The European Commission issued a consultation paper in 2002 on Corporate Social Responsibility, or CSR, a concept whereby companies integrate social and environmental concerns in their business operations.
Among its proposals, the Commission was looking at ways to ensure that redundancies would be viewed as a last resort, that all other solutions should be exhausted first. "Downsizing," explained the Commission, "must include the involvement and participation of those workers affected, to safeguard their rights and enable them to undergo retraining where necessary."
It went further. If an operation is profitable, outsourcing should not be an option, reasoned the Commission. "That there must be immediate, real and serious economic grounds to justify job losses which are only envisaged after consideration of other less damaging options is widely acknowledged and observed in the Member States of the European Union," wrote the Commission in a 2002 paper on corporate restructuring. "A clear explanation of the serious nature of the economic grounds underlying the need for job losses is essential."
These proposals are almost two years old, but they have not been forgotten. Irish Prime Minister Bertie Ahern said in December 2003 that his country's EU Presidency (which began in January) will make CSR a priority policy across Europe.
At present, CSR is nothing more than a voluntary concept. Antonia Mochan, the Commission's spokesperson for employment and social affairs, explained that CSR "does include telling businesses that if they pack up and move offshore it will affect more than just their profits." But she adds: "CSR is not a legislative framework. There is no right to fine companies for failing to observe CSR principles."
Mochan said that a forum of stakeholders in CSR has been "thrashing out the issues" over the last two years. It will report to the Commission in the summer. She admits that it may decide that legislation is necessary. "The problem is that trade unions want us to be more prescriptive and employers want us to be less prescriptive," she said. One issue in this conflict is how to legislate to limit the migration of jobs in a way that does not contradict either the duty of company directors to maximise returns for their shareholders or the basic principles of a free market.
Mochan points out that if legislation is introduced to toughen the principles of CSR, it will be at least two years away from implementation in Member States. Ultimately, she says, the offshoring concern may end up being characterised as a national issue. "What can you usefully legislate for?," she asks.
The answer from Labour's Stephen Hughes MEP is that you can legislate to make offshoring less attractive. A member of the European Parliament's Employment and Social Affairs Committee, Hughes told OUT-LAW that he thinks the Commission is getting it wrong.
He said its proposals on CSR do not go far enough. "This is where there is tension between the Commission and Parliament," he said. "We don't think it's all about returns to shareholders. We call for social and environmental issues to be reported to shareholders."
He believes this can be written into law: "The Commission says this should be voluntary. We disagree because good companies will continue to do the right thing; but other companies will continue their bad practices."
Hughes continued, "We don't need a draconian Directive but we do need more than a voluntary scheme. Unless we see progress, we want to require mandatory CSR reporting – on jobs, sustainable development etc."
He adds that "penalties must be proportionate." We asked whether he meant penalties for failure to report or for failure to follow CSR. "Failure to report is an indication in itself that something may be wrong," he replied. "There should be a financial penalty against companies that fail to respect CSR."
Amicus and UNIFI recently approached Hughes to express their concerns about the increase in offshoring. "The unions were not being protectionist," he said. "They were mature in their approach, saying, 'look, we need to think about what's happening.' They estimate that two million jobs will be lost in the EU."
Hughes agreed with the unions to have a hearing in the European Parliament and said the Directorate-General for Enterprise and the Directorate-General for Employment have been invited. "I expect one unholy battle between DG Enterprise and DG Employment," he warned.
The most positive indication that some companies will voluntarily protect domestic workers when offshoring came in January, with the announcement of a deal between Barclays and UNIFI. The bank undertook, wherever possible, to redeploy domestic staff hit by offshoring projects, supplemented if necessary by internal and external career support. It also promised early consultation and to create a voluntary redundancy register, coupled with voluntary job-matching.
Nigel Fretwell, Barclays' Employee Relations Director said: "If globalisation is an inevitability we cannot and should not ignore the responsibilities that are attached."
This may be good news for Barclays' workers, but Stephen Hughes' point is that, for as long as these are voluntary responsibilities, many companies can and will ignore them.