding of CSR. Many associate the concept first and foremost with how a company treats its own employees in Norway and the extent to which it supports projects in the local community or contributes funds to organisations that are engaged in relief work or environmental protection. Large companies have greater awareness of CSR issues than small companies. However, hardly any differences in attitude seem to be attributable to which branch companies are operating in, or to whether or not they operate in developing countries.

The survey also reveals the following:

• 54 % of companies state that they have written guidelines for how CSR should be practised

• Responsibility for CSR lies either with the senior manager or with no one person in particular

• 44 % report on CSR, the majority in their annual reports or in a special report

• Issues relating to CSR are discussed frequently in 28 % of executive management teams and in 20 % of company boards

The survey also shows that attitudes to CSR are positive. Many see it as giving the company in question a competitive edge, and use it in their marketing efforts. A large proportion of those interviewed believe that the company’s owners and financial contacts attach importance to CSR. Many of those interviewed agree that CSR is important in recruiting competent personnel, and the majority agree that it will become increasingly important for the company in the future.

From the survey results, it appears that it is less common to check suppliers’ and subcontractors’ CSR performance, but many of those interviewed say that they avoid doing business with companies that do not have their own ethical guidelines. Companies believe they encounter the greatest challenges in their international operations in relation to environmental considerations. A minority of the respondents believe that Norwegian companies abroad demonstrate greater social responsibility than foreign companies do.

According to the survey, there is little knowledge of international guidelines and frameworks concerning how companies should practise CSR. There are widely divergent views regarding whether binding national guidelines on CSR should be drawn up for Norwegian companies when operating abroad. Few believe that the Norwegian authorities are playing a particularly active role in advising Norwegian companies on CSR issues. However, there is only moderate interest in receiving information of this kind from the authorities.

The survey shows that there is only moderate knowledge of established international CSR guidelines, and indicates that there is a clear need for raising awareness and increasing knowledge with regard to social responsibility.

1.5 Key issues in this white paper

The Government has defined three key areas for action with regard to CSR. The first is exercising social responsibility in the Government’s own activities. The second is conveying society’s expectations to Norwegian companies. The third is developing and influencing the framework for CSR, both nationally and internationally.

The public administration and the Norwegian authorities have an independent responsibility for taking into account ethical considerations and behaving in a socially responsible manner. The Government’s aim is for the public sector to be at the forefront in this area, both in terms of its conduct as owner and investor, and through the procurement of goods and services. The authorities’ responsibilities in relation to these activities are discussed in Chapter 2.

This white paper is based on the premise that Norwegian companies should be among the best at practising CSR, thereby helping to strengthen the status of human rights, create decent working conditions, protect the environment and combat corruption. In the Government’s view, active corporate involvement in these areas will positively impact both the companies and society at large. The authorities’ expectations of companies are examined in Chapter 3, including the scope of companies’ responsibility, for instance in relation to the supply chain.

Companies have a clear self-interest in conducting business in a socially responsible manner. To an increasing extent, clients and consumers are demanding responsible production of goods and services. Investors emphasise the maintenance of high standards in companies. The media shines a critical spotlight on how companies follow up their suppliers and foreign subsidiaries. Employees and job-seekers are attaching increasing importance to companies’ attitudes to CSR. Many companies have thus come to regard socially responsible conduct as important for ensuring long-term competitiveness, business opportunities and reputational benefits.

Nevertheless, companies will encounter challenges and dilemmas in countries where there is inadequate legislation, or a lack of enforcement and sanctions. Business activities can be particularly challenging in conflict-affected countries, or in countries with widespread corruption or vulnerable natural environments. This raises questions about what role companies should play in relation to the authorities, and whether companies should operate in such countries at all. These issues are discussed in Chapter 4. Partnerships between various actors are important in meeting challenges of this nature.

According to the Government, economic engagement in developing countries is positive, because it contributes to value creation and can promote social and political development. This is the subject of Chapter 5, which discusses various ways in which companies can promote development. The private sector can also contribute to strengthening the status of universal values and norms, as set out in UN and OECD principles, declarations and guidelines.

The Government sees the need for internationally recognised CSR guidelines that give guidance to Norwegian companies, provide opportunities for companies’ stakeholders to appeal against violations of their rights, and create equal conditions of competition across national borders.

The OECD Guidelines for Multinational Enterprises cover the key areas for responsible business conduct. A substantial part of the discussion in Chapter 6 concerns these Guidelines. The OECD Guidelines deal with respecting fundamental human rights and combating child labour, forced labour and discrimination. They include employees’ right to be represented by trade unions and to engage in constructive negotiations. Protection of the environment features prominently in the Guidelines, which also discuss combating bribery. The Guidelines draw attention to consumer interests and the responsibility to contribute to public finances through taxation. They are also relevant for small businesses and suppliers.

The OECD Guidelines address the fundamental social considerations that all Norwegian companies should, in the Government’s view, take into account in their international operations. The Government considers the Guidelines to be important, and urges Norwegian companies to actively comply with them in their international activities. The Government also intends to enhance the effectiveness of the National Contact Point that informs the parties concerned about the Guidelines, and deals with complaints concerning breaches of them.

The Government’s aim is that Norway should play a proactive role globally in order to strengthen the status of human rights, create decent working conditions and protect the environment. This engagement will help to reinforce the existing CSR framework. The Norwegian authorities’ efforts in the various international processes are described in greater detail in Chapter 7.

In debates on CSR, the question of the balance between voluntary action and sanctions is often raised. It is argued that national ethical guidelines of a binding nature could ensure that Norwegian companies fulfil their social responsibility to a greater extent. In connection with a recommendation by the Standing Committee on Justice regarding the Act amending the Company Act and other matters (Recommendation No. 12 (2006 – 2007) to the Odelsting), a majority of the Committee requested that the Government consider the question of national guidelines for CSR in Norwegian companies’ operations abroad, and report back to the Storting in an appropriate manner. This is discussed in greater detail in Chapter 8.

There are clear limitations on the extent to which ethical values and conditions outside Norway’s borders can be regulated by the Norwegian authorities. The Government will seek actively to strengthen and promote CSR frameworks and initiatives in international forums and organisations. The Government places particular emphasis on international efforts to develop effective mechanisms for enforcing and complying with frameworks of this kind. Norway’s anti-corruption legislation is an example of the implementation and enforcement of international conventions nationally.

The Norwegian tradition of close contact and cooperation between the authorities, the private sector and employees has played a positive role in the development of our society. This model is an important resource that should be safeguarded and developed further. NGOs play a proactive role in national and international forums. This provides a good basis for further developing a shared and strengthened commitment to CSR, as discussed in Chapter 9.

This white paper deals primarily with companies’ international operations. Companies also exercise social responsibility in the Norwegian context. Examples of this include initiatives to create a more inclusive working life, environmental projects, and efforts to promote gender equality and competence building through cooperation between companies and educational institutions, for instance in the form of trainee and apprentice schemes. However, these aspects fall outside the scope of this white paper.

1.6 Aims, ambitions and expectations

The Government has high aims and ambitions for social responsibility efforts in the public sector, and equally clear expectations of the private sector. The Government emphasises the significance of CSR for value creation and for bringing about changes that benefit people, the environment and society at large.

1.6.1 State activities

Ownership, investment, procurement and administration

• State-owned enterprises must lead the way in exercising social responsibility. The Government will seek to promote this by actively exercising ownership rights.

• The Ethical Guidelines for the Norwegian Government Pension Fund – Global are currently being revised. The results of this process will be presented in the annual Report to the Storting on the Management of the Government Pension Fund in spring 2009.

• The Government will devise requirements for its own suppliers. The Norwegian Action Plan for Environmental and Social Responsibility in Public Procurement will be followed up, with particular emphasis on guidance, capacity-building and practical advice.

• CSR will be integrated as a cross-cutting theme in the administration of all Norwegian development assistance funds.

International frameworks and processes

• Norway will play a proactive role in strength­ening international CSR guidelines, with a view to establishing more binding frameworks and mechanisms.

• Norway will advocate the revision of the OECD Guidelines for Multinational Enterprises in the areas of human rights and climate change/environment.

• The Government will allocate increased resources to initiatives and bodies that promote CSR, including the UN Global Compact, the Global Reporting Initiative (GRI), the International Labour Organisation (ILO), and the National Contact Point for the OECD Guidelines for Multinational Enterprises.

• Norway is actively supporting the ongoing efforts of the UN Special Representative of the Secretary-General on human rights and transnational corporations and other business enterprises. The aim is to develop a frame­work that sets out minimum requirements for the corporate responsibility to respect human rights.

• The Government is seeking to strengthen and coordinate Norway’s efforts to promote labour rights in other countries, in accordance with the newly-established strategy to strengthen workers’ rights globally.

• The Government will examine the role of secrecy jurisdictions, or tax havens, in facilitating illicit financial flows.

• Norway will advocate integrating CSR into international agreements and dialogues, where this is appropriate.

National measures

• The Government will strengthen the National Contact Point for the OECD Guidelines by holding consultations with NGOs, seeking advice from external sources and developing clear and transparent procedures for specific instances.

• The Government will continue to consider measures designed to prevent Norwegian nationals and companies committing serious environmental crime outside Norway’s borders.

• The Government emphasises transparency and disclosure, and will suggest that the scope of the Accounting Act should be extended to include information on ethical guidelines and social responsibility for the largest companies that have an accounting obligation.

• The Government will consider various models for gaining a better overview of how the private sector follows up its social responsibility, different ways of organising advisory services and appropriate ways of organising the National Contact Point for the OECD Guidelines. A proposal will be submitted for consultation by the summer of 2009.

Other measures

The Government will strengthen the CSR advisory and guidance services available to Norwegian companies by:

• strengthening the services that provide information, guidance and dilemma training;

• establishing a web-based overview of information and expertise regarding CSR;

• setting up a focal point in the Ministry of Foreign Affairs for dealing with companies’ CSR queries;

• drawing up country profiles tailored to the private sector’s needs in areas relating to CSR that are relevant to the situation in the countries concerned;

• cooperating with the social partners and civil society with regard to sharing information and experience;

• evaluating companies’ CSR performance in connection with advisory services and financial support;

• initiating efforts to improve social responsibility in small and medium-sized enterprises. The responsibility for this will lie with the Ministry of Trade and Industry, in consultation with other relevant actors;

• providing arenas for discussing specific problems and challenges that companies en­counter internationally.

1.6.2 The Government’s expectations of the private sector

The Government expects Norwegian companies to be at the forefront in terms of exercising social responsibility, and thereby contribute to innovation and value creation. The Government expects Norwegian companies that engage in activities abroad to:

• respect fundamental human rights, including those of children, women and indigenous peoples, in all their operations, as set out in international conventions;

• base their operations on the ILO core conventions regarding the right to organise and the abolition of forced labour, child labour and discrimination;

• maintain HSE standards that safeguard employees’ safety and health;

• seek to establish other arrangements that enable employees’ views to be heard in countries where universal rights such as freedom of association and the right to collective bargaining are not upheld;

• take into account environmental considerations and promote sustainable development, for instance by developing and using environmentally friendly technology;

• actively combat corruption by means of whistleblowing or notification schemes, internal guidelines and information efforts;

• exhibit the maximum possible degree of transparency in connection with financial flows.

In their CSR efforts, Norwegian companies are expected to:

• integrate a clear awareness of CSR into their boards, management teams and corporate culture;

• build and further develop the necessary expertise within the company;

• acquaint themselves with the OECD Guide­lines for Multinational Enterprises and follow them in their operations;

• consider joining the UN Global Compact;

• develop and implement guidelines for social responsibility;

• follow their own guidelines in the supply chain, by setting requirements, implementing control procedures and building capacity;

• take good corporate practices with them from Norway, including models for cooperating with employees and employee representatives;

• develop their own CSR standards, using best practice within their field or branch as their guiding principle and goal;

• establish mechanisms or schemes for whistleblowing or notification of unacceptable circumstances;

• show transparency with regard to the economic, social and environmental consequences of their operations;

• actively seek out information and guidance in connection with international operations, particularly in developing countries.

The Government calls on Norwegian companies to:

• increase their investments in developing countries, particularly in the least developed countries (LDCs). Companies are invited to enter into strategic partnerships with the Government in order to reduce the risks associated with such investments and improve their development impact;

• actively recruit staff locally in the host country, encourage the use of local suppliers and use local companies as contractors and suppliers in developing countries;

• actively advocate global corporate agreements based on the ILO core conventions, and seek to safeguard worker’s rights;

• place demands on their suppliers and business partners with regard to social and environmental standards, and support capacity and competence-building in the supply chain;

• inform the Norwegian authorities about serious violations of human rights and other unacceptable circumstances they learn of through their operations.