The Danish Government as a promoter of CSR

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Page 52 of 107 5.1.1.1 A Historical Overview of Danish Sustainability Policies

5.1.1.1 The Fight Against Social Exclusion

In the beginning of the 1990s Jacques Delors, the then president of the European Commission, publicly affirmed that companies should make an effort to fight the problem of unemployment in all European countries (Vallentin S. , 2013). Thereafter, in 1994, Karen Jespersen, the former politician of the party Venstre, launched the campaign Det angår os alle, “It matters to us all”, in order to highlight that it is a responsibility of everyone, including businesses, to actively address social matters in the labor market (Grøndahl, 2000).

Business organizations, on a voluntary basis, were encouraged to work on top of the legislation to include marginalized groups, including immigrants, long-term unemployed citizens, and people with basic language and cultural skillsets. This inclusiveness regime was basically the extension of the already in place labor market policy, of which the scope was to fight social exclusion. Some of the policies comprised partnerships between companies and job centers, senior employee policies, sick leave policies etc. The project was started by the Business Forum for Social Responsibility (VFSA) utilizing the funding from the Ministry of Employment. (Vallentin S. , 2013). The VFSA, which has an advisory function for the Ministry of Employment, is constituted by numerous leaders of Denmark’s largest firms and its aim is to inspire more companies to get involved socially (CSR.DK, 2021). Other bodies that have promoted the inclusiveness regime include: the Ministry of Social Affairs, the Danish Working Environment Authority (Arbejdstilsynet), the Minitry of Employment and the Danish Labour Market Authority (Arbejdsmarkedsstyrelsen) (Vallentin S. , 2013).

It is relevant to note that Karen Jespersen’s campaign was appealing not merely to the businesses’ sense of solidarity, but also to their self-interest. (Vallentin S. , 2013). This is in

Page 53 of 107 line with Chandler and Werther’s argument (2014), that firms need to engage actively in CSR if they wish to survive in the long-term, thus, not least for the sake of their self-interest.

Denmark’s is considered a first mover in the CSR field, albeit for several years the country’s commitment was exclusively linked to fight social exclusion and unemployment. The social issues created the need of identifying a broader classification for the inclusiveness regime, and for this reason the term corporate societal responsibility started to emerge. Despite its message of cohesion and its inclusion of different intermediary organizations, the inclusiveness regime did not create tangible improvements in regards to CSR. Its applicability was rather narrow, as it disregarded matters related to globalization, sustainable supply chains and environmental issues (Vallentin S. , 2013). Representative governments on their own are not capable of addressing the issues that modern society is facing. The reason is that national governments act first and foremost in the interest of the citizens withing their national borders; however, national borders have become irrelevant in a globalized world characterized by challenges, such as international terrorism and climate change. Hart (2012). According to Hart (2012), corporations may represent the “best hope”

for a sustainable future, for the economy, the society and the environment. In fact, corporations are increasingly becoming global, thus, they are appropriate to address trans-border issues.

5.1.1.2 The Danish Government as a Facilitator of Strategic CSR

In 2002 the DCCA, following the will of the Ministry of Economic and Business Affairs, appointed CSR as a policy objective; this started the beginning of the competitiveness regime. The new regime has clearly took distances from the inclusiveness regime: CSR is a tool that needs to be utilized to reach economic growth and competitiveness. Therefore, the DCCA centered the new recipe on to shared value creation concept, CSR as a

Page 54 of 107 competitive advantage, the benefits of promoting CSR and the creation of a business case of CSR. The attention was on the consideration of CSR as a mean to create business opportunities, as opposed to the inclusiveness regime’s focus to fight problems, with the ultimate goal to make sustainability one of the key Danish economy’s competitive advantages. (Vallentin S. , 2013). Thus, it can be observed how the efforts of the Danish companies to add sustainability to their business models is a relevant part of the country’s overall strategy (The Danish Government, 2020).

The new governmental approach attracted a strong support from several industries and associations for trade, such as the Confederation of Danish Industry and the Danish Chamber of Commerce. (Vallentin S. , 2013). As a result of the partnership between the Confederation of Danish Industry and the Ministry of Business and Growth, in 2005 CSR Compass was established. The latter is a free online tool that support companies in implement CSR in their whole business model, providing firms with suggestions on CSR implementation and with the regulations they are subjected to as businesses operating in Denmark and internationally. (CSR Compass, n.d.). According to Vallentin (2013) CSR Compass represent the exemplum of how Denmark was liberal and indirect in governing during the competitiveness regime. Thus, the Danish government’s willingness to be present as a leading force in the CSR development highlights the voluntary nature of businesses of promoting CSR (proactive CSR). (Vallentin S. , 2013).

Another project launched during this regime, from 2004 to 2007, was the People & Profit, which received nearly € 2,5 funds from the Danish National Labour Market Authority and the EU Social fund. The project was carried out in cooperation with leading consultancies and businesses through seminars, trainings, and workshops, and it promoted a strategic approach to CSR as a mean of value creation. People & Profit, apart from training over

Page 55 of 107 12.000 managers of SMEs, it also served to create knowledge around the topic of CSR and thus developed several research reports, such as the one analyzing the CSR’s economic rationale. For the development of this report, DCCA cooperated with Michael Porter and Mark Kramer. The latter helped in creating new knowledge regarding CSR, that is that it creates values for businesses as well as for the society. (Vallentin S. , 2013). In fact, the DCCA’s regime is perfectly in line with the CSV concept; as Porter and Kramer (2011) the recognition of the value of CSR is still in the beginning, and realizing it will necessarily require business leaders to develop knew knowledge and skills, “such as a far deeper appreciation of societal needs, a greater understanding of the true bases of company productivity, and the ability to collaborate across profit/nonprofit boundaries” (Porter & Kramer, 2011). In this process of creating new knowledge, the government has to be the representant in regulating the ways that enable shared value creation, which matches the DCCA’s competitiveness regime.

The second defining event of the DCCA’s regime was, in 2008, the creation of the Action Plan for CSR. Even if the Action plan recognized the relevance of the UN Global Compact and international principles, the scope of the initiative was to promote a “business-driven social responsibility, that is the strategic understanding of CSR suggested by Porter and Kramer. (Vallentin S. , 2013). With the Action Plan, the government wished to “promote social responsibility and help Danish businesses reap more benefit from being at the global vanguard of CSR”, which was part of the country’s goal of becoming internationally renowned for sustainability (The Danish Government, 2008). The country’s overall goal can be observed in the fact that many of the governmental documents regarding CSR have been translated to English, so that Danish policies and achievements could be known on an international level (Vallentin S. , 2013).

Page 56 of 107 5.1.1.3 Firms Held Accountable for their CSR Commitment

Helle Thorning Schmidt became the prime minister of Denmark in October 2011, and he renewed the willingness to promote CSR through the action plan Responsible Growth. On the one hand, his plan marked a continuum of the action plan established in the business-driven CSR of the competitiveness regime; on the other hand, the plan also addressed issues of accountability, climate change and human rights, so that Denmark could ensure economic growth coupled with responsible behavior. The Responsible Growth plan included four focus ares (Vallentin S. , 2013):

1. Increase partnerships to increase responsible growth;

2. Increase transparency;

3. Utilize the public sector to promote initiatives for responsible growth;

4. To increase the ties to the international principles.

In particular, the government mostly committed to point number four: in line with the guidelines of the OECD for Multinational Enterprises, the focus was on the adherence to the international principles, especially concerning human rights in developing countries. The action plan, thus, did not look exclusively at firms’ business interests, instead, the government proposed to use natural and human resources in a manner so that it is competitive and at the same time sustainable. A public institution for solving potential cases between Danish companies and CSR international principles was established, namely the mediation and grievance mechanism for responsible business conduct, or MGI. The latter would ensure that, if a company was involved in, for example, in human rights violation, that company would be held accountable for it. (The Danish Government, 2012). The MGI could not force companies to participate in the mediation if they did not want to, however, the

Page 57 of 107 institution would make the issues of a certain company public unless the company would not take action. (Vallentin S. , 2013).

5.1.1.4 Non-Financial Reporting Made Mandatory

Another important point of the Responsible Growth action plan is that it became mandatory for large companies to publicly disclose their achievements, their policies regarding CSR, and how they planned to put their policies into action. (Vallentin S. , 2013). The mandatory non-financial reporting concerned all firms in class D, that is the firm that have securities traded in the EU and state-owned public limited companies. Firms in class C, that are the medium-sized firms, should report if they either (1) had more than € 19.2 million in total assets divided by total liabilities or (2) had a revenue of over € 38 million. (Knudsen & Moon, 2017). Businesses were certainly free to choose whether or not to engage in CSR, but information had to be transparent. (Vallentin S. , 2013). The government also urged institutional investors to engage in investing in socially responsible businesses, and it would use as a relevant push for investors the significant risk for firms and the wider communities in which they operate.

The mandatory non-financial reporting can be seen as a “soft” manner to enforce public policy. In fact, the government would encourage, but not obligate, firms to actively engage in CSR. (Knudsen & Moon, 2017).

5.1.1.5 The Danish Environmental Commitment and the Danish Climate Law

According to the UN (2021) Denmark is worldwide at the forefront of sustainable development, which has been made possible thanks to the Danish government commitment towards sustainability. Danish environmental policies are driven on one hand by the international climate obligations and on the other hand by the commitment to achieve

Page 58 of 107 national targets in the energy sector (Danish Energy Agency, 2020). According to the minister of climate, energy and utilities, Dan Jørgensen, if Denmark wishes to be a green pioneer, actions must follow words. That is the reason why the country must strengthen and expand worldwide collaborations in regards to energy, so that it will be possible to achieve tangible CO2 reductions. Jørgensen further argues that it is necessary to phase out coal and to redirect funds from black to green investments. (State of Green, 2020).

In 2014 the Danish parliament passed the Danish Climate law. The law had the purpose to provide a framework regarding Danish climate policies in order for the country to be low-emission by 2050, that is energy supplies will solely come from renewables and greenhouses gas emissions of other industries will be greatly lower. The main points of the law are the following (Danish Energy Agency, 2020):

• A council on climate change. The Danish Council on Climate Change was created in 2015; it consists of a chairman and six experts from different industries, such as energy, economics, and transportation. They have to give recommendations to the government and participate in the public discussion regarding the country’s efforts towards climate change.

• A yearly energy policy. The ministry of energy has the mandatory task to submit every year an energy policy report to the parliament, containing information regarding the country’s greenhouse gas emissions and the Danish compliance with its international obligations.

• National climate targets. At least every fifth year, the minister for energy, climate and utilities has to publish national targets in regards to climate. The targets proposed must look at the 2050’s ambitions.

Page 59 of 107 According to Porter and Kramer (2011) solving social and environmental issues has been always ceded to governments and NGOs, but businesses possess instead a much greater potential to reach concrete results, as, for example, they are much more effective at marketing than governmental institutions.

The development of governmental CSR policies in Denmark represents a story of policy succession in which the state has tried to make businesses a key driver in solving social and environmental problems, which were traditionally only to be solved by the state. This approach represents a “systemic institutionalization”, because of an increasing spread of CSR policies pointing towards the greater national objectives of creating competitive advantage through sustainability and advancing CSR in numerous areas (Knudsen & Moon, 2017).