Sustainable development and corporate governance high on the political agenda

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Politicians, trade unions and employers in Belgium seem to have found a common interest and area for action under the headings of "sustainable development" and good "corporate governance". This covers a range of themes, such as good business practice, corporate social responsibility, environmental protection and observance of worldwide minimum social and labour standards in production. Many events in 2000 and 2001 indicate the increasing interest in these areas, such as: an employers' conference on sustainable enterprise; a parliamentary bill to foster socially responsible production; trade union and NGO action against multinational companies that violate labour laws in third world countries; and a debate on the plight of small shareholders of the overvalued speech technology company, Lernout en Hauspie.

In recent times, there has been increased attention to the issues of "sustainable development" and good "corporate governance" among Belgian businesses, politicians and trade unions.

Employers for social responsibility

For a number of years, there has been growing interest in corporate governance among Belgian employers. For example, the Federation of Belgian Enterprises (Verbond van Belgische Ondernemingen/Fédération des Entreprises de Belgique, VBO/FEB) has issued numerous recommendations in this respect. It recommends that a company has to be seen as accountable to the many parties around it: employees, shareholders, customers, suppliers, competitors, government and the environment. This involves following a code of conduct whereby good information and openness go hand in hand with discretion (for example, employers should not poach employees with confidential knowledge from a competitor) and the amicable settlement of disputes (companies should go to court only if no other option is left).

At the end of 2000, the Flemish employers' organisation, the Flemish Economic Alliance (Vlaams Economisch Verbond, VEV), held a congress on "sustainable enterprise", which became its theme of the year. Managers who would otherwise talk about "flexibility", "innovation" and "excellence" now concentrated on "stakeholders", "corporate governance" and "social capital". Alongside a number of criticisms of action groups and the press, VEV recognised the importance of a good flow of information between the company and its surrounding players. This is seen as being required for the legitimacy and credibility of the company. For example, the 1999 dioxin food contamination crisis and the lack of transparency in the food chain has led to a deep mistrust among Belgian consumers (BE9906179N). The public should thus know, without fuss, what a company puts into its products and what the added value of them is – not just for the market, but also for society. It is interesting to note that VEV argues for "social accounting" in companies.

Political arena

With regard to the general principles of sustainable development and corporate governance, there seems to be a wide consensus among Belgian politicians over the balance that needs to be found between economic, social and ecological criteria. The current federal government of liberal, socialist and green parties is in itself a blueprint for this objective of balance. In this consensus, ideological positions, such as hard-line economic liberalism, seem to have very little influence. Thus, Patrick Dewael, the liberal Minister-President of the Flemish government, has stated in a personal manifesto about "ethical" enterprise: "I turn away from companies that pay no attention, or too little attention, to the negative aspects arising from their activities. They treat people as merchandise. For whom the environment is their personal rubbish dump. For whom odour, noise, the pollution of water and soil are of minor importance" ("Ideas on a colourful Flanders", Vooruitzien, 15 March 2001).

The federal government's coalition agreement is partly based on the idea of sustainable enterprise, through provisions such as the adaptation and extension of the legislation on product standards, and the introduction of uniform "eco-labels" and "eco-taxes" (under the principle that "the polluter pays"). Institutionally, the government can fall back on the Federal Council for Sustainable Development (Federale Raad voor Duurzame Ontwikkeling/Conseil Fédéral du Développement Durable, FRDO/CFDD). This body came into being after the "United Nations Conference on Environment and Development" in Rio in June 1992 and the approval of Agenda 21, which sets out a framework for activity addressing the combined issues of environmental protection and fair and equitable development for all, linking environmental problems with the need to combat poverty, protect human health and find new patterns of consumption.

Rules and controls

Precise criteria and standards on sustainable development and good corporate governance to be imposed on companies are still lacking in Belgium. For the time being, policy has gone no further than frameworks and working groups. The Flemish Minister of Employment, Renaat Landuyt, has, for example, set up Trivisi, a working group with the task of developing instruments for "social and ethical accounting, auditing and reporting" based on a "stakeholder" approach. Moreover, at federal level a parliamentary bill was proposed in May 2000 to foster socially responsible production. The idea is that companies will be able to obtain a "social quality label "(comparable to the Woolmark label, for example) if they can demonstrate socially responsible production. Once the bill has been approved, there will be considerable further work required in drawing up ministerial orders to lay down the concrete criteria for award of the label.

Employers do not seem to keen on far-reaching government measures in this area. VEV fears that the introduction of social quality labels could lead to extra operating costs and arbitrariness (companies without a label could incorrectly considered to be not socially responsible). The recent announcement by the Minister for the Civil Service, Luc Van Den Bossche, that the government will use ethical criteria in awarding large public contracts (greater than EUR 10 million), provoked the response from Guy Keutgen of VBO/FEB that this would create great legal uncertainty for companies. For example, it is proposed that a company may not do business with countries where human rights are violated. Mr Keutgen is opposed to this on various grounds: where should the line be drawn regarding human rights? Does there have to be a blacklist of countries that use child labour? How arbitrary or manipulated would such a list be? Can a company be required to be aware of all the activities of its suppliers?

Consumer organisations and unions

The problem raised of a possible lack of good information on working conditions in "third world" countries would not seem to be an insurmountable obstacle, however, and certainly not in a number of flagrant cases. The International Labour Organisation (ILO) centralises audited information in this respect, and consumer organisations also collect direct testimony via e-mail and fax. It is then for the companies to answer precise questions. Several recent cases indicate this.

For example, until recently the employees of the Confederation of Christian Trade Unions (Algemeen Christelijk Vakverbond/Confédération des Syndicats Chrétiens, ACV/CSC) had TotalFinaElf fuel cards for their professional travel expenses. However, in January 2001 ACV-CSC severed its commercial link with TotalFinaElf. This was to support the June 2000 ILO resolution denouncing Myanmar (the former Burma) due to serious violations of the ILO Conventions on forced labour and child labour. TotalFinaElf refused to answer ACV-CSC's questions on its gas operation investments in Myanmar. Furthermore, the Belgian government decided, without consultation at European level, to buy no more fuel from TotalFinaElf.

In nine European countries, local non-governmental organisations (NGO s) have been running the Clean Clothes Campaign for 10 years, a consumer campaign seeking to ensure that clothing companies produce their products in reasonable conditions (EU9812134F). The big names that have been required to explain themselves include C&A, H&M, Reebok, Nike, Levi Strauss and Triumph International. In Belgium, the supermarket chain GB/Carrefour was called to account over clothing supplies from Thailand and Indonesia. World solidarity collected 50,000 signatures in a campaign targeting Adidas, the main supplier to the EURO 2000 football tournament, over working conditions in El Salvador and Indonesia. The ACV-CSC chair, Luc Cortebeeck, claimed that the actions of the "Clean Clothes Campaign" had opened the way to enforcing social protection at the workplace at international level.

Notbale features of these actions have been direct contact with local trade unions in the countries concerned, and the detail of the testimonies of those involved. With the "Clean Clothes Campaign", information is centralised in Amsterdam, after which local organisations contact the suppliers targeted and the relevant government. The standards used by the Clean Clothes Campaign in its code of labour practices for the apparel industry are an absolute minimum - such as no forced labour, no child labour, a maximum 48-hour working week and a maximum of 12 hours overtime per week.

Commentary

The approach to sustainable enterprise taken in institutional reports is altogether disappointing. Every two years, FRDO/CFDD publishes a report which examines how Belgium is developing with regard to coordinating policy measures in the economic, social and ecological areas. Although the trade unions are represented in the FRDO/CFDD, they seem – rightly – to be little impressed by its activities. In particular, the Belgian General Federation of Labour (Algemeen Belgisch Vakverbond/Fédération Générale du Travail de Belgique, ABVV/FGTB) considers the way in which the FRDO/CFDD presents problems as being much too vague. Criticising what it views as "management hype", ABVV-FGTB says that a choice sometimes has to be made between economic, social and ecological goals: it is certainly not always a win-win-win situation. In addition, of all social problems, the FRDO/CFDD seems mainly to deal with poverty issues. In this sense, the FRDO/CFDD analysis is seen as largely ignoring the essential (European) achievements such as a fair wage and the development of social security.

The problem of control of company behaviour and penalties for breaches of standards seems to be more important than legislation, especially with regard to stock-exchange listed companies. A particularly painful recent example relates to the speech technology company, Lernout en Hauspie (L&H), based in Ypres (West Flanders). After L&H had grown phenomenally in recent years, at least on paper, and the value of its shares had risen enormously, the company came under fire after critical questions were posed in the Wall Street Journal over the sudden growth of L&H in Korea and the continuing lack of clarity over certain items in the accounts. Over some months, the market value of L&H fell by EUR 10 billion. For small investors in particular, this was a painful experience (a large number of middle-class people in Ypres had invested in the company). The large shareholders and senior management, on the other hand, would have sold their shares very early on.

Although Belgium has very strict laws on "insider trading", it has still been denounced in two cases. The Banking and Finance Commission (Commissie voor het Bank- en Financiewezen/Commission bancaire et financière, CBF) has no direct control over companies. Another factor in the Lernout en Hauspie case was that auditing had failed. The question thus arises as to how the Institute of Company Auditors (Instituut voor Bedrijfsrevisoren) can guarantee the soundness, competence and independent position of company auditors. For Belgians, perhaps the most uncomfortable fact of the L&H case is that the persistent critical questions ultimately came from US investors - indicating that well-organised citizens have more power in the control of business than laws and commissions. (Jan De Schampheleire, TESA, VUB)