A big deal?: corporate social responsibility and the financial sector in Europe

This report discusses the limitations of current voluntary initiatives to manage the negative social and environmental impacts generated by the finance sector in both developed and developing countries. The report presents seven case studies which clearly demonstrate the finance sectors inability to embed corporate responsibility on a voluntary basis.

In particular the report highlights that the financial sector:

• provides a heaven to siphon off much-better needed tax revenue from cash-strapped developing countries, benefiting only a wealthy minority who avoid paying tax altogether
• has abjectly failed to factor in the financial risks if climate change, which may ultimately lead to a global economic breakdown as the costs of climate change begin to outstrip any benefits generated by the global economy, especially for the world’s most vulnerable people
• is a primary conduit for bribery and corruption, providing billions of dollars in loans to repressive governments
• perpetuates poverty and social exclusion in Europe by providing unscrupulous levels of debt at high rates to those least able to afford it, all the while bringing in record-level profits
• regularly undermines human rights protection, by financing projects which pose a threat to the implementation of human rights laws in developing countries, in breach of some companies’ own codes of conduct
• often fails to assess adequately the environmental impacts of projects and to address issues raised before releasing project finance, yet continues to reap reputational benefits of participation in voluntary CSR initiatives.

Each of the case studies presented in the report provides specific issue-based recommendations to ensure that fundamental principles of accountability are adhered to. In particular the report recommends that:

• efforts to self regulate the finance sector be strengthened with a rules-based approach which clearly defines the expectations of behaviour in this area
• any initiates must include an independent monitoring and enforcement regime
• binding and credible sanctions for instances of no-compliance must also be implemented and enforced
• European Company law needs to be strengthened to ensure CSR.