There is no such thing as a common European approach to sustainable business
For European companies, sustainability and corporate responsibility can look very different depending on where they are viewed from.
For German companies, for example, the emphasis is on contributing to the maintenance of the social market economy by conforming to exacting environmental standards and seeking agreement on working conditions with workers’ councils and unions. In Scandinavia, it is more about equality, transparency and innovation – for example, phasing out hazardous chemicals and fair representation of women in boardrooms.
In France, sustainability often comes in the forms of diktats from above, for example as strict non-financial disclosure requirements or a moratorium on hydraulic fracturing, or fracking. Agenda-setting by the French government arguably has the side-effect of turning many French companies into grudging box tickers.
In southern Europe, companies are often close to their communities, but do little on the environment or on social issues such as gender discrimination.
In the UK, the interests of shareholders predominate, and corporate responsibility is seen as worthwhile as long as it contributes to long-term sustainability and shareholder value.
In eastern Europe, meanwhile, there is a desire to ride the wave of market forces in order to catch up with the west, and a suspicion of anything “social” that might sound like a communist-style imposed obligation.
André Martinuzzi, head of the Institute for Managing Sustainability at Vienna University of Economics and Business, says that in the east, corporate responsibility is often “seen as a form of philanthropy, while in western European countries it has a much stronger strategic meaning, for example to create new markets as well as to increase eco-efficiency”.
Nevertheless, ideas about corporate responsibility are spreading in the east, often imported by western companies.
Diverse contexts
Varied attitudes towards corporate responsibility and sustainability are to a great extent a consequence of the differing frameworks within which companies operate in different parts of Europe. Broadly speaking, countries in northern and western Europe expect more of their companies than their southern and eastern European counterparts do.
This can be seen in the application of environmental standards. In principle, companies in the European Union are subject to harmonised environmental rules, wherever they are located, but in practice implementation is done differently across the union, resulting in many variations. Countries such as Denmark and Sweden may go beyond EU regulated minimums, whereas countries such as Italy struggle to fully enforce the environmental regulations that are handed down from Brussels.
Social welfare safety nets also vary significantly. According to the EU statistical office, Eurostat, people in eastern and southern Europe tend to be more “at risk of poverty and social exclusion” than those in the west and north. In Austria, the “at risk” rate is 16.9%, in the Netherlands 15.7%, and in Sweden 16.1%, but in Spain it is 27%, in Greece 31% and in Romania 40%. The differing rates demand different responses from companies.
Peder Michael Pruzan-Jorgensen, vice-president for the EMEA region for non-profit sustainability consultants BSR, says that where citizens can rely on the state, there is little incentive for companies to step in. “It doesn’t make sense for Scandinavian companies to invest a lot in local charities, because the state is there,” he says.
By contrast, cash-strapped Italy has seen a recent trend of wealthy businesspeople pledging money for a job the state might be expected to do in other economies: restoration of the country’s cultural heritage. Fashion conglomerate Prada, for example, is paying for the restoration of a Venetian palace, the Palazzo Ca’ Corner della Regina, while Diego Della Valle, head of luxury leather goods maker Tod’s, has given €25m towards the clean-up of Rome’s Colosseum.
There is also variation in the way working conditions are agreed on across Europe. Companies in many continental European countries, including Austria, Belgium, Germany and the Netherlands, have formal works councils in which employers and employees sit down to thrash out conditions and wages, whereas in Italy and the UK employee representation is carried out via unions (which represent 35% and 26% of the workforce respectively, according to the European Trade Union Institute).
Civil society pressure on companies also varies. For example, in Scandinavia, Pruzan-Jorgensen says, there tends to be “constructive ongoing dialogue” between non-governmental organisations and companies.
This reduces the need for the more confrontational relationship seen in countries including the UK, where organisations such as 38 Degrees attempt to influence companies through public pressure. Meanwhile, “you find a less vibrant civil society in eastern and southern Europe”, Pruzan-Jorgensen says.
Common threads
Despite the diversity of European approaches to corporate responsibility and sustainability, some common elements can be identified. For example, European companies tend to be over-represented in sustainability indexes and initiatives such as the Dow Jones Sustainability Index (DJSI), the UN Global Compact and the Carbon Disclosure Project.
According to the Global Compact, 218 active business participants from the US implement the Global Compact’s human rights, labour, environmental and anti-corruption principles, compared with 697 from France alone.
Ida Karlsson, head of sustainability application and operations at sustainability investment group RobecoSAM, which provides the research behind the DJSI, says that on sustainability, “European companies were the first movers and are retaining this position. The DJSI world has a European bias; 49% of the components are European companies, followed by 22% North American companies, 20% Asia Pacific and 9% emerging markets.”
In the latest DJSI update, published in September, 14 out of 24 sector leaders are European, including Switzerland’s Adecco for commercial and professional services, Air France-KLM for transportation, Belgium’s Telenet Group for media, and EDP (Energias de Portugal) for utilities. The DJSI is drawn up on the basis of sustainability practices reported by more than 3,000 public companies.
In general, Karlsson says, European companies are “very good at focusing on sustainability topics related to improving efficiency of operations and hence saving costs and creating new revenue opportunities related to more sustainable products, rather than on sustainability topics more related to philanthropic aspects.”
He adds: “Europe has also traditionally had a strong middle class with good purchasing power, which has created sub-markets and green segments for consumer-facing companies. This has made it profitable for companies to develop more sustainable products, since there has been a demand for that.”
Steven Tebbe, managing director Europe for the Carbon Disclosure Project, also reports high participation rates of European companies. He notes that of the 300 biggest European companies by market capitalisation, 91% report their greenhouse gas emissions through the CDP system, compared with 81% of the Global 500 largest companies.
Disclosure rates by European companies are similar to those of their counterparts from the US, Tebbe notes, but the reasons for disclosure are different. In Europe, broadly speaking, governments set goals for companies to become more sustainable and to report on their performance, whereas in the US, companies increasingly disclose indicators such as their emissions because of investor pressure. “US companies and even the general public to some extent are sceptical of too much regulation,” Tebbe says.
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