Corporate Social Responsibility (CSR) in Times of Economic Recession

Breakfast meeting hosted by the Norwegian Consulate General, the Norwegian-American Chamber of Commerce and DnB NOR Bank

  

 

The Minister’s address was based on the following points

(check against delivery).

 

 

-          Introduction: New York – the world’s centre of business and finance. Norwegian business – long traditions of presence in New York (shipping industry, Norwegian sailors, etc.). A quarter of the Norwegian pension fund (SPU – office in Manhattan) is invested in the United States. The financial crisis (started in the United States, Lehman Brothers) has led to a global economic crisis, and then to a social crisis, and in some places also to a political crisis. First evidence of this – Iceland. Now, great fear in Europe that more countries will follow. While Norway with its export driven economy is very exposed to the outside world, we are only moderately hit, compared to others. Expect to see a relatively modest fall in GDP (1-2%) compared with other countries. Norway has been particularly engaged in Latvia and Iceland. Close neighbours. 

-          CSR is linked to how we manage the social dimension of the crisis. 

-          The countries with the deepest recessions in Europe so far are our neighbouring countries Iceland and the Baltic states. The fall in GDP in Iceland this year is estimated to be as high as 10%. In Latvia, the fall in GDP is projected to be even higher, at over 12%. These declines are among the most dramatic recessions in the world this year. 

-          These countries are our neighbours. The historical, political, and cultural ties to these countries – and especially Iceland – are very strong. Therefore the Norwegian Government has supported them in their difficult situation. Under Nordic loan agreements, we have provided a loan of USD 625 million to Iceland and a loan of USD 525 million to Latvia. Our policy has been to provide bilateral loans to our neighbouring countries under larger Nordic loan agreements, while other countries should turn to the EU and the international financial institutions. 

-          Norway has also taken international responsibility. To support the international financial institutions, Norway has provided a loan of NOK 30 billion to the IMF. We are also very concerned about the effects of the crisis on developing countries. We will continue to give about 1% of our GNP in development assistance. We have also allocated an additional NOK 300 million to protect the most vulnerable from the effects of the crisis. 

-          While the Norwegian economy is very strong overall, we are currently also in a recession. Most prognoses for the Norwegian economy predict a reduction in GDP of between 1% and 2% this year. While this is a considerable fall for the Norwegian economy, it is nevertheless among the smallest declines in the whole of Europe. 

-          The financial crisis has therefore been at the very top of my Governments agenda these last months. Led by our Prime Minister Stoltenberg – himself an economist who used to teach economics at the University of Oslo – the Government has launched two large bank rescue packages, and one large-scale stimulus package. All in all, the Government has spent about NOK 130 billion (over USD 20 billion) to confront the crisis and secure Norwegian jobs. 

-          A major reason why the Norwegian economy is doing relatively well in this crisis, is of course our strong initial economic situation:

-          First, while the average unemployment level in the European Union is over 8%, the Norwegian unemployment rate is just over 3%. So even though the Norwegian unemployment numbers will rise this year, we will still be far below the EU average.

-          Second, as Norway has been saving during the good times, we are now in a situation where we can spend more in bad times. Our public finances are solid after many years of large surpluses. This means that we can afford large-scale measures against the crisis without going into debt.

-          It is the combination of a very strong economic foundation and the forceful actions by the Norwegian Government in confronting the crisis that explains why Norway will get through this crisis better than most other European countries.

-          It is especially the Norwegian export industry that is affected by the crisis.

 

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-          In line with this: we believe that active cooperation with the business sector is essential in solving the challenges of our time: the financial crisis, environmental meltdown, widespread poverty. As former UN Secretary-General Kofi Annan has put it, “it is a utopian notion that poverty can be overcome without the active engagement of business.” 

-          The Norwegian Government has clear expectations of Norwegian companies:

-          First of all, we expect companies to respect human rights in all their operations. Norway strongly supports the UN Special Procedure on Business and Human Rights led by UN Special Representative John Ruggie, aimed at clarifying the human rights responsibilities of governments and companies.

-          Second, we expect companies to respect the rights of employees and create decent working conditions.

-          Third, we expect companies to protect the environment and the climate. Public–private partnerships will be invaluable in developing climate policies and new technologies. We need to speed up the development of new, clean technologies and ensure rapid deployment around the world.

-          Fourth, we expect companies to engage in fighting corruption and increasing transparency. Transparency about a company’s operations and their impacts on people and the environment is in itself a kind of soft power. What happens in the open will be dealt with, what is hidden may be ignored. We need soft, but firm, mechanisms driving voluntary responsibility, and transparency is one such mechanism. 

-          Requirements for social responsibility are highly relevant in public affairs and administration as well. The Government does not only express what it expects of companies and regulate them. It is an agent in its own right. If we expect companies to act responsibly, we must consider our own responsibilities and promote coherent policies in all areas. The Government aims for the public sector to be at the forefront when it comes to socially responsible procurement, ownership and investment. 

-          My Government is a strong supporter of the Extractive Industries Transparency Initiative (EITI), an Oslo-based public-private initiative that strives to establish transparency regarding money-flows between petroleum and mining companies, on the one hand, and the host governments where they operate, on the other. 

-          Another important way of influencing companies is through the investments of the Norwegian Government’s pension fund. Investments made by the foreign investment part of the fund have attracted a great deal of international attention. 

-          In 2004, ethical guidelines for the pension fund were established. Active ownership is exercised, with an emphasis on corporate governance, child rights and corporate environmental lobbying. In some cases, the fund’s ethical council recommends exclusion of companies that violate the guidelines. Around 30 companies have been excluded from the fund’s investment universe.

 

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-          The core of corporate social responsibility is about respecting basic human rights, providing decent working conditions, protecting the environment – our common future. It is about refusing to accept that corruption should be part of everyday business in any part of the world. 

-          These expectations are as valid in times of crisis as ever. We cannot sacrifice human dignity in our effort to turn the economy around. Rather, we will encourage business to look forward, to think the bold thoughts that show the path to the future. Now may be the time to explore business opportunities in countries that have yet to benefit fully from economic globalisation. Now may be the time to adjust our technology to the demands of sustainability that we know may be enforced in the years to come. Now may be the time for business and governments to work on shaping a new economy for future prosperity. 

-          Thank you for your attention, and I look forward to hearing your comments.