The ‘Coalition of the Unlikely’ Driving the EU Regulatory Process of Non-Financial Reporting

ABSTRACT

The article investigates the driving forces that have been shaping the regulatory process of the EU directive on non-financial reporting (NFR). Drawing on a three-year empirical study, it argues that the latter was driven by a ‘coalition of the unlikely’, led by a growing section of investors, together with a network of non-governmental organizations and parts of European trade unions. Rather than a formal alliance, we are witnessing the emergence of an objective convergence of interests amongst the three groups of actors, aimed at limiting managers’ power and obtaining more corporate transparency and accountability. Deploying a political economy explanatory framework, the paper originally contributes to the existing literature on EU Corporate Social Responsibility policy, focused on the cleavage between business and civil society. The role of EU regulators (the ‘Barnier-effect’) in supporting mandatory NFR and the impact of the financial crisis, seen as catalysts for changes, are also taken into account. The paper concludes discussing some implications for policy-makers and research.

Notes

1. The concept of SER can be broadly defined as the formal account prepared and communicated by and/or about an organisation about social and environmental aspects of this organisation communicated to its internal or external stakeholders (cf. Gray, Adams, and Owen 2014, 7). The term NFR will be used here only as a reference to the EU legislation on NFR.

2. Hopner (2003) has showed that transparency for preservation of jobs and wages has been a major factor in shifting the corporate governance policies of German Social Democratic Party and German trade unions.

3. As Gourevitch and Shinn maintain, ‘The labour versus capital, ‘us versus them' argument no longer looks so simple. If the starting point was a country in a corporatist compromise, workers do not think they are necessarily in the same boat as managers, and they no longer have an attractive ‘deal' with block-holders, swapping agency.

4. Interview # 13 (23 July 2012).

5. Interview # 13 (23 July 2012).

6. Interview # 13 (23 July 2012).

7. Interview # 18 (8 August 2012).

8. Interview # 17 (30 July 2012).

9. Interview # 17 (30 July 2012).

10. Interview # 18 (8 August 2012).

11. The document can be retrieved at http://www.corporatejustice.org/ECCJ-BEUC-Eurosif-and-ETUC-meet.html.

12. Interview # 22 (22 January 2013). EUROSIF (European Sustainable Investment Forum) is a pan-European network whose mission is to develop sustainability through European Financial Markets.

13. This is the author's translation from the original text, which was received by email on 26 February 2013.

14. Interview # 22 (22 January 2013).

15. Interview # 18 (8 August 2012).

16. As George Soros said as regards carbon emissions trade, ‘the system can be gamed [ … ] that's why financial types like me like it, because there are financial opportunities.’ (2008) Furthermore, most industrial sectors will be affected directly or indirectly by the consequences of climate change or by carbon governance policies. Therefore, in the case of long and medium-term institutional investors – that in Europe are around 80% of the total – carbon disclosure is becoming a vital piece of information (EFFAS 2010).

17. Interview # 13 (23 July 2012).

18. ‘Important dimensions of sustainability, such as employment conditions and occupational health and safety, have long been core issues for trade unions. Other dimensions, such as finances of the firm, have also been long-standing concerns of work councils and employee board level representatives. Nevertheless, many elements of the multi-dimensional concept of sustainability stretch beyond the traditional core concerns of trade union'.

19. They represent ‘a challenge for current trade unions’ capacities to take positions on these issues [ … ]’ (Vitols and Kluge 2011, 34).