Many people are now familiar with the concept of Corporate Social Responsibility, or CSR, encouraging companies–regardless of their legal status, size, structure or sector of activity–to minimise the negative impacts of their activities, while contributing to the sustainable development of the societies in which they operate. CSR encompasses all practices, either mandatory by law or voluntary, put in place by companies to respect the principles of sustainable development, which integrate three pillars: environmental, social and economic.

For the individual firm, the social responsibility relates to not only the direct employees of the company itself, but also employees of subcontractors. Several legal instruments and international standards are devoted to the implementation of this responsibility, in particular concerning the obligations of multinational enterprises operating in developing countries.

Global targets highlight responsibility of multinationals

The United Nations (UN) have enshrined the principles of CSR in a series of international documents, such as the Guiding Principles on Business and Human Rights, the Sustainable Development Goals and the 2030 Agenda for Sustainable Development. The International Labour Organization (ILO), the UN agency competent to establish international labour standards and to promote fundamental rights, has drawn up a series of social responsibility and labour law principles applicable to companies.

First, the Declaration on Fundamental Principles and Rights at Work, adopted in 1998, outlines the four main principles of freedom of association and the right to collective bargainingelimination of all forms of forced laboureffective abolition of child labour and non-discrimination in respect of employment and occupation.

Second, the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, adopted more than 40 years ago and most recently amended in 2017, is the main instrument providing direct guidance to companies on social policy and inclusive, responsible, and sustainable workplace practices.

Third, the Resolution concerning decent work in global supply chains, adopted by the ILO Governing Body in 2016, states that in line with the UN Guiding Principles, companies must conduct human rights due diligence to identify, prevent, mitigate and report on how they address their negative impacts on human rights. To achieve this goal, companies must be prepared to disclose this information and establish remedial mechanisms at the operational level for workers affected by their operations.

Moreover, Chapter V of the Guidelines for Multinational Enterprises published by the Organisation for Economic Development and Cooperation (OECD) is also devoted to employment and industrial relations.

The most important takeaways from the above have been compiled by ILO in the document Responsible Business: Key Messages from International Instruments.

Europe moves from guiding declarations to binding law

The European Union has gradually taken steps to enforce responsible business practices. In this respect, the first document was the Communication on Corporate Social Responsibility: a new EU strategy for the period 2011-2014, stressing the need for better implementation of the UN guidelines in order to achieve the Union's objectives on human rights and respect for core labour standards, including child labour, forced labour, human trafficking, gender equality, non-discrimination, freedom of association and the right to collective bargaining.

The Directive 2014/95/EU deals with the disclosure of non-financial information by certain large companies and groups. Specifically, this directive requires large public interest companies with more than 500 employees to disclose their business model and policies, including due diligence processes, performance, key risks and risk management, as well as key performance indicators, within four areas: environment, social and employee issues, respect for human rights, and anti-corruption. In addition, some companies are required to publish diversity reports.

At the end of 2020, the European Council approved the Conclusions calling on the Member States and the Commission to promote Human Rights and Decent Work in Global Supply Chains. Acknowledging that the pandemic had worsened the situation of certain segments of the workforce in global supply chains and had led to significant losses in labour income worldwide, the Council asked the Commission to launch an EU action plan on sustainable design of global supply chains, promoting human rights.

Finally, on 10 March 2021, the European Parliament adopted a legislative initiative report, which calls for the urgent adoption of binding EU legislation to ensure that companies are held accountable when they harm human rights, the environment and good governance.

Beyond compliance lies opportunity

While the UN guidelines and EU directives outlined above ensure that companies adapt and act beyond what has previously been expected from them, truly responsible management of employees today requires more than mere compliance. Employers must also take into account societal trends, including the demands and expectations of new generations of consumers and employees.

These tend to cover both traditional operational CSR aspects such as environmental and social footprints, as well as workplace practices such as the usage of digital tools, remote work and hierarchical structures.  

Emerging is a "collaborative" management model, or the elimination of top-down hierarchies in favour of horizontal and cross-functional management, that invites all employees to participate–to a certain extent–in decision-making that underpin the company's strategy.

Digitalisation has already revolutionised ways of operation, communication and administration, but the pandemic is rapidly pushing this development even further. For example, skilled employees have the possibility of flexible home-working arrangements. In parallel, the emerging gig economy, while also offering more flexibility, like the ability to choose projects that best align with the worker’s goals and interests, has its downsides, which include financial uncertainty and poor regulation–another labour law domain on the rise.

For any employer with an ambitious people strategy, continuous dialogue with employees is therefore essential, as is the mutual commitment to the company’s CSR strategy. Without it, the firm risks being unable to keep up with competition, while obtaining it will allow the company to develop and remain competitive in a world that is constantly changing. And while this is exactly what many top-ranked employers excel at, a vast number of companies still struggle to keep up with the latest developments in CSR-driven labour legislation.

This text is a summary of an article recently published by Loyens & Loeff Luxembourg Partner Sabrina Martin and Knowledge Manager Zsófia Varga in Revue Pratique de Droit Social.