Why governments show interest in CSR

According to the European Commission (2001, 2002, 2006), CSR is ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’. The main idea behind CSR is also known as the triple bottom line principle, implying that businesses (should) not only serve as economic, but also social and environmental ends (Elkington 1994). For some scholars, this view of the corporation stands in stark contrast with the neo-classical shareholder view, asserting that a firm’s only responsibility is to do business and make a profit (Friedman 1970; Henderson 2001a, b). For most business ethics scholars, however, CSR is in the interest of businesses, in particular when stakeholders such as employees, consumers, Civil Society Organisations (CSOs) and governments demand and value the respective efforts (McWilliams and Siegel 2001). Overall, the discourse on the role of businesses in society has been extensive in recent decades, and proponents as well as opponents of CSR can agree at least that a new, challenging notion of CSR that is concerned with ‘built-in’ triple bottom line management rather than ‘bolt-on’ corporate philanthropy has become increasingly popular—for the (neo-liberal) opponents of CSR, this is being done to a threatening degree (Henderson 2001a, b; for further details, see “CSR and sustainable development”).

Given the management focus and widely accepted voluntary character of CSR, why do governments care about the concept at all? This question can be answered by the following five literature-based propositions.

First, governments are interested in CSR because the respective business efforts can help to meet policy objectives on a voluntary basis (see “CSR and sustainable development”). This motivation touches not only on policy objectives related to sustainable development and environmental protection, but also to foreign policy goals such as human development and development assistance (Haufler 2001, p. 29). Liston-Heyes and Ceton (2007) state that CSR is concerned with redistributing corporate resources to public causes. As the CSR critic Henderson (2001b, p. 28) puts it provocatively, CSR is now ‘a common body of doctrine’ that requires businesses to ‘play a leading part in achieving the shared objectives of public policy and making the world a better place’.

Second, CSR policies are regarded as an attractive complement for hard-law regulations in cases where new regulations are politically not desirable or infeasible (in particular at the international level; for examples, see Haufler 2001). Compared to hard-law regulations, the soft-law character of CSR and CSR policies implies comparatively low political costs in terms of resistance by special interest groups (Moon 2002, p. 399f; Moon 2007, p. 302). Some scholars argue that contemporarily (at least until the financial and economic crisis of 2008/2009), corporations are less likely to be the subject of state interventionism than they were in Keynesian times until the late 1970s. To put it positively, a decrease of state interventionism ‘might open up the possibilities for more “responsible” forms of interaction between stakeholder groupings’, including new forms of government interventions such as CSR policies (Mellahi and Wood 2003, p. 190f; see also Moon 2005). In this sense, Haufler (2001, p. 4) frames CSR as an element of the ‘“third way” between socialism and capitalism’ that provides social protections while strengthening national economic competitiveness.

Third, governments inevitably define CSR negatively with conventional social and environmental regulations because the ‘voluntary business contribution to sustainable development’ starts where the legal framework ends (McWilliams and Siegel 2001). In addition, governments seek to play a more active role in defining the concept and also fostering the respective practices positively with softer, non-binding initiatives.

Fourth, a look into the governance literature of recent years shows that the soft approach of CSR policies coincides with a broader transition of public governance altogether, which leads away from hierarchical regulation towards more network-like and partnering modes of self- and co-regulation (Kooiman 1993, 2003; Pierre 2000; Rhodes 1997; see also “CSR policies and implications for business-government relations”). In this respect, ‘CSR is not simply a feature of the new global corporation but is also increasingly a feature of new societal governance’ (Moon 2007, p. 302). As shown in another article in detail (Steurer forthcoming), new governance and CSR in fact became two complementary concepts, both implying (and prompting) that the steering of societies is no longer a sole matter of governments, but rather one of all three societal domains working together through new governance arrangements (see also Knill and Lehmkuhl 2002; Moon 2002; Midttun 2005). While new governance is the often-told story line of how political steering has moved from hierarchical state regulation (or governing) to societal co-regulation through networks that bring state and non-state actors closer together (Thompson et al. 1991; Rhodes 1996; Pierre 2000; Gamble 2000; European Commission 2001; Considine and Lewis 2003; Kooiman 2003; Donahue 2004), the implication for businesses is that they are becoming increasingly involved in meeting not only their business objectives but also the social and environmental issues that are raised by their stakeholders, such as investors, regulators, employees, suppliers, customers and Civil Society Organisations (CSOs). In other words, new governance and CSR both highlight ‘the public role of private enterprises’ (Nelson 2004; see also Haufler 2001).

Fifth and finally, since CSR is concerned with managing business relations with a broad variety of stakeholders, the concept obviously reshapes not only management routines but also the roles of, and relations among, businesses, governments and civil society. In this respect, CSR leads to ‘shifting involvements of the public and the private’ sectors (Hirschman, quoted in Moon 2002). Since CSR is far more than a management approach that could be left to the discretion of managers, governments have a natural interest in co-defining the shifting involvements of the different sectors rather than being passive objects of change.

Consequently, many European governments have assumed an increasingly active role in shaping and promoting CSR in recent years, in which the effect has been that a new thematic area of political activity, i.e. a distinct policy field, has emerged. As this article shows, the numerous governmental CSR initiatives form a cross-sectoral yet coherent policy field because (i) they are all characterised by the governance principles of voluntariness and collaboration, (ii) the policy instruments are consequently soft-law in character and (iii) they all share the purpose of fostering CSR and sustainable development complementarily to traditional hard-law regulations. Accordingly, the UK government, for example, as one of the European frontrunners regarding both CSR (Moon 2005) and new forms of regulation (Bartle and Vass 2007), stated on its former CSR website, ‘The Government sees CR as the business contribution to our sustainable development goals. […] The base level of responsible behaviour for any organisation is legal compliance and the Government has a role to play in setting standards in areas such as environmental protection, health & safety and employment rights. The Government can also provide a policy and institutional framework that stimulates companies to raise their performance [voluntarily] beyond minimum legal standards. Our approach is to encourage and incentivise the adoption of Corporate Social Responsibility, through best practice guidance, and, where appropriate, intelligent [i.e. soft-law] regulation and fiscal incentives’.Footnote 1

Characterising the full array of public policies on CSR across Europe in a systematic way is the key purpose of the present article. Thus, the research documented herein was guided by the following questions:

  • How do governments across Europe try to shape and promote CSR? How can these public policies be apprehended systematically in terms of the themes addressed and the policy instruments used?

  • What significance do CSR policies have for business–government relations? Do CSR and CSR policies strengthen business self-regulation at the expense of state regulation in line with neo-liberal ideas, or are the political underpinnings more complex?

The theoretical and practical contribution of addressing these research questions is as follows. First, the present article complements the existing, often incomplete and/or unsystematic, accounts of how governments address CSR, most of which are published in management journals such as the ‘Journal of Business Ethics’ or ‘Corporate Governance’ (for details, see “The emergence of public policies on CSR in the EU and in (management) research”). In this regard, the comparatively simple matrix typology of the CSR policies presented in “Instruments and themes of CSR policies” brings order to a rapidly growing, and simultaneously confusing, field of government action. Second, by linking the empirical account of CSR policies with the literature on new forms of governance (in particular, on policy instruments and new forms of regulation) the article aims to bring the issue closer to political science. Political science research has explored, for example, ‘Self-regulation within the Regulatory State’ (Bartle and Vass 2007; see also Andrews 1998; Porter and Ronit 2006), co-regulatory tools such as voluntary or negotiated (environmental) agreements (for an overview, see Mol et al. 2000; Croci 2008) and a broad variety of other new governance arrangements (Rhodes 1997; Kooiman 1993, 2003; Pierre 2000; Bevir et al. 2003a, b), but it has largely ignored CSR and the respective CSR public policies (Ward 2004, p. 7; Moon 2002, p. 386; Mathis 2008, p. 49). The present artilce also aims to fill this disciplinary gap. The practical side is that these (inter-)disciplinary advancements also provide a clearer and more transparent picture of how governments can and actually do address CSR. In doing so, it can help researchers as well as practitioners (including policy makers) in Europe, and other parts of the world, to deal with this increasingly important issue more thoroughly.

The article is structured as follows. In order to gain a better understanding of how CSR may contribute to public policy goals, the next section introduces CSR and its societal counterpart known as sustainable development in more detail. Section “The emergence of public policies on CSR in the EU and in (management) research” research briefly describes the emergence of CSR policies in the EU and in (management) research. Section “Instruments and themes of CSR policies” answers the first research question that was formulated above. It presents a typology of CSR policies that provides a systematic overview of how governments try to shape and promote CSR. The typology that distinguishes five types of policy instruments and four themes is illustrated with selected initiatives from EU Member States that were obtained from extensive empirical research. Based on the empirical findings summarised in the present article as well as the existing literature, “CSR policies and implications for business-government relations” addresses the second research question formulated above, i.e. it explores what public policies on CSR imply for business–government relations. Section “The effectiveness of CSR policies: A concluding discussion without answers” concludes with a discussion on the effectiveness of CSR policies.

CSR and sustainable development

Thus far, we have seen that CSR is characterised by the integration of social and environmental concerns into business conduct on a voluntary basis. As Clarkson (1998, p. 250) emphasises, managers do not think or act in terms of concepts such as ‘responsibility’ or ‘integration’. If managers think of CSR, they focus on the claims of particular stakeholders that are perceived as being powerful, legitimate and/or urgent (Clarkson 1998, p. 250; Mitchell et al. 1998). This implies that CSR efforts emerged neither because of legal requirements nor were they completely voluntary, but rather because of increasing stakeholder demands and pressures. As the European Commission (2001, p. 4) adds to its definition of CSR as quoted above, ‘An increasing number of European companies are promoting their corporate social responsibility strategies as a response to a variety of social, environmental, and economic pressures’. If corporations do not respond adequately to these pressures, they may in turn suffer economically. In this sense, the shareholder and stakeholder view of the corporation are not necessarily conflicting approaches. Scholars as well as managers have increasingly recognised that businesses are open entities, confronting the world as ‘an arena of opportunities and constraints in relation to organizational goals’ (Cragg and Greenbaum 2002, p. 327). While shareholders (or owners) provide capital to benefit from these opportunities and constraints, it is up to stakeholders to actually define them. With Frooman (1999, p. 195), one can add, ‘it is the dependence of firms on environmental actors (i.e. external stakeholders) for resources that gives actors leverage over a firm’. Consequently, CSR is conceptually and practically closely linked to the management of stakeholder relations (Jones 1995; Frooman 1999).

However, stakeholder pressure does not move companies unitarily towards CSR or sustainable development; first, because some industries and companies (in particular, those with close relations to end consumers) seem to face more scrutiny by stakeholders than others; second, because companies respond differently to similar pressures due to different corporate cultures, values, structures and strategies (Post et al. 2002). While some businesses use CSR rhetoric for ‘social window dressing’ or ‘green wash’, others integrate the triple bottom line principle more thoroughly in their business strategy and management routines with considerable social and environmental effects, and still others meander somewhere between business ethics rhetoric and CSR as a strategic management approach. Overall, the abundant management literature on CSR suggests that corporations are increasingly acting as a nexus of stakeholders that are concerned with organisational wealth in the long-term (see, e.g. Post et al. 2002; Barth et al. 2007).

If we leave the management side of CSR behind and turn to its socio-political salience, a close linkage with the widely accepted societal guiding model, known as sustainable development, emerges. Similar to CSR, the mainstream understandings of sustainable development emphasise the need to better integrate the social, environmental and economic aspects of development and to involve civil society organisations and businesses in doing so (European Council 2006). Whatever this means for various sectors is defined in government strategies for sustainable development. These tools are supposed to orchestrate different actors and policy instruments across sectors (Steurer and Martinuzzi 2007). Over the last two decades, the overarching societal guiding model that is relevant for all societal sectors has been drilled down to the levels of companies and individuals. In the course of this conceptual differentiation, Corporate Accountability and CSR were linked to the sustainable development discourse. While Corporate Accountability stands for compliance with the mandatory legal standards, CSR is often framed as the voluntary ‘business contribution to Sustainable Development’ that goes beyond what laws actually require (European Commission 2002; see also Dyllick and Hockerts 2002; Steurer et al. 2005). In delivering CSR, many companies make use of a variety of management tools (including sustainability reporting), and they reach out to the societal and political contexts of the firm with stakeholder management and political lobbying. Thus, managing stakeholder relations is for companies what public policies on CSR are for governments: among other things, they are both attempts to better link CSR with sustainable development, and often this is done through new ways of (corporate and public) governance (Fig. 1).

Fig. 1
figure 1

Sustainable development (SD) within, and across, the three societal domains

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Based on conceptual grounds, we can summarise that CSR is voluntary in the sense that it goes beyond what laws actually require, but not in the sense that the respective activities are left entirely to the discretion of managers. The close link between CSR and stakeholder pressure suggests that CSR is not purely self-regulatory, meaning that ‘Regulatory rules are self-specified, conduct is self-monitored and the rules are self-enforced’ by businesses (Bartle and Vass 2007, p. 288). This would leave little scope for both societal and governmental influence on how companies pursue CSR. As the remainder of the present article (in particular, “CSR policies and implications for business-government relations”) illustrates with numerous examples, CSR policies aim to push CSR further towards co-regulation, or, with the terminology of Bartle and Vass (2007), towards a form of ‘mandated self-regulation’ that is not detached from the regulatory state.

The emergence of public policies on CSR in the EU and in (management) research

Business practices that were explicitly referred to as CSR emerged in the US in the 1950s. Back then, legislators intentionally left policy gaps to be filled by non-governmental forms of social provision and promoted CSR practices, for example, by introducing tax incentives for employers to provide employment and health insurance (Carroll 1999; Moon 2005). Today, Europe is regarded as a leader in CSR and CSR policies (see “CSR policies and implications for business-government relations”), in which one should not overlook the fact that the only European country that has a noteworthy history in CSR is the UK. It is there that CSR was already being discussed in the 1970s, in which it subsequently gained wider prominence in the early 1980s during a period of high unemployment, urban decay and social unrest. Parallel to the history of CSR in the US, Moon (2005, p. 54ff) also relates the emergence of CSR in the UK to the fact that the Thatcher governments downsized the role of the state, both as a regulator and provider of social goods and services. Nevertheless, CSR in the UK ‘was a pale reflection of the American counterpart’ (Moon 2005, p. 53). This has changed only in recent years, both in the now Labour-governed UK (which appointed a Minister of CSR and adopted a CSR strategy) and throughout the EU.

From the turn of the millennium onwards, CSR began to spread across Western Europe; not least due to the then active role that the European Commission played, which was based on a mandate from the Lisbon European Council (2000). It, for example, framed CSR in the context of sustainable development in a Green Paper (European Commission 2001), and in 2002, the European Commission released a communication on CSR that explored ambitious policy options to increase the transparency and convergence of CSR across Europe. With the transition of the Commission in 2004, however, the EU CSR policy changed from a pro-active to passive approach that re-emphasises businesses self-regulation (European Commission 2006). Richard Howitt, British Labour Member of the European Parliament pointedly commented on the new course: ‘The Commission wants Europe to be “a pole of excellence” in business, but instead has dumped 5 years of debate and consultation into a black hole. The Commission says that public authorities should create an enabling environment for CSR yet opts out from any proposals for concrete action for itself, simply repeating generalisations which we have all read before’. What the change of course at the EU level shows already at this point is that CSR policies are obviously subject to serious political controversies, despite their soft-law character.

At the Member State level, several Western European countries have become quite active in promoting and shaping CSR in recent years. Before their, and other, activities are systematically characterised in the next section, the existing literature on CSR policies (mainly published in management journals) can be categorised as case studies, conceptual and exploratory analyses:

  • Case studies either focus on single CSR initiatives by governments (see, e.g. Holgaard and Jørgensen 2005; Konrad et al. 2008) or international organisations such as the OCED and the UN (Barkemeyer 2007). A so far unique empirical analysis that explores business–government relations with corporate case studies was conducted by Mathis (2008).

  • Conceptual analyses often focus on the general aspects of business–government relations, (new) governance issues, and on ‘the political economy of CSR’ (Moon 2002; Midttun 2005; Midttun et al. 2006; Moon 2007).

  • Exploratory analyses on CSR policies characterise a broad range of CSR policy initiatives for one or several countries. However, a closer look shows that these mostly comparative approaches are hampered by one or more of the following three shortcomings. First, some of the exploratory approaches describe a more or less random collection of initiatives without providing a comprehensive picture of the array of CSR policies (de la Cuesta and Martinez 2004; Moon and Vogel 2007). Second, other scholarly contributions aim to provide a comprehensive picture of CSR policies, but do so by applying a specific logic that distorts their descriptive-empirical value. Lepoutre et al. (2007), for example, show how selected government initiatives address the substantive, strategic and institutional uncertainties associated with CSR. By using the ‘relational state perspective’ as an analytical lens, Albareda et al. (2006, 2007, 2008) and Lozano et al. (2008) explore how selected government actions on CSR can be related to interfaces among governments, businesses and civil society. None of these approaches provide plain descriptions of CSR policies but rather typologies that are filtrated by the particular logic applied.Footnote 2 Third, at least a few exploratory works attempt to characterise CSR policies with themes and instruments without filtering them through a particular logic (Fox et al. 2002; Riess and Welzel 2006; DG Employment 2007; Bertelsmann and GTZ 2007; OECD 2008). However, with the exception of the meanwhile outdated study of Fox et al. (2002), they often mix themes and instruments (Bertelsmann and GTZ 2007 mixes themes and instruments even with many other analytical categories), in turn resulting in typologies that are at times confusing rather than clarifying.

By presenting a comprehensive picture of the full array of public policies on CSR that distinguishes instruments and themes without applying a particular analytical lens that highlights or groups some government activities and overlooks others, the remainder of the present article seeks to iron out the shortcomings of the exploratory approaches, in which it also draws some conclusions that reach into the conceptual approach as outlined above.

Instruments and themes of CSR policies

This section provides a systematic account of how governments address CSR. The proposed typology characterises CSR policies with five types of policy instruments that are employed in four fields of action. Once the typology is lined out, examples from across Europe will fill it with substance. It is based on a systematic comparison of existing CSR policy typologies and empirical research covering three of the four fields of action (for details, see footnotes 1 and 2).

CSR policy instruments

Public policies on CSR are a diverse field with respect to both the themes addressed (see below) and the policy instruments employed. According to Howlett and Ramesh (1993, p. 4), ‘Policy instruments are tools of governance. They represent the relatively limited number of means or methods by which governments effect their policies’. Although ‘There is no single agreed characterization of government resources or instruments in the literature on public administration’ (Hood 1983, p. 201), one can distinguish a widely acknowledged standard set consisting of informational, economic and legal policy instruments (Howlett and Ramesh 1993; Bemelmans-Videc et al. 1997; Jordan et al. 2003):

  • Informational instruments (or ‘sermons’, metaphorically speaking) are based on the resource of knowledge. Their rationale is (moral) persuasion. As they are usually restricted to highlighting options and the possible consequences, they imply thereby no constraints. Examples are campaigns, trainings and websites.

  • Economic instruments (or ‘carrots’) are based on the resources of the taxing authority and money. Their rationale is to influence behaviour with financial incentives and market forces. Examples are taxes, tax abatements, subsidies and awards.

  • Legal instruments (or ‘sticks’) prescribe the desired choices and actions by making use of the state’s legislative, executive and judicial powers. The underlying rationales are hierarchy and authority. Examples are laws, directives and regulations.

All three types of these instruments can also be found in the context of CSR policies, but the following two deviations are obvious. First, the economic and legal instruments assume uniquely soft characteristics. If legal CSR instruments have a mandating character that goes beyond recommendations, they are either not universally binding (businesses, for example, do not have to obey label regulations if they do not want to apply them), or enforcement is non-existent or weak (as is the case for most laws on CSR reporting, for details, see Joseph 2002, p. 97ff). If economic instruments are employed in the context of CSR, they are not concerned with taxes that are statutory for all, but rather with tax breaks and subsidies. The second deviation is that the tripartite instrument set has to be expanded by two additional instrument types, i.e. partnering and hybrid ones:

  • Partnering instruments (or ‘ties’) build on a co-regulatory networking rationale, assuming that different actors are interested in working together towards shared objectives, for example, because they can exchange complementary resources and avoid conventional regulations. Due to the voluntary character of CSR, one would assume that CSR policies make extensive use of stakeholder forums, negotiated agreements and public-private partnerships (Fox et al. 2002).

  • Adding hybrid instruments (or ‘adhesives’) as a fifth type is necessary because numerous government initiatives on CSR either combine or orchestrate two or several other instruments as mentioned above (for a similar use of this instrument type, see Rittberger and Richardson 2003). Among the most significant hybrid CSR initiatives are, for example, CSR platforms, centres and strategies.

Metaphorically speaking, we can summarise that governments engage in CSR with sermons, sticks (or rather soft rods), carrots, ties that hold different actors together and adhesives that hold different instruments together. Although the policies that are coercive for all businesses must be kept apart from soft and voluntary CSR policies, this does not imply that the CSR policy themes that are described below are unsuitable for hard-law regulations or taxes, quite on the contrary. This means that mandatory instruments represent conventional (social or environmental) policies that curtail the scope of softer CSR policies, and not the other way round. In this sense, governments usually emphasise that their CSR policies complement the existing hard-law. The following paragraphs delineate the fields of action that these soft policy instruments are employed in.

CSR policy themes

Based on own empirical researchFootnote 3 and a systematic analysis of several (often unsystematic) exploratory stocktaking efforts (for references, see the exploratory approach above), CSR policies can be characterised by the following four thematic fields of actionFootnote 4:

  • Raise awareness and build capacities for CSR: Due to the voluntary character of CSR, management activities and corporate performances essentially depend on how social and environmental concerns are perceived among both companies and stakeholders. Thus, an important activity for governments is to raise awareness for CSR and to build the respective capacities among both groups.

  • Improve disclosure and transparency: Reliable information on the economic, social and environmental corporate performances is a prerequisite for investors, regulators, employees, suppliers and customers (including public procurers) so that they can favour those who take CSR seriously. Governments can play a key role in improving the quality and dissemination of the respective CSR reports.

  • Facilitate socially responsible investment (SRI): By considering the economic, social, environmental and/or other ethical criteria in investment decisions, SRI merges the concerns of a broad variety of stakeholders with shareholder interests. Fostering SRI helps to embed CSR in the functioning of shareholder capitalism (Eurosif 2006; Scholtens et al. 2008).

  • Leading by example (or ‘walk the talk’) regarding socially responsible practices can foster CSR. This applies, in particular, to

    • Making public procurement more sustainable;

    • Applying SRI principles to government funds (including public pension funds);

    • Adopting CSR management systems (such as EMAS) and audits in public institutions and by

    • Reporting on the social and environmental performance of government bodies.

These four CSR policy themes provide an exhaustive picture in time that will, however, be subject to change as the policy field develops further.

The CSR policy typology at a glance

With four themes that are pursued with five different types of policy instruments, we obtain a matrix typology that systematically describes the CSR policy field (for an overview see Table 1). To make the typology tangible, the remainder of this section fills 19 of its 20 cells with examples of how European governments actually address CSR. Interestingly, the only empty cell of the typology is concerned with making ‘leading by example’ more attractive to government bodies with economic instruments. Nevertheless, it is noteworthy that many initiatives in this field of action indirectly provide economic incentives for CSR in businesses.

Table 1 Themes and instruments of public policies on CSR: a matrix typology
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Of course, the political reality is rarely as neat as an ideal-type classification. Thus, instruments sometimes share the characteristics of more than one theme. Awards, management and reporting tools (such as the GRI guidelines), for example, can raise awareness and build capacities for CSR and thereby also increase transparency. Moreover, a few governments co-ordinate their CSR policies across some themes through co-ordination structures or bodies (such as the Minister for CSR the UK government was well-known for until 2008 when the position was abolished), or by adopting governmental CSR strategies and action plans (see e.g. Danish Government 2008).

Raise awareness and build capacities for CSRFootnote 5

Not surprisingly, legal instruments are hardly used in this context. One of the legal instruments that has raised the awareness of sustainable development and CSR policies is the ‘Charter for the Environment’, which is an annex to the French Constitution that was passed in 2005 that provides a constitutional basis for sustainable development in France. According to a French Ministry official, the Charter was a key driver for including sustainable development in the French public procurement law in 2006 after a similar attempt failed in 2004 (Steurer et al. 2007, p. 24f).

Economic incentives that raise the awareness of CSR are export subsidies with CSR strings attached. In Sweden, for example, export credits and state guarantees for foreign investments are only granted if companies sign an anti-corruption agreement. By linking foreign investments to CSR, the government reaches companies that usually pay little attention to CSR. Another economic instrument that builds the capacities for CSR are tax breaks for donations to CSOs. In 2000, the UK government re-launched a ‘Payroll Giving’ scheme from 1986 that grants tax exemptions for employees who donate money to CSOs of their choice via an approved Payroll Giving Agency (http://www.inlandrevenue.gov.uk/payrollgiving). The re-launch of this incentive scheme was accompanied by a £2 million publicity campaign, and a government commitment to add a 10% supplement on all Payroll Giving donations from 2000 to 2004. As a result, Payroll Giving donations increased from £29 million in 1999 to £89 million coming from more than 5 million employees in recent years (Steurer et al. 2008a, p. 30, b). Obviously, this and other similar tax schemes across Europe build capacities for CSR by strengthening CSOs as independent and critical stakeholders (Christian Aid 2004, p. 14).

The most widely used awareness raising instruments are self-explanatory, informational initiatives, among them (i) funding of research and educational activities; (ii) information resources such as websites and reports on CSR (for the UK government, see http://www.csr.gov.uk); (iii) government-sponsored guidelines that often adapt international initiatives such as the UN Global Compact to their respective national circumstances (for the German Corporate Governance Code/GCGC, see Werder et al. 2005, p. 178f) and (iv) campaigns, such as the above-mentioned British Payroll Giving campaign, or the Danish CSR campaign ‘Our Common Concern’.

By far the most popular partnering instrument that preceded many other CSR policy initiatives is concerned with negotiated agreements between governments and businesses. As research findings suggest, these agreements are the most effective if they are negotiated and enforced ‘in the shadow of hierarchy’ (Mol et al. 2000; Croci 2008). Partnering instruments facilitating both awareness raising and transparency are stakeholder gatherings, such as the European Multistakeholder Forum or so-called multi-stakeholder initiatives, such as the Global Reporting Initiative (GRI), the Forest Stewardship Council or the Marine Stewardship Council. A permanent national partnership on CSR is the Swedish ‘Global Ansvar’ (meaning ‘global responsibility’). Based on a parliamentary call to sensitise Swedish companies regarding greater social responsibility in a global context, four ministries (lead by the Ministry of Foreign Affairs) launched a partnership in March 2002. It acts as the national focal point for CSR, which aims to turn Swedish companies into ‘ambassadors’ of human rights, decent labour conditions, environmental protection and anti-corruption around the world by making use of various informational and educational tools, which is often in co-operation with Swedish embassies worldwide.

Hybrid instruments on CSR awareness raising and capacity building that combine partnering and informational aspects are centres or platforms, such as the Dutch ‘Knowledge and Information Centre on CSR’. Following the advice of the Dutch Social and Economic Council, the government established the Centre with an annual budget of approximately € 1 million in 2004. It co-ordinates the CSR activities in the Netherlands, disseminates information on CSR, and promotes dialogues and partnerships. A well-known hybrid instrument that combines informational and economic aspects in building capacities for CSR is the Eco-Management and Audit Scheme (EMAS), an environmental management system based on an EU directive. It helps organisations to improve their environmental performance on a voluntary basis. Programmes that support the implementation of EMAS, or similar CSR tools, with information and economic incentives (in particular, subsidies) are other examples of hybrid instruments (de la Cuesta and Martinez 2004, p. 283). Hybrid instruments that raise awareness and foster transparency are awards for CSR (or aspects thereof), such as the Hungarian ‘Family-friendly Workplace Award’, which has been conveyed annually since 2000. The opposite of awarding, namely bad practice ‘naming-and-shaming’ with so-called ‘blacklists’, was discussed at the EU level in the early 2000s but was never put into practice (European Commission 2002, 2006).

Improve disclosure and transparency

Corporate disclosure and transparency on CSR can be improved, inter alia, with CSR reports, labels and stakeholder involvement. Governments target all three means with a wide range of policies. The best known legal initiative on disclosure and transparency in Europe is the French ‘New Economic Regulations’ (NRE), a law that was passed in 2001. Among other things, it requires companies that are traded on the French stock exchanges (more than 600) to include social and environmental information in their annual reports, or to publish CSR reports. This law ideal typically illustrates the soft law character of CSR policies because it does not specify the extent or quality of the information to be published, and neither enforcement mechanisms nor sanctions for non-compliance are foreseen. While the French Exchange Supervisory Authority (‘Autorité des Marchés Financiers’) is obliged to control the financial information that is provided in corporate annual reports, information on CSR remains unchecked. Similar laws exist in Denmark, the Netherlands, Sweden and Spain (Holgaard and Jørgensen 2005). After serious debates on the pros and cons of mandatory CSR reporting (for example, in the European Parliament), neither the European Commission nor other EU Member States have adopted stricter regulations (de la Cuesta and Martinez 2004, p. 284). Instead, some governments have attempted to foster corporate disclosure by awarding good CSR reports (economic instrument), issuing country-specific reporting guidelines, many of which are based on the guidelines of the Global Reporting Initiative (informational instrument), and facilitating stakeholder forums (partnering instruments), in particular, with those companies that have major effects on local communities, such as ports and airports (Kolk and Veen 2002).

Due to the lack of enforced regulations on CSR reporting, certified labels are not only the oldest but also the most important instrument fostering corporate transparency. Labels are hybrid instruments because they combine informational features (mainly addressing consumers) with economic (or marketing) incentives for companies. Although the use of government sponsored labels is usually regulated, they are in line with the voluntary character of CSR because companies do not have to adopt them. The first environmental label was the German eco-label ‘Blue Angel’, which was introduced in 1978 long before CSR or CSR policies were broadly discussed in Europe. Meanwhile, dozens of national and international labels (such as the EU Eco-label from 1992) exist, where most of them are still concerned with environmental issues rather than CSR in general (Jordan et al. 2003, p. 568f; de la Cuesta and Martinez 2004, p. 282). In recent years, however, governments have lost ground in this respect: many well-known labels have been developed by multi-stakeholder initiatives (such as the Marine Stewardship Council and the Forest Stewardship Council) or CSOs rather than by governments.

Socially responsible investment (SRI)Footnote 6

SRI is an important lever for CSR because it integrates social, environmental and/or ethical concerns into the core of shareholder capitalism. Among the comparatively few government initiatives on SRI, the following are worth mentioning. In 2007, the Belgian government adopted a law that forbids Belgian investors from financing or investing in any Belgian or foreign company that is involved with anti-personnel mines and cluster munitions in any way. To ease compliance with the law, the Belgian government publishes a list of companies that fall under the ban, in which it expects investors to apply screening methods that enable them to obey the law. As with other legal CSR policy instruments, however, the law is ideal-typically soft because disclosure requirements for professional investors are low, in turn making it difficult for state authorities to learn about violations. Furthermore, sanctions for offenders are not foreseen (http://www.netwerkvlaanderen.be/). A more demanding law on SRI was adopted in Sweden. In 2000, five political parties passed the so-called Public Pension Funds Act (2000/192, http://www.ap3.se/en/). It requires all Swedish National Pension Funds (AP1-AP5 and AP7) to dispose an annual business plan expressing how environmental and ethical issues are considered in the Pension Fund’s investment activities and what impact these considerations have on the management of the funds. Although pension funds can comply with the law without major SRI efforts, it has led to a rare hybrid SRI initiative that combines the informational, partnering and economic aspects. In 2007, four of the six funds (AP1-AP4) established the Joint Ethical Council that engages in CSR dialogues with companies that the pension funds are interested in investing in. The Ethical Council makes recommendations for the companies and pension funds, and if it concludes that a company does not meet the Council’s CSR principles, the pension funds may decide to divest their holdings (for details, see http://www.ap3.se/en/). A similarly hybrid SRI initiative is the French Pension Reserve Fund (‘Fonds de réserve pour les retraites’, FRR) that contributes to the general old age insurance plan in line with the SRI principles. Like the Swedish Ethical Council, the FRR also probes and promotes CSR in companies that it would like to invest in. Less ambitious regulations that require pension funds to disclose their investment policy with regard to SRI exist, for example, also in the UK.

An economic SRI initiative is the Dutch Green Funds Scheme, which was developed jointly by three ministries and introduced by the Dutch tax office in 1995. It facilitates green investments in certified projects that meet certain environmental standards (such as wind farms or organic farming) by granting tax exemptions to lenders and borrowers. The Green Funds Scheme is implemented in co-operation with banks and has attracted approximately 200,000 savers and enabled approximately 5,000 green projects.

Two examples of informational instruments promoting SRI are the website http://www.gruenesgeld.at (‘green money’), which was established by the Austrian Environment Ministry in co-operation with an environmental CSO in 2001, and the Dutch ‘Sustainable Money Guide’, which is financed by the Dutch Ministry of Environment and was developed by a Dutch CSO for the first time in 2002.

Lead by exampleFootnote 7

Governments can advance both sustainable development and CSR when they lead by example in various respects. While management systems and reporting practices are most often applied without the support of CSR policy instruments, and comparatively little is done on socially responsible investment, governments use a wide range of initiatives to promote sustainable public procurement (SPP).

In March 2004, two EU directives on public procurement were adopted to simplify and update the existing procurement legislation (directive 2004/18Footnote 8 focuses on contracting authorities, and directive 2004/17Footnote 9 is oriented towards the special sectors of contracting authorities). Although the two directives do not prescribe SPP, they open the possibilities to consider social and/or environmental criteria in the tender specifications (McCrudden 2007; van Asselt et al. 2006). Directive 2004/181, for example, ‘clarifies how the contracting authorities may contribute to the protection of the environment and the promotion of SD, whilst ensuring the possibility of obtaining the best value for money for their contracts’ (L134/114). A survey on SPP in Europe has shown that most EU Member States have renewed their procurement laws in line with the two EU directives in time. In addition, the French government, for example, also facilitates SPP with circulars, i.e. non-binding, but compelling, legal texts that are issued by the Prime Minister that provide details and advice regarding the meaning of the new procurement law.

Many governments also issue advice on how to make public procurement more sustainable with informational instruments. The European Commission (2004), for example, published ‘A Handbook on Environmental Public Procurement’. In Austria, the environmental criteria catalogue ‘Check it’, the guidelines ‘Greening Events’, and the General Government Guidelines on GPP (first issued in 1998) provide guidance on green public procurement (GPP). In 2004, however, the Austrian council of ministers refused to adopt a revised version of the latter because it regarded the costs of GPP to be unclear. Cost-benefit concerns are, overall, the key obstacle for SPP and GPP throughout Europe.

Called for by the European Commission (2003) in its Communication on ‘Integrated Product Policy’, many Member States began to systematically co-ordinate their activities on SPP with SPP/GPP strategies or action plans in recent years. They are the most common hybrid instrument used in this field of action. One of the most comprehensive strategic frameworks on SPP is operational in the UK. In 2007, the UK government adopted a ‘Sustainable Procurement Action Plan’ (DEFRA 2007) that aims to turn the UK into a leader in SPP by 2009. The plan was drafted based on recommendations that were formulated by a business-led Sustainable Procurement Task Force in the report ‘Procuring the future’ (DEFRA 2006).

A rare example for a partnering instrument on SPP is the Dutch PIANOo network. It fosters an exchange of experiences among public procurers primarily via its homepage http://www.pianoo.nl. Economic incentives that encourage government bodies to make public procurement more sustainable (or to lead by example in other respects) do not exist. Indirectly, however, all the SPP initiatives not only have a role model function, but since they can stimulate demand for CSR, they may also unfold an economic incentive character, at least for businesses interested in supplying to the public sector.

CSR policies and implications for business-government relations

Do CSR and the CSR policies strengthen business self-regulation at the expense of state regulation in line with neo-liberal ideas or are political underpinnings more complex? Based on the empirical findings brought forward above and the growing body of conceptual literature on CSR policies, this section shows that, presently, the latter seems to be the case. A proxy to judge the political foundations of CSR is the popularity of the concept under different political circumstances. As mentioned in “The emergence of public policies on CSR in the EU and in (management) research”, CSR took root in countries and periods that were dominated by neo-liberal rather than welfare state policies, for example, in the US under Reagan and the UK under Thatcher. Consequently, Midttun (2005) and Moon (2005) conclude that CSR started out as a neo-liberal concept that facilitated the downscaling of government regulations (in contrast, new governance always tended to transcend ideologies of this nature by reshaping the notion of regulation and the state in entirely new ways). In recent years, however, CSR has matured from a philanthropic idea to a more comprehensive concept of strategic triple bottom line management (at least in some companies). This maturing process has also affected the concept’s political underpinnings. As several analyses suggest, CSR practices are now more popular among businesses and governments from countries with comparatively stringent social and environmental regulations than among the more neo-liberal ones. Midttun et al. (2006), for example, explored the popularity of selected CSR initiatives (such as the UN Global Compact) in Europe and the US, and found that CSR is now the least popular among US and the most popular among Scandinavian companies. They explain this finding by the influence of different welfare state traditions. While they regard welfare state models as ‘old embeddedness’ of businesses in society, they interpret CSR as a corresponding form of ‘new embeddedness’ (leaving it open how these concepts correspond to neo-corporatism). According to Midttun (2005), this new embedded model aims to amalgamate the social and environmental policy agendas of a particular welfare state type with the governance approach of business self-regulation. What follows are ‘new embedded-relational models’ of business-state co-regulation (or perhaps accommodated forms of neo-corporatism) rather than variations of the neo-liberal or Keynesian welfare state models (Midttun 2005). Likewise, Rubin (2008) and Liston-Heyes and Ceton (2007) show that CSR is more popular in Democratic rather than Republican US states. Liston-Heyes and Ceton (2007) explain this finding by the ‘symmetry hypothesis’, in turn stating that in states where governments are more in favour of redistribution, firms also engage in more progressive CSR redistribution practices because pleasing governments by doing so may result in political and administrative advantages. This speculation is empirically confirmed by Mathis (2008). By exploring business–government relations in corporate case studies, he concludes that ‘higher CSR performance and open and transparent stakeholder management lead to lower bureaucratic costs due to easier and faster processes to get licenses, permits, and other necessary official documents’ (Mathis 2008, p. 445). Likewise, public policies on CSR are not the domain of neo-liberally oriented governments, but they are applied across Europe, in particular, in pronounced welfare states. According to own surveys that revealed more than 200 CSR policy initiatives from across the EU-27, CSR is being promoted most actively in Ireland and the UK (both known for the longest CSR tradition in Europe), followed by countries from the Scandinavian welfare state model with a strong neo-corporatist tradition (Steurer et al. 2008a).

Overall, the different levels of activity in CSR and CSR policies across Europe as summarised above, the recent policy change at the EU level from a pro-active CSR approach during the left-wing Prodi Commission towards a passive approach at the outset of the right-wing Barroso Commission (see “The emergence of public policies on CSR in the EU and in (management) research”), plus the fact that the conservative US administrations increasingly ignored CSR as the concept matured in recent years (Aaronson 2002) are three congruent developments that lead to two conclusions. They both substantiate that the political underpinnings of CSR are more complex than one might assume based on the neo-liberal history of the concept. First, apart from being a business approach concerned with triple bottom line management, CSR is also a politically contested concept that can assume many meanings, just like the underlying societal guiding model of sustainable development (Hopwood et al. 2005). Thus, the political salience of CSR varies from country to country, and it changes over time. While some countries and actors still frame and pursue the concept in line with neo-liberal ideas, many others have developed CSR activities further into co-regulatory arrangements where businesses, CSOs, and governments test and exert their powers in collaborative and simultaneously confrontational ways (Moon 2002; Utting 2005). A good example for an international co-regulatory arrangement between actors from all three societal sectors from around the world is the multi-stakeholder process on the ISO 26000 guidelines (Schmiedeknecht and Wieland 2007).

Second, pro-active public policies on CSR that facilitate co-regulatory arrangements are fundamentals of a transformation of business–government relations altogether. As numerous scholars acknowledge with different terms, this transformation leads away from the hierarchical regulatory state, which is more or less separated from the private sector, towards more networked, ‘enabling’ (Jann 2003), ‘relational’ (Moon and Vogel 2007; Albareda et al. 2006; Lozano et al. 2008), or ‘embedded’ (Midttun 2005) forms of societal steering, also referred to as societal co-regulation (see also Utting 2005, p. 5; Bartle and Vass 2007) or (new) governance (as opposed to government) (Mörth 2009). What we seem to be observing, in particular, from the CSR perspective taken in this article, is indeed ‘not a reversal of twentieth century trends to nineteenth century self-regulation’ but rather an embedding of the new forms of business self- and societal co-regulation within the regulatory state (Bartle and Vass 2007, p. 902). Consequently, the CSR policies characterised in the present article point beyond the traditional dichotomy of regulation and voluntary compliance or self-regulation (Lozano et al. 2008). The ‘softening’ of regulation that is typical for CSR also seems to ‘soften’ the dichotomy between regulation and self-regulation,Footnote 10 partly because it often facilitates co-regulation as a new governance alternative between the two extremes. However, as Lascoumes and Le Gales (2007) pointed out for new governance in general, the shift towards network governance and co-regulation comes at the risk of ‘denying the interplay of social interests and of masking power relations’ (see also Arts and van Tatenhove 2004)—two key issues of policy making that have so far hardly been addressed in the context of CSR policies (the present article being no exception).

The effectiveness of CSR policies: a concluding discussion without answers

The present article has shown that governments have five types of policy instruments at hand to shape and promote CSR in various fields of action (for an overview, see Table 1), and that some governments in Europe are quite active in making use of them. Since the numerous policy initiatives described and systematised above have not only a common purpose (i.e. to foster CSR and sustainable development), but also share the governance principle of voluntariness as well as the respective instrument-related characteristics (i.e. partnering and soft-law), one can speak of CSR policies as a distinct policy field. Regarding the sometimes complex differentiation and complementation of soft- and hard-law, the present article has also emphasised that, although there is a wide consensus that CSR activities are, by definition, voluntary and CSR policies soft in character, this does not mean that governments cannot (co-)develop binding minimum standards and quality-assuring procedures for issues currently being discussed under the heading of CSR. There are two reasons for this. First, the CSR minimum standards may only be binding for those who apply them voluntarily; and second, if they become new mandatory legal standards for all, CSR policies will simply be turned into conventional social or environmental hard-law regulations (for examples of this, see Rasche et al. 2008). According to an EU research project on the ‘Rhetoric and Realities in CSR’, conventional social and environmental regulations not only curtail the scope of voluntary CSR but also provide crucial points of orientation: ‘companies proved more active with regard to voluntary sustainability activities when ambitious policies provided clear points of orientation’ (Barth et al. 2007, p. 34).

While some of the soft instruments (such as negotiated agreements) have been applied and scrutinised for years, many others (such as various responsible investment and public procurement initiatives) are still a blank page regarding their effectiveness. As Andrews (1998) notes, environmental business self-regulation was dysfunctional before the 1970s (making command-and-control environmental policies necessary), and the jury is still out as to what degree CSR and the respective public policies are more effective today. While the previous section has explored what CSR policies signify for business self-regulation and the regulatory state, questions about their effectiveness were deliberately omitted because they are beyond the exploratory scope of this article. Thus, further research should systematically fill the assessment gaps and explore, case by case, as to how effective CSR policies are in achieving public policy goals and what opportunity costs that they imply compared to conventional regulations (perhaps by also paying more attention to power issues).

Corresponding to the peculiarities of new governance that are explored in detail in the political science literature, the political salience of CSR is obviously a complex issue that is shaped by actors from all three societal domains, i.e. by (progressive) companies (Zadek 2001, 2004), by societal demand for CSR and the respective CSO activism (McWilliams and Siegel 2001; Frooman 1999) as well as by pro-active public policies on CSR as outlined in the present article (see also Zadek 2001; Joseph 2002; Utting 2005). Since the CSR and political science literature track similar governance activities and trends from different perspectives, it is reassuring that the two strands of research draw similar conclusions, e.g. on the transformation of business–government relations and the nature of regulation. Consequently, both of these research strands obviously have much in common and can mutually benefit from each other. The typology of CSR policies that is introduced here can serve as a starting point for exploring the policy field more systematically across disciplinary boundaries to learn more about the effectiveness of respective initiatives, and the shifting involvements of the public and private sectors, or perhaps even the blurring of ‘one of the major dichotomies in social science’ (Mörth 2009) altogether. This subject is never more relevant than in a time of economic crises, which highlights the political role of corporations on the one hand, and that seems to bring back government influence (not to say nationalisation) in key business sectors on the other.