Leo Martin founder of the GoodCorporation looks at the importance of the recent overwhelming rejection of the EU constitution by France and the Netherlands and explores what it means going forward for HR professionals.
This recent vote highlights the extremely divergent views that exist within the EU about the role of business in society.
In France people cling onto the view that the State’s role is to temper markets (product, labour and capital) in order to protect domestic businesses.
This is combined with relatively high taxes and high quality public services. The crisis in France however, has not come from the EU Constitution per se, but rather from the sclerosis of its own economic system.
At the other extreme in the Netherlands it is possible to find people who sound quite similar to the mainstream voice in the UK, who perceive the EU to be a considerable burden on the country financially and a source of unwelcome interference in Dutch life.
What is central to this issue is the importance of establishing the kind of Europe we would like to see emerging and what the role of business will play in it.
The corporate social responsibility debate is fascinating because it highlights the potential roles that business may play in shaping the new Europe. But before turning to the role of CSR we first need to understand why the UK view of the world is so different.
The reason for the low turnout at the recent General Election was down to a consensus that has emerged between the main political parties regarding how the economy should be run, the role of business and the State.
This consensus is broadly as follows: the forces of the global market are unstoppable and a free business sector can benefit from globalisation to create wealth and drive the economy. In turn the State can and should provide a minimum social safety net, good education and health and a core social infrastructure.
The key difference with mainstream opinion in France is actually not about the State’s role to provide this social infrastructure, but rather about the role of the State in regulating business.
The heart of the debate is therefore about how business in Europe should operate. Should it compete freely, with Anglo-Saxon type stock markets and be left alone to create wealth or should the State direct its ownership, competition and development?
Given the mainstream French view is still towards intervention and ‘control’ of markets, the French population has done the logical thing in rejecting the EU Constitution. But why most people in the UK are celebrating this is a mystery.
The fact is that the EU Constitution did enough to set out a free trading EU combined with a sensible role for the State in providing the necessary social infrastructure for a fair society that people in the UK should have welcomed it.
Indeed the British should have been pushing for France and other States to ratify it.
Ultimately the challenge for the UK and the rest of Europe is coming from a rapidly globalising world in which all nations are being forced to pool sovereignty and to cooperate. Trade cannot be conducted through a cordon-sanitaire built across the English Channel. The reality is that it has always required cooperation about units of exchange, quality control, safety and so on and as it becomes more integrated so the rules governing it must follow.
If we fail to update our rules (as many in the UK seem to wish) all that will happen is unplanned globalisation, economic distortions and cost.
The recent development of India highlights the dangers. Here both the federal and State governments have historically done all they can to tinker with markets and to try to restrict activity in the vain hope of protecting some group or other.
This has created huge and expensive distortions in the economy which are a direct cost on its own population. But globalisation is such that development is taking place there despite the stupid and contradictory rules between the different States and between the States and the federal government.
The outcome is a lawyers dream and a free traders nightmare. Surely this is not the result that most in the UK want to see in Europe?
So what about CSR in this debate? I believe that in putting forward a vision of a free trading bloc with the State providing the social infrastructure, there is an enormous challenge for businesses to set out how they will behave in this environment.
I believe it has little to do with do-gooding and corporate philanthropy, as the reality is that the business sector’s contribution is relatively small (about 4% of the third sector’s income in the UK for example).
But it has a lot to do with businesses taking responsibility for how employees, customers, suppliers, partners and shareholders will be treated while organisations competes in a free trading environment.
Many of the nuts and bolts arguments actually fall into the HR professionals’ domain. Can we rely on UK style light regulation of labour markets, or even deregulate, while maintaining a fair working environment for all?
If we can create a culture in which corporate responsibility becomes the norm and the expectation, then even the French may be persuaded that there is little to fear from this type of model. It is a terrible shame that instead of jointly creating that model we are now going to spend the next ten years in dispute over it.
Leo Martin is director and founder of GoodCorporation, the corporate responsibility standard and is the principal character in the BBC’s series, Good Company, Bad Company.
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