Ambassador Stub gave the speech at a conference arranged by The Hellenic Network for Corporate Social Responsibility February 28 2011. Photo: HNCSRFirst of all I congratulate The Hellenic Network for CSR for its valuable work and on the initiative to organize this conference.
I will talk to you about the Norwegian approach to CSR, and give some insight into the ethical guidelines of the world's second largest sovereign wealth fund, The Norwegian Government Pension Fund.
- See Kathimerini's article on Ambassador Stub's speech here.
Norway is one of the first countries to develop a coherent policy on CSR in a global economy. In 2009 the Government issued a policy paper on “Corporate social responsibility in a global economy” . The paper stresses that companies are not just operating in a market generating financial results. They are also operating within a culture, a local community and a political system, and have an impact on social development where they operate. Hence, companies have a responsibility that extends beyond financial value creation; companies have an ethical responsibility. In a global economy this ethical responsibility goes beyond national borders.
Therefore the government tries to encourage companies to make corporate social responsibility part of core business concepts and strategies.
In the whitepaper three key areas for action are defined:
a) Exercising social responsibility in the Government’s own activities (try to set a good example).
b) Conveying society’s expectations to Norwegian companies.
c) Developing and trying to influence the framework for CSR both in Norway and internationally.
The Norwegian Government has a specific international approach on CSR. The ethical aspects of CSR have become more apparent as a result of globalization. Increasingly Norwegian companies are engaged in countries where human rights are challenged, and in companies producing products that are not ethically defensible.
The ethical basis for CSR derives from the inviolability of human dignity. The Government views the four following areas as central when it comes to corporate social responsibility in international operations:
- We expect companies to respect human rights in all their operations.
- We expect companies to respect the rights of employees and create decent working conditions.
- We expect companies to protect the environment and the climate.
- We expect companies to engage in fighting corruption and increasing transparency about a company’s operations and their impact on people and the environment.
Norwegian companies and our Government have a diversity of initiatives concerning all of the four points. I want to refer to an example on how the Government engages in international initiatives fighting corruption and increasing transparency.
Norway is, as you may know, a major producer of both oil and gas, not only from its own continental shelf, but also in countries around the world. The Extractive Industries Transparency Initiative (EITI) is a coalition of governments, companies, civil society groups, investors and international organizations that sets a global standard for transparency in oil, gas and mining. The EITI, in a nutshell, is a globally developed standard that promotes revenue transparency at the local level.
The EITI implementation is the responsibility of individual countries. In 2009, Norway moved from supporting the EITI to also implementing it. In 2010 the government published all payments made by oil companies to the government for 2008. In doing so Norway became the first European and OECD country to publish its payment figures in an EITI Report. We hope other OECD and emerging economies will follow this lead.
This is one example on how our Government supports the first of the three key areas:
Exercising social responsibility in the Government’s own activities is a crucial CSR-action. If we expect companies to act responsibly, state-owned enterprises must lead the way.
Now some words about the Government Pension Fund. The assets in the Government Pension Fund stem from oil and gas revenues. The oil and gas reserves will one day run out – we already see clear signs of that. Since these resources are limited, it would not be fair if this wealth was only to benefit the couple of generations that happen to live when the oil and gas is extracted. Its assets also belong to our future generations. This means that the prosperity enjoyed by the present population entails obligations: The assets must be safeguarded for the future. Ensuring good returns on the fund over time is an important way of securing the future of the welfare state.
The size of the Fund is now almost 400 billion euro, invested in companies all over the world. The Pension Fund owns 1 percent of all global stocks. It also owns considerable amounts of bonds, and has recently started to invest in real estate. At the end of 2010, total investments in Greece was around EUR 1,1 billion.
The size of the Fund should entail a significant and influential voice in the global market. In 2004 The Government took an official stand to what this voice should communicate by issuing the ethical guidelines for the Fund and appointing an Advisory Council on Ethics.
The background for this is our belief that as an investor, the state also shares the responsibility on how the companies, in which the fund invests, conduct, what they produce and their impact on the local community. The Government will seek to actively exercise ownership rights, put companies under observation and exclude companies from the Fund’s portfolio. The Council on Ethics makes recommendations concerning screening and exclusion. The Ministry of Finance decides whether to exclude a company from the fund’s investments.
A year ago a new set of guidelines was implemented. The guidelines are specific on how the fund is to be managed. The Fund shall not invest in companies which
a) produce weapons that violate fundamental humanitarian principles
through their normal use;
b) produce tobacco;
c) sell weapons or military material to certain states
The Ministry of Finance may exclude companies from the Fund’s investment portfolio if there is an unacceptable risk that the company contributes to, or is responsible for:
- serious or systematic human rights violations, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation;
- serious violations of the rights of individuals in situations of war or conflict;
- severe environmental damage;
- gross corruption;
- other particularly serious violations of fundamental ethical norms.
The threshold for applying this exclusion-mechanism is high. According to the criteria grossly unethical activity must be involved. Currently, 51 companies operating on the international market are excluded from the Pension Fund in accordance with the mentioned ethical criteria.
Of the excluded companies 17 are tobacco producers. The decision to exclude all companies that produce tobacco was made due to international and national developments, through the entry into force of the WHO Framework Convention on Tobacco Control and the tightening of the Norwegian Tobacco Act. (Smoking ban, similar, implemented!)
Production of cluster munitions falls within the scope of the Guidelines. Eight of the currently excluded companies are so according to this regulation. Norway has been especially engaged in The Convention on Cluster Munitions (CCM); CCM is an international treaty that prohibits the production and use of cluster bombs in order to eliminate the humanitarian suffering caused by these weapons.
In 2006 The Ministry of Finance decided to exclude Wal-Mart – the largest grocery retailer and largest private employer in the United States – due to serious and systematic violations of human rights and labour rights.
The Council on Ethics concluded that "Wal-Mart consistently and systematically employs minors in contravention of international rules, that working conditions at many of its suppliers are dangerous or health-hazardous, that workers are pressured into working overtime without compensation, that the company systematically discriminates against women in pay, that all attempts to unionize by the company’s employees are stopped, that employees are in a number of cases unreasonably punished and locked in, along with a number of other circumstance. What makes this case special is the sum total of ethical norm violations. Many of the violations are serious, most appear to be systematic, and altogether they form a picture of a company whose overall activity displays a lack of willingness to countervail violations of norms in its business operations.”
Prior to the decision to exclude the company, The Ethical Council wrote to Wal-Mart inviting the company to comment on the allegations. Wal-Mart did not respond to that letter.
The exclusion of Wal-Mart made international headlines, putting Wall-Marts business in the spotlight. The value of its share fell. This is actually part of the Norwegian Government’s plan: the companies will get an incentive to improve when the public are made aware of their violations.
Raising awareness is a first important step towards making investors and companies broadly accountable. There will always be a risk that the fund is invested in companies that may, for various reasons, merit criticism. On that note however, there is a high degree of openness about all aspects of the Fund’s activities, including disclosure of all investments held by the Fund. A desired implication of this is that feedback will be received from the media, voluntary organizations and others concerning potentially blameworthy circumstances on the part of individual companies.
We believe that the Ethical Guidelines for the Norwegian Government Pension Fund and the enforcement of the guidelines set an example for Norwegian companies and is also contributing to developing and influencing the framework for CSR internationally. I should add that already much valuable work is going on in fora like the United Nations and the OECD that will strengthen the role of CSR.
We should acknowledge our differences. Every country must find its own way. But at the same time we should agree on certain key principles regarding corporate social responsibility that should apply in all countries.
To conclude I would like to underscore that Corporate Social Responsibility does not necessarily involve a conflict of interests. On the contrary, efforts in this area can create a community of interest that brings together companies, employees, the authorities and other actors. In other words, exercising corporate social responsibility can provide a win-win situation.
My final words will be that corporate social responsibility in essence is a question of what kind of society we want, for ourselves, for our children and grand-children, and also for our neighbours all over the world.