State Secretary Vidar Helgesen
Royal Garden Hotel, Trondheim
24 November 2003

Corporate Social Responsibility

Companies have a responsibility beyond that of earning money is becoming widely recognised. Becausse of the increased awareness of businesspartnesrs, investors, customers and employees, corporate social responsibillity, or CSR, is becoming the modern way of doing business. A CSR policy is an integral part of any modern corporate image.

Company web-sites are full of it. More importantly, many companies pursue such policies not only to look good but also because they believe them to be consistent with good long - term financial results. This is a very welcome development.

Like any other kind of human activity, corporate action carries responsibility. Corporate social responsibility is in essence not any different from the social responsibility that devolves on each and every one of us.

There are still some difficult questions, however. 1 is how far companies social responsibility goes. We would not want governments to abdicate their roles as regulators, or companies to act like governments. So, what should be regulated, and what should be voluntary? Another, related question is that of division of roles between different stakeholders. I am particularly interested in the relations between companies and governments, and I shall address this in the following. Given my present outlook in Foreign Affairs, I shall concentrate on international economic activity. A 3 question is obviously how companies can design CSR-policies that yield results. I see from the program that you will turn to this ? challenge later.

Let me start by saying something about the content and nature of CSR as I see it. This is being discussed with such intensity these days that one should think that one would imagine that is something new. But companies have never operated in a vacum. The debate on their influence on society is at least a 100 years old. Economic activity, like other human activity, has always involved choices of an ethical nature. Within the boundaries of the law there has always been a room for ethical and social considerations. Many business leaders, had been taking account of such considerations long before the invention of the term "CSR" became current.

This being said, the increased emphasis on CSR is a highly relevant development for everyone who takes an interest in international affairs. The UN’s list of the world’s 100 largest economies comprises 71 countries and 29 companies. Globalisation is accelerating the fundamental shift of power from the state to the individual, from government officials to market actors. Thus the importance of corporate social responsibility will continue to grow. Irresponsible conduct by companies in the globalised economy can cause serious harm, and ethical economic conduct is essential to all socio-economic development. Companies can be important agents of change – for better or for worse – particularly when they operate in areas with weak regulatory structures. Large international companies in environments like Iraq exert great influence. No goverment can fail to acknowledge the power vested in private economic actors. If goverments are to achieve foreign policy objectives, they most either curb or direct this power through binding regulations, or try to form alliances and influence the voluntary exercise of this power.

Some of we might want to think at this stage that - fine, none of this 29 mega-companies that I mentioned are Norwegian, and besides, Norwegians are so well-behaved, and this doesn’t really apply to us. If we think this way it is a good thing we are 4.5 mill. people.CSR issues occupy an important place in the Norwegian economy. We have a petroleum sector that operates in a variety of political environments, we have an international shipping industry and we have other raw-material based international activities in fisheries, forestry and metals. I shall not comment Statoil’s recent problems dislogged in company seiles & procednes other than by saying that I am quite convinced that this is not the last time Norwegian economic activity abroad will be under scrutiny. This means that ? is necessary – on the part of the government, and on the part of the Norwegian business community.

So what is the responsibility of companies? I would say their primary responsibility is to save society through delivering goods and services that general profits.Profits are legal, ethical and necessary for the common good. But companies are also responsible for other effects of their activities. If businesses claim that social responsibility should be left to politicians, they actually invite more regulation and less free enterprise. If markets are to be free, market actors must take responsibility not only for the beneficial effects of their actions, but for the negatives ones, too.

And I think it makes sense to say that the greater a company’s influence on society, the greater it’s social responsibility. On this basis we can establish that companies that pollute should care for the environment; that companies that operate in countries with weak regulatory systems should be careful not to abuse such systems; that companies that operate in areas of conflict should make sure they do not fuel conflict by financing various factions;and that all companies should act in ways that are not in conflict with fundamental human rights standards.

We should not, however, blur the division of roles between states and companies. It is the responsibility of States to ensure that human rights are upheld on their territory. Socio-economic development in developing countries is still primarily a state responsibility, even though companies can act in ways that encourage or hinder such development. States must not abdicate their role as regulator. Policy and diplomacy should remain primarily a State responsibility. Binding provisions should still mark the outer parameters within which businesses operate. Governments have a role to play in addressing injustice. Poverty must be addressed globally through changing international systems of debt, trade and investment, through providing development assistance and through reforms in national policies. Climate change is another issue too serious to be left to self-regulation – we need sound, binding international provisions. This also applies to other activities that might seriously harm the common good. Another area that cannot be left to self-regulation is corruption - probably the largest barrier to trade in our time and an obstacle to any sound socio-economic development. These matters are not a question of social responsibility – these are unlawful acts.

In time, when the international regulatory framework is strengthened, I believe more "hard" regulations will come. I note with content how a legal framework against corruption is emerging, lately through the new UN anti-corruption convention. It makes sense to reduce the relative latitude allowed, particularly to businesses that operate across several spheres of jurisdiction, in order to reduce harmful side-effects of commercial activity. Such regulation may be particularly pertinent when "doing the right thing" carries a price. Self-interest and ethics often only coincide up to a certain point. Beyond that point self-regulation may need to be supplemented by binding provisions. I believe most Norwegian businesses will be well served by such provisions – they will reflect practices already adhered by Norwegian companies and thus help create a level playing field.

The "hard" rules should form a sort of outer framework for economic activity. Within this "box" we have the CSR-issues. In my view, it is neither realistic nor desirable that these should be governed by binding legislation. CSR is by its very nature something that companies choose to do. This freedom of choice cannot be replaced with legal provisions. Both because we do not have an adequate international regulatory framework, and because it would not be desirable to try and replace ethics by law. Indeed, it can be counterproductive. If consumers, shareholders or executives begin to expect governments to define responsible behaviour, we would make CSR into something static and burdensome rather than what it should be: a question of values and a dynamic response to market demands. We would also consolidate the unhelpful view held by some people, that corporations are bad and governments are good. This simplistic view can only serve as a disincentive for corporations that want to act responsibly.

I am aware that self-regulation unavoidably distorts competition between companies that follow ethical norms and companies that choose to operate in ethical grey zones. One can only hope that market mechanisms will counteract this unfairness, although this will not solve the problem entirely. There is no way we can rid ourselves of all dilemmas in the CSR field. My point is that the legislative route is not the best way.

As corporate behaviour is primarily the responsibility of corporate actors, why should governments engage? Firstly because corporations are important social actors with whom we need to engage to achieve our objectives. And secondly, because we realise that one of the effects of globalisation is that promoting our national image abroad no longer depends primarily on traditional diplomacy. As a result, Norway’s image depends just as much on individuals and private actors – be they football players or corporations. Therefore we have an interest in Norwegian companies being socially responsible, just as we like our policies to be.

Let me say something about what I believe the Norwegian government can usefully do:

Firstly, the interlinkages between companies and governments necessitate debate and exchange of information. For that purpose, the Foreign Ministry has established Kompakt, a consultative body where NGOs, research institutions, government and business meet to discuss human rights and CSR. We find the Kompakt to be a useful format and hope that other participants share our view. We are doing some adjustments to Kompakt in order to make it more active, more relevant and more in line with today’s agenda. We want to engage more actively with businesses faced with CSR challenges. We also want to extend the ownership to the mechanism on the government side beyond that of the Ministry of Foreign Affairs. We want to use Kompakt more actively to convey a coherent message on CSR.

Secondly, in addition to exchange of information, companies can benefit from advice in certain areas. For instance, government ministries may offer political assessments or advice on issues pertaining to international law. For example, we recently, advised against being involved in oil exploration off-shore outside Western Sahara as the area is contested under international law.

Thirdly, governments can do general advocacy work. By formulating expectations with regard to Norwegian companies’ conduct and keeping this issue on the agenda home and abroad, companies are given an incentive to pursue CSR policies. On the global level, we support the UN Global Compact politically and financially. We also consistently address questions like corruption and good governance in our dialogues with the recipients of Norwegian development assistance. If we bring our influence to bear on these issues in co-operation with other donors, we may succeed in bringing about change. Finally, we include CSR in our human rights dialogues with other countries.

Competence building is another area. We have found it useful to fund research on relevant CSR issues. As a result, Norwegian CSR research is expanding, which I consider a welcome development.

Norway is also engaged in relevant multi-stakeholder processes, where governments, civil society and companies work together towards adoption of recommendations and guidelines. In these processes governments or inter-governmental institutions can exert influence and lend legitimacy as third parties or offer to facilitate in ways that can supplement corporate efforts. The British-led Extractive Industries Transparency Initiative is a good example of this type of new diplomacy, which combines dynamism with political clout. The initiative aims to enhance transparency in the flows of cash, oil and other benefits between governments and extractive industries. Norway is an active supporter and has pledged itself to supporting the further work financially. We are also contributing to the "Voluntary Principles on Security and Human Rights", a multi-stakeholder process aimed at preventing human rights violations by private security personnel in the extractive industries.

In addition to underpinning the corporate world’s own efforts, states must pay attention to their own conduct as economic operators, be it as shareholders, as purchasers of goods and services or as investors. The Norwegian State’s economic activities are significant. The state should be a role model in terms of good human resource management and sound environmental policies, have a good record in fighting corruption and fraud, and in ethical investment. In particular it should set a good example in terms of being transparent. I know that the Ministry of Trade and Industry are looking into how CSR-related themes can be better reflected in the way the considerable state shareholdings are being managed. I also welcome the debate on ethical guidelines for the investments of the Petroleum Fund. These guidelines, if adopted, will bring the Petroleum Fund in line with the general thrust of private institutional investors that apply socially responsible investment policies. We will not be leading, but that again is not the role of a state fund of this nature. Nevertheless, if we manage to act in concert with other large investors on core issues, I am convinced that the Petroleum Fund can send a clear signal to companies. Besides, I think the Fund give positive momentum to the trend towards socially responsible investment. We also hope that the competence building and research that we shall put into this effort will help advance the SRI agenda.

In spite of what is being done on the government side, there is in my view a need for increased coherence in the way the State thinks about CSR. This goes for the way the State conducts its own business, and for the message we convey to the Norwegian business community. With regard to Norwegian economic activity abroad, the Ministry of Foreign Affairs is in the process of stepping up efforts to see how we can facilitate a coherent government response.

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To sum up:

• CSR is a way for companies to respond to a growing market demand and to improve their competitive edge. Corporations acting responsibly can be powerful agents of change and foster sound social and economic development. Particular care must be taken when powerful companies are up against inadequately regulated markets and weak states.
• CSR is by and large something that companies have to develop, within the parameters set by binding norms that regulate activities that could harm the common good.
• Within these parameters, the legislative route is not a good option. Law can never replace the ethical dimension inseparable from any human activity. Besides, we do not have an adequate global regulator. Finally, we should not pretend that hard regulations could solve all questions.
• Governments can do more to assist and reinforce the efforts of the business sector. Emphasis should be put on consultation, advocacy and research, and, finally, on setting a good example.

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In conclusion let me wish you two days of good discussions on an important topic for Norway. I believe Norwegian business and Norway as a whole is well placed to have a good profile on CSR. We have a small, but very open economy. We have a progressive private sector and a tradition of partnership between government and industry. On part of the Government, our objective is to step up our efforts in the field of CSR in search of tangible results, while at the same time enhancing the competitiveness of Norwegian industry.

Thank you.