Embedded Neoliberal Corporate Social Responsibility

Embedded Neoliberal Corporate Social Responsibility. Institutionalist and critical Political Economy perspectives on CSR governance A dissertation submitted to the University of Manchester for the degree of Master of Arts in the Faculty of Humanities 2014

Rasmus Hansen

School of Social Sciences

Contents Introduction .................................................................................................................................................. 5 Taming corporations, correcting markets, or enabling marketization? ............................ 7 Structure of the paper ........................................................................................................................... 8 1. What is political about Corporate Social Responsibility? ................................................... 10 From business case to political engagement ............................................................................. 10 The globalisation debate in CSR: why has CSR risen to prominence? ............................. 13 CSR as response to global transformations ............................................................................... 14 National institutions as drivers of CSR ........................................................................................ 16 Bringing state and discourse into institutionalism – and into CSR .................................. 19 Social forces, contested hegemony and rescaling.................................................................... 20 2. CSR governance and embedded neoliberalism ....................................................................... 22 Embeddedness in global transformationalism and institutionalism ............................... 24 Towards a social conception of state, market, and institutions ......................................... 25 The political terrain for market-correcting policies ............................................................... 27 Towards a concept of CSR governance as market-making .................................................. 28 Market liberalisation and crisis management as driver of CSR ......................................... 28 Regulated CSR and social market constructions ...................................................................... 31 Contestations over CSR in embedded neoliberalism ............................................................. 33 3. Competitiveness, social cohesion and CSR in the EU ............................................................ 35 EU CSR governance and the terrain for political contestation ........................................... 36 The neoliberalisation of EU CSR governance ............................................................................ 37 Embedding neoliberal CSR through complementary regulation....................................... 39 From terrain to regime: the double purpose of EU CSR governance ............................... 41 Non-financial reporting as regulated marketization .............................................................. 42 CSR governance, economic efficiency, and structural stability .......................................... 44 Conclusion .................................................................................................................................................. 47 Bibliography .............................................................................................................................................. 50 Word count: 15.381

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Abstract This paper discusses whether corporate social responsibility (CSR) measures intended to correct and guide market behaviour actually correct markets, or whether they instead deepen the marketization of social progress. It argues that while CSR policies may change market incentives, the discursive framing of the benefits of market-led development supports the neoliberal construction of capitalist markets. The rise of CSR as a practice and strategy of corporations, states, and international organisations have led scholars in International Political Economy to increasingly scrutinise the mechanisms by which market and non-market actors utilise CSR to mobilise resources, raise legitimacy, and fulfil on declared targets of social progress and environmental sustainability. The paper analyses two major contributions to the CSR debate in Comparative and International Political Economy, namely global governance and comparative institutionalism, and argues that none of these otherwise contrasting perspectives deliver to provide a fully social and political approach to the emergence of CSR in the political economy. As case, it uses the contested, but ambitious character of EU CSR governance in order to contend that CSR policies have a double purpose: it offers a (new) terrain for social struggle over which kinds of markets political and social institutions should produce, but this terrain remains fully conditioned by the imperatives of embedded neoliberalism. In turn, even state-regulated CSR can strengthen the relative power of capital vis-à-vis labour as the terrain for contestation is strategically uneven and privileges the interests of capital. Keywords: Corporate Social Responsibility, global governance, institutions, discourse, critical International Political Economy, EU governance, labour, capitalism.

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Declaration No portion of the work referred to in the dissertation has been submitted in support of an application for another degree or qualification of this or any other university or other institute of learning.

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Introduction When the European Parliament passed the directive on disclosure of non-financial and diversity information in April 2014, the European Commission's plan to implement 'the most significant corporate social responsibility measure, anywhere, to date' took a step closer to realisation (Kourabas 2014, web). The directive, requiring companies with more than 500 employees to disclose information on their impact on social, environmental and employee-related matters, signalled the culmination of a decisive U-turn away from the hostile attitude the European Commission showed towards any regulation on corporate social responsibility (CSR) as late as 2006 (Commission 2006).1 The directive is supposed to change the incentive structures for financial market actors, reduce the amount of risk-excessive investments, and channel more investments towards sustainable and socially progressive corporations, thereby also correcting markets of goods and services in the direction of social and environmental sustainability. The research question of this paper is whether the governance of CSR actually corrects markets or whether it constructs markets, thereby creating a marketization of social progress. A tentative answer suggests it does both, but that the correction is contingent upon neoliberal marketization. CSR governance can enable a correction of market structures and incentives: for instance, the new EU directive may prove pivotal for changing a risk-excessive investment culture. Based on the proposition that markets are socially and thus political produced, political market-correction is however part of the material and discursive construction of markets. Political and discursive contestations determine the means by which markets are corrected, but are conditioned by the strategic selectivity of capitalist institutions that privileges certain interests over others (Jessop 1990). In this light, complementary regulation on CSR plays part in the ongoing negotiations to renew embedded neoliberalism by emphasising market-based solutions to social problems. In the EU, a regulatory approach to CSR is now seen as pivotal to provide the kind of social cohesion

1

The Directive is based on the same comply-or-explain standard as most European codes of good governance (cf. Aguilera and Cuervo-Cazurra 2009).

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envisioned in the Lisbon Strategy and the Europe 2020 (Council 2000, Commission 2010). Scholars in academic fields such as International Political Economy, global governance, and comparative public policy, are increasingly engaging in discussions on how governments, non-market institutions and the wider civil society govern and influence the social responsibility of increasingly powerful corporations. Similar, discussions on the merits and limitations of CSR have flourished. Among scholars critical to the apparent rise of corporate power, and the accompanying neoliberal ‘straitjacket’ on public policies, diverging expectations to CSR exist. For Colin Crouch (2011), CSR has the capacity to increase public accountability with corporate power in an era of resilient neoliberalism. He suggests that the public must increasingly target corporations directly to tame the social deficits of business-friendly policies as states remain unwilling of or incapable to legislate in the interests of their populations. The decision in the EU to require information on the social costs of corporate activities to be disclosed can thus be seen as a feature that enables the public to critically scrutinise social (ir)responsibility. The European Commission's (2011) renewed definition of CSR as the responsibility for corporations' social and environmental impact resembles Crouch's statement that CSR 'essentially’ should be treated as ‘corporate externality recognition’ (Crouch 2011: 138). Other voices have raised concerns over the link between CSR and the ‘ability of corporations to mobilize significant resources to compromise political control’ (May 2006: 276) and view CSR as an instrument for the corporate desire to operate autonomously and neutralize anti-corporate struggles (Soederberg 2007). These two contrasting arguments on the promises of CSR exemplify the respective approaches to the relationship between corporate power, the apparent liberalisation of market-economies across the world, and the introduction of market rationalities to political governance. If corporations are now powerful enough to determine neoliberal public policies of deregulation, the prospect for a renewal of nation-state regulation does appear small (cf. Crouch 2011). Perhaps, then it is more realistic for consumers and employees to directly demand corporate code of conducts in order to 6

correct undesired market outcomes, such as inequality or environmental damage. However, if the increased focus on good behaviour among global corporations plays an important role for legitimising corporate power and neoliberalism, Crouch's modest optimism regarding CSR is untenable. For Soederberg (2007), the institutionalization of CSR in political governance is not about taming corporations, but a question of embedding the neoliberal market-approach to social development deeper in political decisions and making the formulation of alternative visions for development more difficult.

Taming corporations, correcting markets, or enabling marketization? CSR policies are traditionally seen as a type of governance that works to promote corporate accountability to a broader set of stakeholders than owners and shareholders (Kinderman 2011). CSR governance has consequently been interrogated as a way to tame corporate power (see Soederberg 2007 for a critical review). CSR governance has also been associated with the embedment of markets in an era of global neoliberalism that may help to re-constitute the ‘global public domain’ (Ruggie 2004). Sometimes framed as a response to ‘the view that CSR emerges as a functional response’ to challenges of globalisation (Gjølberg 2009), ‘comparative capitalism’ and institutionalist literature have directed focus to the relationship between national institutions (such as those of welfare states and corporate governance) and CSR strategies (e.g. Jackson and Apostolakou 2010). Whether CSR governance is motivated by competitive pressures or stakeholder relations, CSR policies are supposed to alter the functioning and incentive structures of markets. This paper discusses the potential for CSR (governance) to correct and construct markets. As capital continues to renounce the class compromise of post-war embedded liberalism, the governance of CSR can serve as an alternative political facilitation of desired market-corrections. However, CSR is also part of the current process of state reconfigurations in which governments actively promote a deepened commodification of social life. In regard to the latter, I follow critical engagements focusing on CSR as part of the economisation of state governance that buttresses market-led development by de-politicising the implementation of business-friendly environments (Shamir 2008, Soederberg 2007). 7

Thus, I argue, the interaction between CSR governance and capital should be approached in the nexus of market-correction and market-construction. This paper focuses on the political governance of CSR and critically engages with two strands in the CSR literature: global governance and transformationalism (Ruggie 2004, Bernstein 2011) and institutionalist approaches to comparative political economy (Campbell 2007, Matten and Moon 2008). This paper offers a way out of the impasse in the current literature, in which CSR governance is either seen as way of embedding markets at a global level (global governance), an institutionally contingent response to liberalisation (comparative institutionalism) or merely an instrument in the hands of capital to further their interests (Ireland and Pillay 2010). It utilises discursive institutionalism to understand the contestations taking place over the kind and means of market-correction, and a neo-Gramscian approach (Jessop 2002, van Apeldoorn and Horn 2007a) to investigate the processes by which these contestations are contingent upon a hegemonic regime of entrenched marketization of social progress.

Structure of the paper This paper is structured into three main chapters followed by a conclusion. The first chapter discusses selected contributions to literature on CSR. After an analysis of the untenable assumptions inherent to management studies of CSR, I narrow my focus to the political governance of CSR. The main purpose of the first chapter is to establish the ground for a political perspective on CSR that can assess the factors driving CSR governance in public policy. Further, it argues for the utility of discursive institutionalism as well as critical Political Economy for studying the contested nature of CSR governance while remaining aware of the hegemonic project of embedded neoliberalism. First, I discuss whether exogenous pressures coming from globalisation demand cooperation between public and private actors to ensure that the market economy is re-embedded in society (Mayer and Gereffi 2010, Ruggie 2004). Second, I focus on national institutional legacies as drivers of CSR (e.g. Gjølberg 2009). Last, I argue why discursive institutionalism and neo-Gramscian analyses both offer better approaches to CSR by focusing on the relationship between historically grounded

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ideational formations and the structural changes in the international political economy (particularly those of rescaling).

In the second chapter, I discuss how different perceptions of the institutionally embedded nature of markets influence the interpretation of how CSR governance influences the political economy. Embeddedness is central to both global transformationalists and institutionalists, but they differ on how to conceptualise it. For comparative institutionalists the embedded nature of the firm can have different faces such as ‘explicit’ and implicit CSR and the motivations may change over time towards competition, but firms are never free from being embedded in society. For Ruggie, there is a real risk that the globalisation of markets and the rise of transnational corporations dis-embed corporations and markets from the public domain. They do however share the problematic assumption that a hard core of market behaviour exists beyond social life. Discursive institutionalism and neoGramscian Political Economy can correct these flaws, but are not two easily reconcilable approaches. Chapter 3 provides a case study of EU CSR governance to illustrate how CSR functions both as a terrain for contestation and a hegemonic regime. I look specifically on the role of the emerging state project in deconstructingreconstructing the capital-labour relations through the soft-policy tool of requiring CSR reporting. The directive on non-financial reporting shows a remarkable change in attitude to regulation on CSR, but not in a way that challenges the neoliberal approach to European crisis governance. Rather, it functions to extent and refine the project of embedded neoliberalism in Europe by silencing critique of lacking corporate governance and company law reforms, while reiterating the vision that competitiveness and structural stability are prerequisites for social cohesion. That being said, it may provide some temporal stabilisation of a project that remains crisisridden. I end with a conclusion that also discusses the perspectives for future critical CSR research.

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1. What is political about Corporate Social Responsibility? Before engaging with the political governance of CSR, I will give a brief review of the discussion of CSR in business literature. I illuminate a number of problematic theoretical assumptions across different approaches to the business case of CSR, which global transformationalist, institutionalist, and neo-Gramscian perspectives all seek to address. Reviewing the business literature, I deliberately make a joint analysis of how CSR has been conceptualised historically and how it has been utilised in business. I assess the emergence of CSR as a co-evolution of theories and practices, both of which forms an integral part of the other.

From business case to political engagement Carroll (2008) dates the first emergence of expressed CSR to the late 19th Century. In the UK factory system, it primarily came from a public and political concern over the employment and conditions of women and children. Simultaneously, philanthropy became an increasingly popular way to show moral leadership, with American businessmen like Vanderbilt and Rockefeller donating part of their revenues for social purposes. As the legal obstacles against contributing to causes aside from what benefited the company eroded, a general shift from 'profit maximizing' to ‘trusteeship’ management occurred in the 1920s and 1930s. In the trusteeship era, corporate managers claimed increased power, and took on responsibility for both maximizing shareholder value and responding to competing claims on the corporation, such as those coming from customers, employees and the community (ibid: 23; Hay and Gray 1974). In the 1950s and 1960s, formal CSR policies began to emerge, as responsiveness to social demands increasingly became part of the management of corporations (Carroll 2008: 26-7). A decade later, the ethical dimension of CSR was increasingly supplemented by managerial and strategic approaches to and rationales for CSR; a process witnessed by Carroll’s highly influential 1979 article on corporate social

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performance (Carroll 1979, Carroll 2008: 33). 2 In the 1980s, a number of complementary themes to CSR ascended, including stakeholder theory, but CSR has remained the base point for all competing concepts, including the more recent focus on corporate citizenship (Carroll 2008: 34-9; for a critical review of corporate citizenship, see Matten and Crane 2005). In sum, CSR has increasingly come to fore as a strategic decision that combines the management of the business case and public expectations (Carroll and Shabana 2010). The former concerns sustaining a long-term viable business climate, while the latter implies meeting the public demand for business responsibility towards ‘their workers, communities and other stakeholders’ (ibid: 89). Analysing the state of the art on contemporary CSR literature, Garriga and Melé (2004) summarizes four firm-level theories of motivation for social responsibility. The instrumental theories encompass both the profit-maximising (‘the social responsibility of businesses is to increase its profits’, Friedman 1970) and strategic responsible theory of the firm, the latter promoting CSR as a vehicle to increase competitive advantage or increase customer potential (Porter and Kramer 2006, Prahalad 2006). Political, integrative and ethical theories all seek to challenge these narrow, instrumental conceptions of the business case for CSR. These theories draw respectively on the ability of businesses to conduct as a responsible, political citizen; the potential of engaging in public policy formation and stakeholder management, thereby integrating in society; and the ethical imperative of giving back to stakeholders and ensuring the universal right to sustainable development (Garriga and Melé 2004). Carroll’s approach is first of all concerned with the relationship between strategic profit-seeking activities and ethical and social concerns. The challenge for the corporation is to develop an ethical responsibility that does not compromise its fundamental purpose of profit. As such, it rests on agency theory as its central 2

In his 1979 article, Carroll conceptualises CSR as layered social responsibility categories, discretionary (philanthropic) and ethical responsibilities added on top of the basic legal and economic responsibilities. This conceptualisation still frames managerial and political discussions. E.g. Porter and Kramer (2002, 2006) argue for the potential of integrating philanthropy and ethical considerations into core corporate strategies. The idea that CSR must go beyond legal requirements also constitutes basic definitions in most public policies, e.g. in the European Union (see case study in this paper).

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analytical concern. In this framework, the corporation is composed of principals (shareholders) and agents (managers) whose rational interests might diverge but remain resolvable through appropriate firm-level decisions. While the solution to the problem does not necessarily rely on profit maximisation, any deviations from that must rest on the moral agency of shareholders (Jensen 2001, Crouch 2011). Multistakeholder forums can this way be seen as a solution to the principal-agency problem as the inclusion of negatively affected social groups may ‘educate shareholders into accepting a moral approach to business’ (cf. Crouch 2011: 105). Neglected in this theory are the national institutional systems on which corporate strategies are dependent (Aguilera et.al. 2007) as well as the struggles between social forces inherent to the distinctively capitalist mode of production (van Apeldoorn et.al 2007). A response to this firm-centric perception of CSR based on the agency problem, proclaimed critical scholars has focused on the social power of corporations and the inevitably political character of CSR. In these responses, the social and ideational struggles over the power and purpose of corporations are the central tenet for the development of CSR, which in turn must be understood in tandem with the systemic features of capitalist development. The capitalist class use business strategies to improve market positions by disciplining labour and influencing governments (Levy and Newell 2002, Levy 2008). Emphasizing historical developments in capitalism and the social forces driving these developments, this perspective addresses the strategies by which capital enforces its interests throughout increasingly global production networks. A strategy to shape and contest state regulation on climate change (Levy and Egan 2003), civic activism on labour standards (Sum and Ngai 2005), or communal property rights (Banerjee 2008), CSR enhances marketization of social progress and environmental protection. These perspectives, contextualised in a critical engagement with corporate power and neoliberalism, have been met with criticism for treating CSR as nothing more than ‘a smokescreen for deregulation’ and ‘window-dressing for irresponsible behaviour’ (Gond et.al. 2011: 641). Consequently, it is claimed, the institutional and ideological characteristics of different CSR regimes are not thoroughly interrogated (Vallentin and Murillo 2012). Allegedly, the “critical” approach has struggled to distinguish between different ideologies within CSR 12

governance, for instance when CSR governance actually promotes regulation, as it perceives CSR as fully embedded in neoliberal hegemony (e.g. Shamir 2008). A number of self-declared critical engagement does however address CSR as empirical, institutionalised phenomena of political decisions (e.g. May 2006, Soederberg 2007). Both of these addresses the UN Global Compact whereas critical engagements with regional actors such as the EU are rare (see Horn (2011) for an exception - in German). As CSR has become a central tenet for the public articulation of expectations on social justice, discursive institutionalism and a neo-Gramscian Political Economy approaches are well suited to critically engage with CSR governance. In this paper, it is suggested that the ideational struggles over the expectations and requirements to increasingly transnational corporations take form on the terrain of CSR, which may allow for some supplementary regulation (e.g. in wake of manifested crises of capitalism) but are always conditioned by the (neoliberal) preference across governmental scales for governance-at-a-distance (cf. Swyngedouw 2004).

The globalisation debate in CSR: why has CSR risen to prominence? Mediating between agency theories of CSR in the business literature on the one hand and the critical engagements with the neoliberal character of CSR on the other, political scientists have increasingly scrutinized the political authority, responsibility, and legitimacy of corporations (Matten and Crane 2005, Scherer and Palazzo 2011, Bernstein 2011). Drawing on the so-called transformational approach to globalisation (Held et.al. 1999), Scherer and Palazzo (2011: 20) discuss the importance of CSR in wake of the 'decline in governance capability of nation states'. While the competitive pressure on corporations has increased as markets become increasingly global, the political pressure to engage in global governance is also increasing. Thus, as investors seize the economic opportunities coming from globalisation to demand higher returns, communities affected by economic globalization increasingly demand market actors to act responsibly (Bernstein 2011). In order to accommodate the needs of the most vulnerable social groups, corporations have increasingly taken over responsibility for 'administering citizenship rights for individuals' (Matten and Crane 2005: 173). Lacking jurisdictional and political authority to directly legislate market behaviour, 13

intergovernmental organisations should cooperate with corporations to ensure 'a smart mix' of regulatory and voluntary measures (Ruggie 2011).

CSR as response to global transformations The work of Scherer and Palazzo, Bernstein, and Ruggie all exhibit a global transformationalist approach (Held et.al. 1999) to CSR in their attribution of the rise of CSR to changes associated with globalisation. For Held et.al. (1999: 9), globalisation has qualitatively changed the world order, and global politics can no longer be conceived as ‘primarily state governed, as authority has become increasingly diffused among private and public agencies’. In this approach, globalisation is conceptualised as external to the strategies and actions of corporate, institutional and state actors. For instance, when Ruggie (2003) argues in favour of a re-embedment of liberalism at a global scale through CSR, the processes by which this should be done are not seen as a constituent part of neoliberal globalisation, but merely as a response to an already occurring transformation of the world economy. As networks of finance and production have increasingly gained the upper hand vis-á-vis nation-states, their bargaining power threatens the post-war settlement consensus of 'embedded liberalism' (Kell and Ruggie 1999; on 'embedded liberalism' see Ruggie 1982). Consequently, intergovernmental organisations need to establish ‘learning networks’ like the UN Global Compact in order to guide, inspire, and regulate the social responsibility of global market actors (Ruggie 2002). For Bernstein (2011), CSR and similar ‘non-state market-driven governance systems’ are part of an ongoing negotiation between states, corporations, and communities affected by globalisation. States and non-state actors are forced to work closer together to govern the ‘increasingly fuzzy boundaries between formerly distinct policy domains’, (Bernstein 2007: 7). According to Bernstein (2007), popular support for said cooperation between states and non-state actors exists, but populations across the globe also articulate a deep scepticism towards the structural changes associated with globalisation. This constitutes the core conundrum for states and nonstates actors alike, as communities affected by economic globalisation increasingly 14

demand market actors to act responsibly, while also requiring ‘far more stringent democratic and deliberative’ governance from market actors than from state-led forms of governance (Bernstein 2011: 18) Closer cooperation between state-led and market-driven governance systems are thus needed to restore trust in the political economy, as ‘efforts to reconstitute the embedded liberalism compromise in the global context would not be lacking in popular legitimacy’ (Ruggie, quoted in Bernstein 2007: 8). The global transformationalist approach to CSR has been contested for the way it externalises the effort to raise legitimacy from the factors causing the need for legitimacy (Kinderman 2011). It separates the transnationalisation of capital (i.e. the rise of power of transnational corporations) that has caused anti-globalisation and other expressions of anti-corporate resistance from the strategies used to create legitimacy at a global scale (i.e. the rise of CSR). This assumption can be contested by the argument that any reconfiguration of the political economy must have an inherently political character: thus the internationalisation of the economy is ultimately a social, and thus political, construction. To the extent the power relationship between states and corporations has changed it has been caused by institutional changes and through the contestations between state, capital, and labour. While global transformationalism illuminates the importance of CSR for shaping those contestations, it should be contested whether CSR is constituent the changing balance of forces, or only a response to the problems arising from the possible subordination of states. From a neo-Gramscian perspective, institutionalising CSR in initiatives like the Global Compact represents an incremental marketization of global governance that 'absorbs counter-hegemonic ideas', portrays global corporate power as 'a natural occurrence driven by the unstoppable forces of globalization' and free 'states of any responsibility for their decisions to implement business-friendly environments' (Soederberg 2007: 503, 509-10). While CSR governance such as Global Compact does not necessarily push out state regulation, it align state and market actors more tightly on promoting a level playing field for market actors who posit ‘the capacity to produce the desired changes’ (Ruggie 2002: 33).

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National institutions as drivers of CSR Whereas the global transformationalist approach to CSR focuses on the global pressures that forces corporations to adopt socially responsible practices, another influential approach to CSR has focused on national institutions and legacies as the determining variable for socially responsible corporations (Gjølberg 2009, Campbell 2007, Matten and Moon 2008). A sociological and political counterpoint to the stakeholder theory within business ethics, stakeholder-relation studies gained significance in institutionalism and comparative political economy throughout the 1990s. While individual corporations struggled to contribute to social welfare and the public good beyond their legal requirements, some institutionalists contested that the pursuit of short term profit and share prices could be balanced with a broader set of corporate strategies if the right institutions were in place (Albert 1993, Crouch and Streeck 1997). Drawing on this literature, Campbell (2007) analyses the institutional conditions under which corporations are most likely to behave socially responsible, and argues that state regulation, NGO activism and collective industrial self-regulation all contribute positively to the formation of socially responsible corporations. As such, traditionally liberal market economies, such as the US and the UK, may produce socially responsible corporations to the extent that civil society activism and selfregulation provide the necessary impetus for responsible behaviour in the absence of strong state regulation. The study does however conclude that strong state regulation is an important driver of CSR. According to Campbell (2007: 963), a general negative relationship between neoliberal policies and socially responsible behaviour exists. With this study, Campbell illuminated the tendency in predominantly American business literature to disregard institutional agreements in e.g. the labour market as socially responsible. From an institutionalist perspective, CSR studies should be approached via the informal institutions in which expectations to CSR take form and the formal institutions that govern market actors. Institutions, in this regard, can be concrete organisations and governments, formal rules and procedures or informal patterns and 16

interactions that shape and constrain individual behaviour (Matten and Moon 2008: 406). Most institutionalist CSR research presumes that corporations may engage in a number of practices that qualifies as social responsibility, and not just formal CSR. In 2008, Matten and Moon established a (purposefully) simplistic and widely influential dichotomy of 'implicit and explicit CSR'. The political, financial, labour and educational, and cultural systems in continental Europe have ensured a tradition of 'implicit CSR': in order to contribute to the society, corporations play a ‘role within the wider formal and informal institutions’ that helps coordinate the continental-European market economies (Matten and Moon 2008: 409, emphasis in original). Even informal institutions develop norms and values that subsequently translate into mandatory or codified requirements for the corporate responsibility. The visibility of CSR in the US is the result of corporations explicitly and often unilaterally developing voluntary policies and programmes for social responsibility. In this dichotomy, different motivations for CSR can be detected. Corporations in liberal market economies (LMEs) such as the US and the UK are generally motivated to develop CSR strategies and practices for instrumental or competitive reasons (Aguilera et.al. 2007, Kang and Moon 2012).3 This type of CSR is thus embedded in the market-place, driven by the desire to enhance (international) competitiveness and short-term profit through enhanced reputation (Aguilera et.al. 2007). What drives CSR in coordinated market economies (CMEs) are conversely relational motivations, which concerns the wellbeing of stakeholders. The relationship with stakeholders is valued in Continental CMEs not only because it ensures long-term growth, but also due to ‘the need for social legitimation’ (ibid: 845). As the study by Matten and Moon (2008) show, a changing pattern in European Continental CSR has emerged. European CSR institutions have layered competitive CSR motivations onto relational, which in turn makes the European CSR typology increasingly explicit. Kang and Moon (2012) argue that CSR actors (i.e. “external' stakeholders like consumers and environment) mirror the demands and motivations of corporate governance

3

For the distinction between liberal and coordinated market economies, see the Introduction in Hall and Soskice (2001).

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actors (managers, investors and workers).4 For instance, if the national system of corporate governance practices is configured on the basis of shareholder primacy, the principle of so-called institutional complementarity expects CSR actors to demand a more competitive CSR strategy (Kang and Moon 2012, Crouch 2005). Over time, CSR has become increasingly neoliberal or market-led, which means it is more visible, directly driven by managers, and involves little or no labour participation, even in economies characterised by corporatism. In CMEs, hybrid forms of corporate governance institutions have emerged, as ‘shareholder value practices’ have ‘layered onto the existing stakeholder value system through incremental amendments' (Kang and Moon 2012: 97, for incremental and gradual change, see also Streeck and Thelen 2005). As a result of this process of conversion, but not convergence upon explicit CSR models, competitive forms of CSR in CMEs 'have not displaced the more formal institutions of stakeholder representations’ (Kang and Moon 2012: 98.) Jackson and Apostolakou (2010) have a slightly different approach to (European) CSR, suggesting that CSR practices substitute welfare states and stakeholder institutions. In turn, neoliberal conversion, e.g. the changes under Thatcher in the UK in the 1980s, fosters CSR as a trade-off for deregulation (see also Kinderman 2012). The different findings come from diverging opinions on how to define CSR. Whereas Jackson and Apostolakou (2010) focus primarily on what Matten and Moon call ‘explicit CSR', Kang and Moon (2012) and Campbell (2007) choose a broader definition, which includes institutionalised

stakeholder

involvement.

From

a

discursive

viewpoint,

independently of which definition is most “correct”, we are faced with the question as to whether there exist a link between neoliberal transformations of the political economy and the general emphasis on explicit CSR, which seems to occupy the perception of social responsibility in public policy. From the perspective of discursive institutionalism, this would suggest that the competitive form of CSR is actively contesting the relational form in and through the state, and not only ‘layered onto' in different non-state institutions (Schmidt 2009: 520).

4

While Kang and Moon (2012) and Aguilera et.al. (2007) utilise the most common framework for new institutional theory in comparative political, Varieties of Capitalism, Matten and Moon (2008) engage with the national business systems research (Whitley 1999).

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Bringing state and discourse into institutionalism – and into CSR What is informative about discursive institutionalism is its ability to clearly detect the role and power of social forces and the state as a political actor. In the comparative institutionalist approaches discussed above, the decisive role of state actors and dominant social forces in providing the political consent for major corporate governance reforms are at best understated (cf. van Apeldoorn et.al. 2007, Schmidt 2009). Further, it rest on a more or less explicit assumption of continuous accumulation stabilised by national institutions (Jessop 2012). Kang and Moon (2012: 97) assign the German corporate governance reforms as incremental layering of market-based arrangements onto the coordinating institutions. The decisive changes occurring in corporate governance and labour market regulation thus appear inferior to the “spontaneous” change in corporate governance and CSR actor preferences. For instance, the three key market-liberal corporate governance reform complexes, passed in the German parliament from late 1990 onwards (the KontraG and related transparency reforms, corporate tax reforms, and takeover regulation reforms; Höpner 2006) are not mentioned. In the case of the USA and the UK, the historical and political struggles leading to a high degree of managerial autonomy are not addressed (Marens 2012, Kinderman 2012). When Matten and Moon (2008: 415-6) discuss the shift toward more explicit CSR in Europe they assign it to the financialisation of capital markets and the weakened position of trade unions. These institutional changes function as an exogenous pressure on corporations to develop explicit CSR strategies, but it remains unclear to what extent explicit CSR may accelerate or impede such processes. In order to retain attention to political struggles in CSR governance, and to address the ways CSR, financialisation and trade union marginalisation interact, I suggest that we address the political discourse of CSR. Thus, the relationship between articulated or explicit CSR and neoliberal reforms should be studied in more detail. Vivien Schmidt’s (2006) discursive institutionalism emphasises discursive factors to institutional change by focusing on the interactive process by which ideas of actors are fought over to produce desired change. It creates a more open-ended process than the economic or historical determinism characterising the comparative institutionalist 19

approach outlined above. CSR can thus be comprehended as conditioned by political struggles rather than the functional outcome of exogenous changes (whether abrupt or incremental). This does not mean that CSR is no longer related to corporate governance or welfare state reforms, but that the state institutions through which ideas on these policy issues provide pivotal terrain for ideational and social struggle. For instance, while the EU state project has worked closely along an increasingly transnationalised fraction of capital to facilitate the marketization of social policy and corporate governance regulation, such policies were in turn consolidating the power of this class (e.g. Carroll et.al. 2010, van der Pijl et.al. 2011). As case studies of EU CSR governance illustrate, the social forces of capital have enjoyed a privileged access to formation of ideas, knowledge and inspiration in the development of CSR policies (Fairbrass 2011, Kinderman 2013).

Social forces, contested hegemony and rescaling Discursive institutionalism has been contested on the ground that it lacks an understanding of the material factors that re-contextualise ideas in ‘specific conjunctures’ (Jessop 2014: 48, Bieler and Morton 2008). Further, an assessment of how the ideational battles on CSR governance works at multiple scales of state governance that seemingly alter or undermine popular conceptions of legitimate rulemaking is needed to achieve a more holistic understanding of discourse. What is often considered the natural sphere of regulation (the relationship between state, market and society in nationally confined systems) should thus be understood as a unique phase in the history of capitalism.5 Often coined the Fordist-Keynesian mode of production, post-war capitalism was characterised by the accommodation of labour struggles at the national scale, with capital simultaneously tightening its bond with the nation-state. The nation-state became the primary scale for the governance of labour rights, while the capital interests were secured through an extensive

5

When I engage with this particular change in the organization of production and governance, I acknowledge that it only provides a cross-sectional analysis of capitalist evolution. For instance, while recent European processes of rescaling may facilitate financialisation, the latter should also be contextualized in the hegemonic transition occurring in the autumn of systemic cycles of accumulation (Arrighi 1994, Krippner 2005).

20

regulatory framework of property rights and other legal and normative institutional arrangements (Swyngedouw 2004). The nation-state is a historically contingent institutional condensation of social forces that has provided at critical terrain for the regulations of capital-labour relations. Through the process of 'glocalisation' (ibid.), the capital/labour nexus is rescaled upwards and downwards to international and local scales of governance, which alters power relations among social forces and re-contextualises what is conceived as legitimate political processes. For instance, wages are increasingly being negotiated at local levels or individually, with governments actively undermining the power of organised labour and instead preferring labour rights being negotiated at the firmrather than national level. CSR is thus an enabler of neoliberalism in the sense that it gives a consensual foundation for 'the selective transfer of state capacities upwards, downwards, and sideways' (Jessop 2002: 454, also see Horn 2011). Under pressure to displace the crises and contradictions inherent to capitalist organisation of production, state 'intervention is rescaled in the hope of securing conditions for a smoothly operating world market and to promote supply-side competitiveness on various scales above and below the national level' (Jessop 2002: 454.). Political strategies determined on supply-side economics continuously alter regulation at local, national and trans-national scales in accordance with the interest of capital and with severe consequenses for labour: for instance, while financial mobility across national borders are encouraged by the supra-national scales of government, the migration of labour is at once encouraged and frowned upon by hegemonic forces, which translates into extreme hostility at local scales, such as nationalist movements and urban ghettos in otherwise advanced capitalist countries (Swyngedouw 2011). The role of CSR governance is consequently not as much about lending legitimacy to markets, but rather the facilitation of networks or scales of governance on which capital can extent its regulation of labour and nature. Thus, the processes of rescaling or scale-jumping (Jessop 2004) are intrinsically linked to the constructions of markets and market-led social progress. The marketization of social progress has very real influence on labour, society and the environment. For instance, the relationship 21

between trade union membership and economic equality is unequivocally proportional. In the last 30 years, while trade union membership in the US has fallen by more than 40%, the share of the income going to the top 10% has also increased with 40% (Eisenbrey and Gordon 2012). Across countries, the relationship between union membership and inequality has been measured to be inversely proportional (Gustafsson and Johansson 1999). To be clear, CSR does not necessarily erode the foundation for trade unions. However, I will argue, capital strategically seeks CSR as a specific mode of regulation that rescales the terrain for capital-labour negotiations. In this sense, CSR facilitates a promotion of the market-based approach to the regulation of labour rights and social development that has characterised the governance of capitalism since the fall of the Bretton Woods. The existence, expansion and 'glocalisation' of markets rests on social and thus political constructions (cf. Soederberg 2007). These constructions are not fully open-ended, but depend on strategically selective regulatory institutions that privileges certain discourses and interests (Jessop 2000: 330). Unlike comparative institutionalism such as the VoC framework, and to a lesser degree discursive institutionalism, neo-Gramscian scale analyses

consider

institutions

unstable

condensations

of

the

underlying

contradictions of capital accumulation. In sum, this chapter has established the ground for a political analysis of CSR. After showing how CSR has been framed in light of ‘global transformationalism‘ and comparative institutionalism, I argued that discursive institutionalism and neoGramscian analyses are particularly informative to illuminate how CSR at once has become a central terrain for political contestation over market regulation and part of a hegemonic project of rescaled neoliberal governance.

2. CSR governance and embedded neoliberalism In the following chapter, I will elaborate on my critique of the global transformationalist and comparative institutionalist approaches to CSR. I will do so by pointing at a common feature of these two approaches: their tendency to assess CSR governance as processes of embedding markets in society. Building on a critical 22

assessment of the term 'embeddedness', and utilising van Apeldoorn and Hager’s (2010) distinction between market-correcting and market-making policies, I will argue that more regulated forms of CSR governance is part of the social and political struggle to legitimise the constant and expanding construction of markets. In other words, CSR cannot be fully understood in terms of the correction it imposes on already existing markets; capitalist markets are in constant need of political regulation in order to displace problems, manage crisis tendencies and legitimise inequality. I will argue that the way global transformationalism de-politicise the apparent dis-embedment of the market economy is deeply problematic, while the institutionalist approaches brings us closer a fully social conception of markets although their assumption of a ‘hard core of market behaviour’ is ultimately untenable. The correction/making distinction illuminates the connection between two important, and for this paper, useful debates on the political governance of CSR. In the first debate, different ideological characteristics and dynamics are discussed, especially between neoliberal or voluntary and social-liberal or regulated modes of CSR governance (Fairbrass 2011, Vallentin and Murillo 2012, Kinderman 2011). The different positions in the debate emphasise the role of ideas, political power of contesting institutions, or political rationalities and programmes, but agree on a central proposition: the institutions, political discussions and public administration that govern CSR is a terrain for political contestation through which a number of different outcomes are possible. CSR has also been scrutinised for its capacity to make market-extending and neoliberal policies look natural, inevitable or morally superior (Soederberg 2007, Banerjee 2008, Shamir 2008). The question of how CSR governance is contested at the scale of state governance can be unfolded at the intersection of these two debates. Further, discursive, hegemonic, and scalar perspectives can strengthen a critical engagement with the possible ‘return of politics’ to CSR governance (cf. Kinderman 2013).

23

Embeddedness in global transformationalism and institutionalism For Ruggie, Bernstein and other successors to global transformationalism, ‘contemporary patterns of globalization … constitutes a unique conjuncture of social, political, economic and technological forces’ (Held et.al. 1999: 425-9) that reshapes the post-war era of (nationally) embedded liberalism. In this unprecedented era of globalization, international institutions respond to new political configurations with increased collaboration with non-state and market actors to create a more flexible, yet globally encompassing embedment of the market economy. The concept of embedded markets is utilised not only in global transformationalism but also in comparative institutionalist approaches to CSR. In comparative institutionalism, market actors are already embedded in customary ethics and social relations, and this embeddedness co-determines how corporations manage their stakeholder relations and which CSR strategies they pursue (Matten and Moon 2008: 407). Instead of viewing CSR as a response to the qualitative and quantitative transformations of globalisation, comparative institutionalists analyse the historical background, sociological patterns and agential motivations out of which distinctively different CSR institutions have emerged across national varieties of capitalism. Global transformationalism operates with an explicit separation of economy and politics: economic globalisation, such as the internationalisation of trade and investments, forces political institutions to create innovative solutions to emerging and enduring problems. Thus, it ends up with a concept of globalising market economies as ‘a “thing” independent of our actions’ (Bruff 2005: 271) to which institutions are forced to act with innovative policy tools in order to embed markets and regain legitimacy for market societies. Moving on to the discussion of how comparative institutionalism deals with the question of embeddedness, we revisit how this approach interprets the political governance of CSR in CMEs. According to comparative institutionalism, governments in continental Europe continue to pursue a relatively ‘relational’ and partly mandate agenda on CSR as part of their historical preference for a mixed economy (Gond et.al. 2007). Other institutional features of European CMEs contribute to an institutional equilibrium of implicit or relational CSR. Strong coordination in labour markets can for instance provide competitive advantage through the promotion of firm- and 24

industry-specific skills for workers, while coordinated corporate governance regimes focus primarily on long-term profitability (Hall and Soskice 2001) - both arrangements ensure stakeholder and labour protection without explicit CSR. When Matten and Moon (2008) and Kang and Moon (2012: 97-100) discuss recent trends towards explicit or competitive CSR in continental Europe, they refer to a process of ‘layering’. This concept, coined by Streeck and Thelen (2005), allows them to acknowledge the graduate transformations occurring in the institutional attitude of European CSR actors, through which competitive CSR motivations ‘alter the overall trajectory’ of CSR governance without directly undermining existing institutional motivations (cf. Streeck and Thelen 2005: 23). In Streeck and Thelen’s relatively dynamic institutional framework (2005), incremental institutional evolution occur ‘in response to changes in ‘the economy’ which are invoked but not enquired into’ (Bruff and Hartman 2014: 77). For instance, when assessing the ‘layering’ of competitive CSR onto relational CSR, Kang and Moon (2012) are not inquiring into those features of capitalism these changes are part of. They treat financialisation, a decisive causal factors for the emergence of competitive and explicit CSR in Europe (Matten and Moon 2008: 416), as an institutional reaction in corporate governance to changes in “the economy”, not as part of a general transformation in the mode of production in advanced capitalism (cf. Krippner 2005).

Towards a social conception of state, market, and institutions What is problematic about these assessment is the assumption that there exist a hard core of market behaviour that either market or non-market institutions corrects (cf. Bruff and Hartman 2014). In Greta Krippner’s words (2001: 787), for institutionalists, ‘markets represent an informal institution in which exchange relationships are bilateral’, a representation that overlooks the multiple sources of legislation, construction and manipulation of the terms of those exchanges. Further, they treat markets as 'little more than placeholders in theories of economic governance, a foil against which to elaborate institutional forms conceptualized as alternatives to markets’, leaving capitalist markets as the sine qua non form of commodity and service exchange (ibid: 787). Consequently, when institutionalists use typologies (SMEs, LMEs) 25

as heuristic devices, 'they are not explaining variation in markets, but rather variation across institutional forms, taking the market as a fixed and somewhat unitary entity' (ibid: 787). Comparative institutionalism ends up with a rather fallacious assessment of market behaviour as fixed and exogenous to the social life of institutions and politics. Thus, they end up with a vision of something out there – i.e. pure market forces or 'the economy' – that materialise in different forms as it engages with different institutional arrangements, but without ever explaining what this market is. In response, I suggest that multi-faceted, yet distinctively capitalist markets are produced and re-contextualised over time and across time in the nexus of ideas and material factors. Thus, seeing markets as fully social and embedded institutions, economic policies becomes less a question of whether to embed markets in society, but by which means and at which scales this embedment takes place. With regard to the means of embedment, CSR governance works through the circumambulation of state regulation, which involves an incremental marketization of political economic governance (Horn 2011, Levy and Kaplan 2008). With regard to scales, CSR can facilitate upwards, downwards, and sideways rescaling of governance - in the present era, state governance moves primarily from from the nation-scale onto other scales. Sideways rescaling is facilitated when CSR utilises the kind of circumambulation described above. Upwards rescaling is facilitated by CSR qua international guidelines and point of references, such as the ISO 26000 or the OECD guidelines for Multinational Enterprises, to which both corporate and political actors refer (e.g. Commission 2013). Last, CSR may work to downscale regulation to the scale of local scales such as urban areas, for instance when ‘local communities’ and poor urban areas are emphasised as strategic nodal points for CSR (Porter and Kramer 2011).6 Proposing to investigate CSR as a contested terrain in rescaled state formations, my approach clearly diverges from that of global transformationalism. It also diverges from comparative institutionalism by treating economic governance as the

6

Note, for instance, how Porter and Kramer (2011) criticise Friedman’s ‘old, narrow view of capitalism’ for being too reliant on the contributions corporations provide the nation-state, such as taxes.

26

management of the crisis ridden and contradictory nature of capital accumulation, rather

than

as

the

creation

of

relatively

stability

through

institutional

complementarity (potentially punctuated by rare occurrences of disequilibrium).

The political terrain for market-correcting policies In order to understand how the discussions on CSR provide an important terrain for contestations over the purpose of markets, and thereby the constitution of market-led solutions to social issues in the first place, I contest that we need a more thorough investigation of the power of ideas and discourse (Schmidt 2006). What is particularly informative about Vivien Schmidt’s discursive institutionalist approach to political decision-making is the attention given to the asymmetries of discursive power. While comparative institutionalism also illuminates different ideologies informing CSR governance, what should be addressed is how different civil society actors become aligned with the idea that social cohesion can be achieved without a wider paradigm shift away from policies focused on competitiveness. While this indeed is the case in the Global Compact (see Soederberg 2007), my case study of the EU also illuminates how a more social-liberal CSR governance works as a legitimising apparatus on the wider embedded neoliberalism paradigm. In the CSR debate as elsewhere, the important question of whether we need competitiveness has been muted by the contestation over how we increase competitiveness while ensuring some vaguely defined “social cohesion”. As a consequence, the contestations over which policies will produce Europe as a space of competitiveness have themselves turned the EU into ‘a bulwark of neoliberal globalisation' (Rosamond 2002: 173). Thus, the political terrain for contestation at the EU level is itself constituted by institutionally embedded discursive fixation on competitiveness. Discourse is not understood as ‘echoes of underlying interests’, but as a structural variable in the production of those interests (ibid: 157). CSR governance seen this way represents a terrain for debates on how to bring markets in line with what is perceived as a special European feature: a combination of a cohesive social model and a competitive market economy (Council 2000: item 5). 27

Towards a concept of CSR governance as market-making In order to take the analytical step from viewing how CSR governance corrects markets towards how it constructs or makes markets, we need to assess the material conditions that enable class forces to shape ideas and provide them with consensual aura. Based on their position in the spheres of production and circulation, certain fractions of capital enjoy privileged access to the state apparatus, which in turn constitutes the structural foundation for hegemonic projects. Giving priority to CSR and similar market-based solutions to inequality and unsustainability, state institutions play a pivotal role for the de-politicisation of an ever more direct commodification of social life. This happens not only at the state scale, but also the household, at which ethical consumption and the facilitation of reproduction (work/life balance, parental leave) becomes targets for corporate strategies, the urban scale, at which gentrification accelerates through social partnerships, and so forth. At all of these scales, contestation and resistance to commodification exists, and critical scholarship needs to avoid reproducing the neoliberal slogan of no alternatives (such as when Crouch (2004: 4) leaves ‘little hope’ for egalitarian policies in the emerging regime of post-democracy). Yet still, the capitalist state reproduces itself by strategically selecting which contestations it facilitates. While CSR governance in a capitalist state cannot undo the marketization of social life, it offers a terrain on which discursive interactions and social relations determine the extent to which markets are produced through a laissez-faires, cooperative, or state-led institutional design. Though CSR is characterised by its simultaneous presence at multiple scales, for reasons of scope this paper primarily discusses the presence of CSR in state governance and emerging state formations such as the EU. 7

Market liberalisation and crisis management as driver of CSR To illustrate that the specific contestations over different forms of CSR governance are embedded in a general shift towards promoting markets as the means for social

7

Though, see e.g. Smith (2002) for a discussion on partnerships and gentrification, and Macartney and Shields (2011) for a critique of the tendency in critical Political Economy to fetishise scales and privilege state and production over e.g. households and reproduction.

28

progress, the attitude of German employers towards welfare state reforms and regulatory frameworks on CSR will serve as a case in point. This case shows how capital has been able to utilise its social power to contest regulation of both CSR and labour markets. German capital has utilised its position in transnational capital-state relations to directly attack social provision and seeks to replace it with voluntary measures of corporate-led social provision. According to comparative institutionalism, the coordinated institutional framework has led German corporations to accept and engage in legislation and agreements that guarantees labour rights and relatively generous social provision. Thus, German employers maintain a relative conservative and reluctant approach to deregulation and neoliberalisation (Hall and Soskice 2001). Accordingly, German corporations have been constitutive of the preference in Germany for ‘CSR as mandate’ rather than voluntary (Gond et.al. 2011). However, both assessments struggle to cope with the numerous attacks on employee provisions, the regulated German labour markets, and the initial regulatory frameworks for CSR in the EU proposed by the European Business Network for Social Cohesion (EBNSC) in late 1990s (Kinderman 2005, Kinderman 2013). Had it not been for decisive changes in corporate approaches to welfare reforms, the drastic deregulation of labour markets and cut-backs in unemployment enacted through the German reform Agenda 2010 would not have been likely to gather the needed consent (Kinderman 2005, Bruff 2008). Also with regard to EU CSR governance, German capital played a decisive role in the neoliberalisation of market-correcting policies. On initiative of then President of the European Commisison Jacques Delor, a large group of European corporations signed a declaration against social exclusion in 1995 and formed the EBNSC a year later (CSR Europe 1995). Concerned with a perceived hidden regulatory agenda in the close relationship between the EBNSC and the Commission, German companies began attacking the EBNSC while advocating a far more voluntaristic definition of CSR through the employers’ association BusinessEurope (ibid: 707-8). The success of the more neo-liberal approach to CSR, led by German corporations, exemplifies the power of an increasingly transnationalised fraction of German capital. This fraction had become highly influential in European networks of corporations and managers, 29

among them BusinessEurope (ibid.) and the European Trade Union of Industrialists (van der Pijl et.al. 2011). Increasingly transnational capital formations have utilised their influence to foster ‘market-making’ policies on a number of issues, including corporate governance (van Apeldoorn and Horn 2007a), competition (Buch-Hansen and Wigger 2010) and CSR, as I will argue. While German capital arguably utilised its power to influence the terrain on which CSR was negotiated, this contestation should be understood in tandem with the successful effort of deregulating the German labour market. To the extent comparative institutionalism address the neoliberal features of CSR policies (the competitive motivations) they explain it with the ‘institutional complementarity’ through which CSR actors respond to corporate governance reforms (Kang and Moon 2012). Kinderman (2013) focuses on the agency of prominent corporations and business associations to influence the EU CSR framework in a neoliberal direction, thereby emphasising the political contestations over the trajectory of CSR governance in the EU, as well avoiding the crude methodological nationalism of Kang and Moon (2012). His study shows that there have been thorough contestations over which means CSR governance may utilise to correct markets. Associations representing capital has repeatedly emphasised a voluntary form of CSR governance as the fundamental prerequisite for any kind of corporate responsibility. In particular, the rapidly transnationalising German capital has openly and (until recently) successfully fought any signs of “creeping regulation” on CSR (Kinderman 2013). Thus, the relationship between contesting social forces is highly unequal. The inequality does not only grow out of the strategic position of the capitalist class to influence EU policies (see Carroll et.al. 2010, van der Pijl et.al. 2011), but also the selectivity by which European state project has been strategically responsive to capital (Jessop 2000). In this regard, CSR governance has been supported by employers because it provides the discursive link between marketized corporate governance regulation and social cohesion. For instance, in the European Union, the importance of socially responsible corporations for ensuring that increased competitiveness also translates into more sustainable and socially cohesive market economies have been emphasised at numerous occasions (Council 2000, Commission 30

2005). It is therefore useful to integrate CSR governance studies into the critical studies of the ‘formal, informal and self-regulatory rules’ by which the structure of the (publicly listed) corporation is shaped (Horn 2012b: 89-90). A marketization of corporate control, as we have witnessed in Europe (van Apeldoorn and Horn 2007b), is legitimized through the perceived competitiveness it provides for corporations and the economy (see for instance Commission 2012: 3). In addition to determining which kind of market-correction is promoted, the political contestations on CSR are also “making markets” by emphasising the benefits of better-functioning markets and corporate solutions to social struggles.

Regulated CSR and social market constructions In line with van Apeldoorn and Hagen (2010) I define EU ‘market-making’ policies as the promotion of a certain type of governance that seeks to embed neoliberalism across Europe. Embedded neoliberalism designates the symbolic social protection of humans and nature from the ‘destructive effects of the self-regulating markets’ (ibid: 216). In EU public policy, embedded neoliberalism means the simultaneous introduction and erosion of social policies at different scales of government. Approaching embedded neoliberalism as a contradictory hegemonic project aimed at the commodification of social life illuminates how the social purpose of the Lisbon Strategy was to entrench capitalist market-mechanisms in ever more governance areas. In the strategy, the European Council argues that labour markets, education, and welfare systems must be modernised to ensure greater social cohesion (Council 2000). As such, the EU utilises social policies to argue for structural reforms of the European social model. These reforms in the EU have taken a very clear path towards marketization (van Apeldoorn and Horn 2007b, Apeldoorn and Hager 2010). Through these steps, the purpose of social policies and corporate governance can be viewed as commodification of social life, which means that goods, services, labour and nature become objects feasible for market transaction (Polanyi 1944, Nolke et.al. 2007). The social purpose of CSR governance is especially the legitimization, institutionalisation, and de-politicisation of market-led social progress (Soederberg 2007). Consequently, CSR cannot be fully understood as a ‘counter-movement’ to market liberalisation, but 31

must be comprehended equally as a strategy that co-opts those subordinate groups that seek to challenge the framework of embedded neoliberalism. With market-making CSR governance I refer both to (possible) creation of 'markets for virtue' (Vogel 2005) and to the discursive production of 'the virtues of markets'. It has become a priority for states and governments to stress the competitive advantage of ambitious CSR strategies, by which these governments invest in the idea that society and the economy can do well if corporations “do good". Public policy hence needs to create market incentives that guide corporations in socially responsible directions. Such policies may focus on corporate disclosure of social and economic activities in addition to financial disclosure (the so-called triple bottom line) or on public procurement to ensure that corporations sullying the public sector comply with certain standards. These types of policies are integral to EU CSR governance and are essentially about correcting markets. While discursive institutionalism provides valuable analytical clarity to the processes through which market-regulatory approaches are contested, it neglects the context in which contested ideas are shaped. As governance-at-distance regulation such as requirement on disclosure becomes a key component in discussions on regulation, they inevitably change the framework for the type of market-correction deemed possible. Conceptually speaking, CSR governance is a hegemonic project of embedded neoliberalism to the extent that the ‘strategic selectivity’ of the institutions it occupies provides only a very limited room for manoeuvre for social groups seeking to contest prevailing perceptions of necessary regulation (cf. Jessop 2004). The extent to which CSR governance is an open terrain for political debate - versus the extent to which the debate is fully confined by capital’s current preference for neoliberal policy solutions depends on which level of governance is given priority. An enhanced regulatory framework for CSR is not a deliberate concession given in order to quiet subordinate groups. It grows out of the interaction of ideas between social actors on how and whether corporate conduct should be regulated. Yet still, these contestations are conditioned by the recurring processes of rescaling, which in its current configurations continuously undermine some important barriers against the 32

entrenchment of market-rationality across the social and political sphere. For instance, labour market reforms and social policies at national and EU level keep scrutinizing an inflexible work force as the source of unemployment. As a result, labour market reforms keep increasing the number of precarious jobs around Europe, in hope that less secure employment will create a more flexible market for also unskilled labour (cf. Janssen 2009).

Contestations over CSR in embedded neoliberalism Thus, CSR can tentatively be understood as a 'double-movement' in and by itself: it corrects markets by making the social responsibility of market actors increasingly formal and explicit, while it simultaneously enables the marketization and commodification of social life under embedded neoliberalism. This conceptualization requires us to look specifically at the social purpose of CSR practices at corporate level as well as CSR governance at the state institutional level. In its efforts not only to fill the gap between, but also to discursively produce, a de-politicised alignment of competitiveness and social cohesion, the European Commission has made CSR a top priority. This attempt to 'buttress' and institutionalise market-led social development are also present in the approach of the UN Global Compact (see Soederberg 2007). As my case study will illustrate in more detail, the financial crisis changed the context for CSR and social progress, and pushed the Commission to re-engage in discussions with organised labour (the European Trade Union Confederation, ETUC). As Soederberg contests, CSR governance can become a hegemonic regime if it succeeds in institutionalising anti-corporate struggles. In times of crises, it is of greater importance that non-hegemonic groups, such as organised labour, become part of the policy formation process. The shift towards regulation is not an end-state, but an on-going, contested and contradictory process. It rests on the formation of hegemonic regimes that contain or institutionalise dissent and builds consent for an otherwise crisis-ridden political project. By hegemony, I refer to the production of particular forms of power that depends on political contestations between social forces, which may, using the words 33

of Stuart Hall (1987: 19), be called the active synthesis by which unity is constructed ‘out of difference’. As a contested hegemonic regime, embedded neoliberalism may contain dissent and provide valuable legitimacy to current reconfigurations of social regulation while also allowing for explicit political disagreements and contestations. CSR governance are thus the result of active contestations between social forces, especially between capitalist class actors and organised labour, whose position in the capitalist mode of production determine their accessibility to capitalist state politics and thus their power to influence CSR governance. It is consequently not given that CSR governance rests exclusively on voluntary initiatives; contrary there is considerable room for more regulatory approaches as the result of social and political struggles. However, I argue, CSR governance plays a constituent role for embedded neoliberalism, independent of its social-liberal or neoliberal features. CSR and similar voluntary measures have been privileged over state regulation by capital as the preferred mode of social regulation. This signals what has rightly been called European capital’s renunciation of ‘the class compromises that have underpinned European integration’ (Horn 2012a: 589): traditionally based on balancing between securing free movement of labour, capital, goods, and services on the one hand and respecting national protection of social interests on the other, recent developments suggests that the latter have been effectively subsumed the former (see for example, Dolvik and Visser 2009). To the extent CSR is promoted as an instrument to correct particularly financial markets, it becomes an important force of legitimacy for the retreat and reconstitution of the state.8 A terrain for contestation between hegemonic and subordinate social forces, CSR governance is utilised in the wider hegemonic regime of neoliberal reconstitution. The promotion of regulated, socialliberal CSR, which involves a more active state and ‘the return of politics’ (Kinderman 2013), is not counter-productive to a political project of embedded neoliberalism.

8

The historical phases of state withdrawal in the 1980s and state reconstitution from 1990s onwards are also referred to as respectively roll-back and roll-out neoliberalism (Peck and Tickell 2002).

34

3. Competitiveness, social cohesion and CSR in the EU The analytical framework outlined above utilises discursive institutionalism and neoGramscian hegemonic analysis. I have argued that these two approaches offer a way out of the “global forces vs national institutions” impasse in the discussions between comparative

institutionalism

and

global

transformationalism.

Comparative

institutionalism has important insights to offer, but it fails to perceive markets as fully social institutions, and instead provides markets with an inevitable character unlike the socially constructed political institutions. To the extent institutionalism engages with the political regulation of CSR, it is either treated as the functional outcome of change in other institutions, such as welfare state or corporate governance reforms (Jackson and Apostolakou 2010, Kang and Moon 2012), or as shaped by the discursive interaction between different ideas on CSR (Fairbrass 2013, cf. Schmidt 2006). The latter approach exhibits a more thoroughly developed understanding on the ideological character of CSR governance. Especially, it is useful to understand the ideational battles between actors embedded in neoliberal and social-liberal ideology whose discursive interaction determines whether CSR governance seeks to correct markets through regulation or voluntarism. In the following case study, I will argue for the utility of neo-Gramscian analyses on the contested hegemony of neoliberal EU integration (van Apeldoorn and Hager 2010), arguing that CSR governance ‘must be understood in terms of the outcome of political contestation in what Gramsci (1971) called the realm of hegemony’ (van Apeldoorn and Horn 2007b: 79). While discursive institutionalism provides analytical clarity on the formation of these contestations in EU CSR governance, the scalar reconfigurations through which CSR has become an important engine for capitallabour negotiations illuminates the hegemonic character of the EU CSR regime. As a hegemonic regime, CSR governance becomes integral to the wider ‘embedded neoliberal’ approach to economic and social policies in the EU. In other words, discursive institutionalism provides insights to the discursive power relations among interacting social forces prohibiting and fostering regulation prior to and after the financial crisis, but a neo-Gramscian scale analysis is well suited for analysing the material basis for the dominance of certain discourses as well as the hegemonic 35

character of the newly recovered arrangements of co-optation between the emerging EU state project, trade unions and capitalist interest groups (cf. Horn 2011).

EU CSR governance and the terrain for political contestation The hegemonic regime of marketization grows out of the contestations on CSR. In the case of the EU, the emergence of a regulatory framework involves a symbolic transfer of ‘the embeddedness of embedded neoliberalism’ from the national to the European scale of governance (cf. van Apeldoorn 2009). While the changing tides in EU CSR governance thus show signs of a more embedding version of neoliberalism in light of the financial crisis, the general EU crisis management rests on more authoritarian and less consensual neoliberal policies (Sandbeck and Schneider 2013, Bruff 2014). Returning to the proposition that CSR works as a marketized embedment that circumvents direct state regulation, the 'embedded neoliberal' CSR approach emerging in the EU takes into account social-liberal ideas, but functions mainly to maintain a marketization of social policies. In advanced capitalist market economies, social policies have increasingly been subsumed to and undermined by economic meta-priorities in the last couple of decades,

in

particular

the

recently

discovered

economic

imperatives

of

competitiveness and structural stability (Cerny 1997, Rosamond 2002, Pochet and Degryse 2012). In the European Union, undemocratic forms of governance on structural stability has been strengthened as a result of the financial and sovereign debt crises (Becker and Jäger 2012, Sandbeck and Schneider 2013), with competitiveness being reiterated in a number of policy documents on social policy and corporate governance (Commission 2010, Commission 2012). As part of the ongoing struggles to renew the project of embedded neoliberalism, considerable room for regulation CSR has been granted, resulting in the formation of a decisively more social-regulatory (as compared to competitive-voluntary) approach to CSR in the EU since the financial crisis (Kinderman 2013). However, as the complimentary regulation is designed to utilise core features of the marketized EU corporate

36

governance framework, it extends and legitimises what appears a continuous, yet crisis-ridden, project of social commodification. In light of the financial crisis and subsequent reconfigurations of corporate regulation, the ideational interactions between social actors on the issue of CSR have provided valuable impetus to the re-launch of ‘embedded neoliberalism’ in the European political economy. CSR governance, interestingly, marks one of the few policy regimes in which fundamental changes have occurred. While this suggests that CSR governance is first of all important for the EU due to the legitimacy it raises for the broader marketization of social cohesion and workers’ rights, it also illuminates how the crises in Europe and the EU has increased the importance of including trade union in the CSR governance framework, forcing them to pay lip service to the discursive production of ‘the virtues of the markets’. After describing the emergence of the EU CSR governance framework, this chapter argues that the neoliberalisation of CSR governance arrived at a stalemate as the financial crisis appeared. The emerging, more regulatory, alternative is still fully committed to the project of continuous marketization of corporate governance as the solution to corporate irresponsibility. However, CSR governance has now become an integrated part of the EU state project. Despite the ‘return of politics’ (Kinderman 2013), EU CSR governance effectively legitimises the ongoing marketization of corporate governance and social policy, and undermines efforts to create an alternative to the current 'shareholder democracy' of economic governance.

The neoliberalisation of EU CSR governance First, we trace the emergence of CSR in the EU. While EU CSR governance had been initiated by Jacques Delor in 1995 (see chapter 2), CSR moved to ‘the top of the political agenda’ of the European Council and the European Commission with the Lisbon Strategy outlined in 2000 (Commission press release 2002, quoted in MacLeod 2005: 543-4). In the presidency conclusions for Lisbon European Council (Council 2000: item 5), the Council outlined its goal of a ‘transition to a knowledge-based economy’ and aimed to step up ‘the process of structural reform for competitiveness 37

and innovation’ while ensuring to complete the internal market. Announcing a new open method of coordination (OMC) as means to spread best practice and ensure ‘common responses in areas where legal competences rest with the member states’ (Borras and Jacobsson 2004: 186), the Council emphasized the role of CSR by making ‘a special appeal to companies' corporate sense of social responsibility regarding best practices on lifelong learning, work organization, equal opportunities, social inclusion and sustainable development’ (Council 2000: item 39). Thus, the Council placed a general responsibility on the business community for delivering the desired goals and mobilizing the necessary means: ‘Achieving the new strategic goal will rely primarily on the private sector, as well as on public-private partnerships’ (ibid.: item 41). In sum, the Council created a clear link between the macroeconomic reforms, providing a competitive environment for market actors to prosper on the one hand, and the responsibility of those market actors for their employees and local communities on the other. In other words, the EU ‘looked to business, and specifically CSR, to fill the gap between the objective of economic competitiveness and the goal of increased social and economic standards’ (Gond et.al. 2011: 656). Within the following two years, the Commission published a Green Paper (Commission 2001) and a Communication on CSR (Commission 2002). In both publications, the voluntary character of CSR was stressed, despite concerns raised by trade unions and civil society organisations over the lack of enforcement mechanisms (ibid: 4). The Commission defined CSR as ’a concept whereby companies integrate social and environmental concerns in their business operations’ and goes ‘beyond compliance’ with legal and economic expectations (2001: 6). Proposing a European multi-stakeholder forum on CSR, the Commission aimed at ‘promoting transparency and convergence of CSR practices and instruments’ among ‘representative organisations of employers, employees, consumers and civil society’ (2002: 17). In its Final Report, the Forum largely reiterated the Commission’s definitions with regard to the voluntary foundation of CSR (European Multistakeholder Forum 2004: 3-4). This inability to create firm guidelines that moves beyond the ‘best practices’ method was met with thorough criticism from ETUC, who suggested that the Commission

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acknowledged that ‘the prerequisite for CSR is respect for collective bargaining and laws’ (ETUC 2004: item 5.1; item 8). In wake of the renewed Lisbon Strategy, focusing on jobs and growth (Commission 2005), the Commission published a new Communication on CSR (Commission 2006), which prompted ETUC to withdraw from the process altogether (ETUC 2011). Also among European Parliament members, the 2006 Communication was seen as a decisive shift away from anything left of the social-liberal approach of President Delor’s Commission (Howitt 2014). In a remarkable refusal of regulation, the Commission (2006: 2) stated that imposing any obligations on corporations 'would be contrary to the principles of better regulation'. Refusing to consider regulation, and prioritizing its relationship with corporations over all other stakeholders, the Commission’s approach to CSR was guided by neoliberal principles of deregulation and anti-labour policies (Kinderman 2013: 708-11, Fairbrass 2011: 962). For instance, the Commission renounced the importance of trade unions in the policy process and instead launched the enterprise-led European Alliance for CSR (Commission 2006: 6)., thereby accompanying its strengthened neoliberal approach with an explicit exclusion of non-business groups and a reiterated commitment to promote CSR as voluntary and business-led.

Embedding neoliberal CSR through complementary regulation After the financial crisis, in wake of the Commission’s EUROPE 2020 strategy and the 2011 Single Market Act, a renewed strategy for CSR was published in October 2011 (Commission 2011). It emphasized ‘the responsibility of enterprises for their impacts on society’ and made ‘respect for applicable legislation’ and collective agreements ‘a prerequisite for meeting that responsibility’ (Commission 2011: item 1.3). It directly mirrored ETUC’s own proposed definition, leading the latter to endorse the new Communication and to once again engage in the policy process as a social partner (ETUC 2011: 150). The new definition did underpin a voluntary-based conception of how CSR develops at firm-level, arguing that ‘voluntary public policy measures’ should support the development of CSR, ‘led by enterprises themselves’ (ibid. item 39

3.4). But business responsibility was no longer something corporations could integrate into their strategies or choose not to; it was a fundamental duty with regards to the externalities the corporations produce. The Commission declared its intention to illuminate corporate externalities by promising to ‘present a legislative proposal on the transparency of the social and environmental information provided by companies in all sectors’ (Commission 2011: 12). The proposal on non-financial reporting was part of the Commission’s suggestions on ‘complementary regulation’ that could stimulate voluntary CSR initiatives through correcting and increasing the market information available for investors, employees, and consumers. In a renunciation of its former anti-regulation attitude, the Commission (2014a: 2) argued that ‘we have seen the limits of a voluntary approach’ to corporate disclosure on social and environmental risks. The lobby organisation BusinessEurope (2012b: 1) warned that voluntary efforts to increase transparency would be ‘impeded by more rigid requirements at EU level’ and expressed concerns about the ‘sense of obligation from companies towards society’ (BusinessEurope 2012a: 4) implied in the new definition of CSR. Despite the mobilization of business associations against the renewed agenda and proposed regulation, especially from the German employers association BDA (Kinderman 2013), the European Parliament approved the directive on non-financial reporting CSR in April 2014. European Parliament's spokesperson on CSR Richard Howitt (2014) regarded it as the most ambitious CSR initiative of any regional actor in the world. While the Commission did not address the wider problems of shareholder capitalism in the 2012 Action Plan on Company Law and Corporate Governance (Commission 2012), this directive is likely to have a significant influence on European accounting standards. It is aimed at regulating and thus correcting investment markets by increasing the available information on 'environmental, social and employee-related' impacts of corporate activities (Commission 2014b)9. Combined with the renewed

9

The exact conditions for the non-financial reporting are not yet known. However, all listed companies with more than 500 employees ‘will be required to disclose certain non-financial information in their management reports’, concerning the ‘policies, risks and results as regards environmental matters,

40

definition of CSR to encompass their overall impact on society and nature, one could be forgiven to remain relatively hopeful that corporations cannot simply choose to report on e.g. charity donations but will compelled to also report on their negative externalities10. With the consequences at the corporate level yet to emerge, we can only analyse what appears a paradigm shift in EU CSR governance.

From terrain to regime: the double purpose of EU CSR governance Even if the new definition and regulation has not dramatically altered state-capital and capital-labour relations in Europe, it shows a remarkable divergence from the increasingly neo-liberal path of the pre-crisis years. The Commission acknowledged the need to play a more active role in correcting the market failures leading to the financial crisis, as well as promoting an investment culture more attentive to social and environmental risks (Commission 2013). Further, it signalled a relative decline in the discursive power of business, making it increasingly difficult to maintain an institutional framework for CSR governance solely based on voluntarism (cf. Fairbrass 2011). In light of the crisis, and what the Commission perceived as a public lack of trust in business (Commission 2011), the criticism coming from organised labour was picked up in the draft process for the renewed CSR strategy (Kinderman 2013). The introduction of mandatory non-financial reporting was also one of the most consistent demands from Members of the European Parliament (Howitt 2014). This illustrates how CSR governance functions as a terrain for ideological contestation, shows that crises may strengthen the power of contesting approaches, and highlights the case for discursive institutionalism (Fairbrass 2011). It also supports the case for an empirical approach to CSR governance that seeks to detect the competing ideological debates at

social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on boards of directors’ (Commission 2014b ) 10

The directive is based on the standard soft regulation policy tool ‘comply-or-explain’ that gives companies the option to explain why they cannot comply to the reporting requirements. The compliance rate in Denmark, where a similar requirement was introduced in 2009 is 93% (Neergaard and Rosenmeier 2012).

41

stake, rather than a priori assume that CSR remains an expression of neoliberal ideology (Vallentin and Murillo 2012). However, in order to understand the contradictory nature of regulated CSR, I will focus on the conditions under which CSR regulation is enacted (corporate governance and financial regulation) as well as the social purposes on which CSR should deliver. It is my argument that the trajectory towards neoliberalism in CSR governance was contingent upon the marketization of corporate governance, and in spite of becoming increasingly neoliberal in character it provided vital legitimisation for the marketization project. It is this legitimising purpose of CSR governance that makes it necessary to perceive such policy formations (also) as the result of deliberate attempts at market-making. Here, market-making refers to the increasing commodification of the European social model. The rest of this chapter aims at illuminating how the directive on non-financial reporting works to legitimise the continuous marketization of the corporate governance regulation and social policies. Marketization is ultimately a continuous project, because markets (as 'fully social institutions'; Krippner 2001) rests on renewed social sanctioning. CSR enables social sanctioning by creating a terrain for policy discussions and institutional learning, thereby legitimizing the current ‘embedded neoliberal’ approach to corporate, social, and economic regulation by absorbing the critique in the cooperative spirit of social partnerships (Commission 2010a: 4, Commission 2011: 6). Bearing in mind the hegemonic, yet contested, nature of EU CSR governance, we can now revisit the Commission’s new, positive approach to CSR regulation and the newly passed directive.

Non-financial reporting as regulated marketization The decision to introduce non-financial reporting and emphasise the omnipresent responsibility for externalities is clearly a sign of the 'return of politics', as Kinderman (2013: 711-3) argues, and indicates a more proactive role of the EU. The directive on non-financial reporting aims at increasing investors’ demand for socially responsible corporate behaviour. In this regard, it correlates with the Commission’s emphasis on 42

‘shareholder democracy’ in corporate governance (Commission 2005b) 11 . The directive should increase the information available for investors on the environmental and social impact of potential investments. In return, it is argued, investors can no longer claim that they do not know the social and environmental impact of their investments. The directive is thus intended as a correction to financial markets (and markets for goods and services) that enables better decision-making as market actors become increasingly aware of social and environmental issues (Commission 2013). However, I argue, the proclaimed 'return of politics' in EU CSR governance is also an effort to gather support for the continued liberalisation of labour and capital markets in the EU. The directive on non-financial reporting allows for deepening of the marketization processes on which the current European ‘double movement’ rests. 12 First of all, it deepens the shareholder democracy as it seeks to balance the rights and responsibility of investors. Second, by way of discursively utilising CSR in what appears a continuous liberalisation and marketization of social and labour market policy, the renewed commitment to more social-liberal and regulatory CSR can be understood as a 'passive revolution' or 'trasformismo' whereby trade unions and other subaltern groups engage in the formation of consensual formations with dominant social actors without fundamentally transforming the hegemonic project (Horn 2011). The social-liberally inclined CSR approach emerging in these years seeks to impede investors’ excessive risk taking in favour of socially responsible investment by addressing lack of information as an obstacle for such investments. It aims at correcting what has been framed as the main cause for the financial crisis and a main 11

Shareholder democracy is built on the assumption that ‘that corporate control ought to be exclusively in the hands of the shareholders’, and that minority shareholders are no less privileged than anyone else (van Apeldoorn and Horn 2007a: 226). The strengthened property rights for minority shareholders over corporations are supposed to make the need for further corporate governance regulation obsolete.

12

While Kinderman approaches the alleged return of politics with some hesitation, his institutionalist legacies seems to cut his analysis short of an assessment of the contradictory nature of the hegemonic ‘embedded neoliberalism’ regime.

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corporate governance failure: arrangements between investors and directive that increase the incentives for risk-excessive behaviour, prioritise short-term profit, and play hazard with financial, social and environmental sustainability. The directive on non-financial reporting should thus increase the responsibility and duty of investors, as they receive full disclosure on the social and environmental impact. In turn, the inequality between workers, managers, and investors becomes institutionalised and de-politicised. Investors are supposed to grow increasingly aware of the potential negative impact of their investments, while labour is increasingly responsible for the inadequacies of the current labour market. As a result, labour becomes the target for ever stronger structural reforms that make it increasingly dependent on the market for its reproduction, while capital receives increased information on the dynamics of the labour market. Before revisiting the formation of the EU CSR governance project in the light of these arguments, I will contextualise the renewed commitment to regulation in the broader set of regulatory initiatives in response to the financial crisis.

CSR governance, economic efficiency, and structural stability The ideational battles within the EU CSR governance institutions (especially the Commission and the labour market parties) were conditioned by a discursive framework that attributed the financial crisis to poor management of financial institutions, excessive risk-taking and malign corporate governance. A central component in this framework was the De Larosière report, commissioned to provide policy recommendations for the regulation of the financial system. While being ‘quieter on big structure questions’, the report seeks to ‘rationalise European-level regulatory and supervisory arrangements’ that can correct the behaviour of financial market actors (Seabrooke and Tsingou 2014: 395). Identifying corporate governance arrangements as ‘one of the most important failures of the present crisis’ (quoted in Horn 2012b: 104), the policies it initiated nonetheless focused narrowly on better regulation of the financial industry, with policy makers especially focusing on concentration of capital and hence lack of competition in financial markets as the 44

cause for the crisis (Wigger and Buch-Hansen 2014). Both in the realm of company law and in social policies, the EU has strengthened it subordination of all other criteria to the efficiency criterion and structural stability. The renewed focus on competitiveness highlights the ambition of the EU to determine how the basic capitalist imperative “produce” are ought to be interpreted across the (emerging) European economic space. It repeatedly gives priority to the efficiency criteria over contesting reflections on the purpose of European integration. Subordinating social progress to neoliberal growth formulas, the regulation of CSR thus enhances the marketization of social responsibility and sustainability. Apparently, the EU CSR governance regime has founds its current ‘embedded neoliberal’ approach through a dialectical process. First launched as part of President Delor social-democratic project, it addressed the mechanisms of social exclusion in Europe (CSR Europe 1995). Increasingly moving away from such negative connotations, subsequent Commissions’ have aligned their CSR strategies with the expressed desire of capital to emphasise the multiple, voluntary measures taken by corporations to create opportunities, cohesion, etc. (e.g. BusinessEurope 2012). Although the Lisbon Strategy gave CSR a special role for delivering social cohesion in a competitive knowledge economy, nothing beyond the mere “appeal” to businesses' sense of responsibility was issued. The Commission became increasingly indifferent to labour and civil society participation, and by 2006, it only collaborated with corporations. The financial and sovereign debt crises were quickly framed by politicians and mass media a like as a crisis of capital concentration that has led to a popular lack of trust in business. For instance, in the Commission’s agenda for full employment ‘the crisis has highlighted the urgent need to pursue labour market reforms, without reducing the scope for consensus and trust between social partners — a key prerequisite for successful ‘flexicurity’ policies (Commission 2010a: 4). In the Europe 2020 growth strategy, the promotion of CSR was stressed as ‘a key element’ in promoting employee trust (Commission 2010b: 15). From a more critical point of view, it was important to restore labour’s trust in business in times of vast structural reforms of welfare and labour markets. In order to enhance this trust, and to restore trust in CSR in the first place, a synthesis has emerged between the social-liberal 45

thesis of CSR in the mid-1990s, which underpinned the corporate responsibility to fight the structural (as opposed to individual) causes of social exclusion (CSR Europe 1995), and the deeply neoliberal antithesis of the 2000s pointing solely at the positive and voluntary corporate contributions to society (Commission 2006). The embedded neoliberal framework now utilised integrates a social and competitive content as well as regulatory and voluntary modes of governance, but it strategically subsumes social targets under economic competitiveness and stabilisation. Alongside the EUs renewed emphasis on the utility of CSR for bridging economic growth and social cohesion, a deepened marketization of corporate control has occurred (van Apeldoorn and Horn 2007b). This raises the question of the unequal distribution of responsibility between capital and labour. The fact that the EU continues its promotion of corporations as commodities, in a depoliticized fashion framed as “necessary” competition on capital markets, appears at odds with the Commission's emphasis on corporations as agents who are capable of making responsible decisions in order to create positive externalities. The solution to this apparent contradiction has been to place more responsibility on investors by mandating the disclosure of non-financial information. While the formal requirements to disclose information fall on corporate management, the envisioned disciplinary mechanisms of the policy affect investors who no longer should be able to blame “harmful” investments on lack of information. Thus, non-financial disclosure at once deepens the marketization of corporate control and discursively frames the corporation as a responsible subject. Given the systemic rather than institutional character of the present crisis, the policy tool cannot address the contradictions in finance-led capitalism and neoliberal crisis management. The temporal stabilisation it may bring comes from the discipline entailed in the organisation of (investor) conduct of (corporate) conduct. In this regard, the directive governs corporate conduct “at a distance” – this distance being the financial markets. The social purpose of the directive must be understood as an effort to raise legitimacy for continued finance-led accumulation. It is thought to enable a restoring of popular trust in shareholder democracy by holding (minority) shareholders accountable for their (ir)responsible investments. Thus, the promotion of shareholder democracy by means of CSR 46

becomes an integral project to the EU state project. Unlike the outspoken antiregulation agenda of pre-crisis CSR governance, the EU now embraces complementary regulation as a mean to entrench the markets of corporate control. Thus, regulating CSR becomes yet another instrument for market-making EU policies, alongside corporate governance regulation and social governance. All of these “market-driving” policies challenge, if not marginalize organised labour. Neither the inclusion of trade unions in social dialogue, nor a more regulatory CSR regime seems to enhance the possibility of a revival of job security, increase in real wages, or continent-wide means of solidarity. Even after the complete U-turn on regulation, the Commission's approach to CSR is fully configured on embedded neoliberalism.

Conclusion In this paper, I have used the case of EU CSR governance to illuminate a number of untenable assumptions regarding market institutions in comparative institutionalism and global transformationalism. I concur with the emphasis on institutions that enables these two important strands in the CSR literature to move beyond the crudest neo-classical assessments of corporate agency and challenge the proposition that CSR is essentially a solution the principal-agent problem. Taking the institutional context serious, these approaches have scrutinized CSR as a political question, redirecting focus to the governance of CSR at corporate, state and international levels. However, an ultimately fallacious separation of politics and the economy informs both approaches. It leads global transformationalists to suggest that markets can be embedded in society through increased collaboration between states institutions, civil society organisations, and corporations, but they ignore the power of CSR to actively contest any emerging forms of regulation and to institutionalise anti-corporate struggles. Comparative institutionalism focuses on the institutional legacies through which CSR appear in multiple forms and relate to other market-embedding institutions. However, they fail to deliver on the crucial question of how and whether markets in the first place are socially constructed. Arguing that markets are social and political constructions, and that their form and content thus depends on political and social struggles, I have scrutinised CSR as an important terrain for discursive 47

contestation over which kind of markets antagonistic social forces want to produce. In effect, CSR governance can range from purely neoliberal, voluntary measures to firmly regulated, social-liberal approaches. However, as the EU case illustrates, even the most regulated approaches to CSR governance are fully confined by the hegemonic regime of embedded neoliberalism. This is not just a consequence of a specific institutional asymmetry, but is structurally dependent on the strategic selectivity of capitalist states, through which the interests of (fractions of) capital remain privileged. In effect, organised labour becomes increasingly marginalised, as regulated CSR continue to place an ever greater responsibility for current crises on labour. The recent refinements of EU CSR policies should thus not be understood as progressive, as they merely displace and reproduce the contradictory social relations in capitalist production networks. This paper has investigated the ways CSR are now actively becoming part of the European state project and its market-based, antiwelfare approach to embedded neoliberalism. In the decade leading up to the financial crisis, the Commission’s stark anti-regulation stance was based on the assessment that CSR needed to be safe-guarded from state interference, and that any deviation from such a purely voluntary approach would stifle social innovation and hinder the exchanges of best practices between corporations. In an effort to promote the legitimacy of CSR in wake of the crises, and directly promote CSR as an alternative to cooperative or state-led social progress, the Commission utilised a more regulatory approach in order to include other social forces such as organised labour. Further research will need to utilise scalar reconfigurations as a much more active conceptualisation of the political nature of CSR than this paper has allowed for. Here, I have merely used the notion of rescaling as a background on which to draw perspectives on the mode and content of state regulation on CSR. Using CSR as an active analytical component would necessarily entail engaging with the multifaceted patterns of CSR across social and political scales. Likewise, in this paper, the contradictory nature of CSR has appeared primarily as the baseline for understanding the contested nature of CSR governance at the state scale. Investigating the multiscalar characteristics of CSR would illuminate more clearly how crises are displaced 48

across scales in capitalist market societies and how CSR may enable a displacement of crises across time through changing conditions of social reproduction. For instance, current processes of “socially responsible marketization” do not in any way adequately recognise the value of reproductive labour. With the imminent risk of “adding gender at the end”, it should thus be clear that a non-feminist approach to CSR risks reproducing: the unjust and untenable separation of production and reproduction; 'essentialized understandings of women and girls' (Roberts 2014: 18); and business case narratives of gender inequality that provides 'instrumentalist solutions to complex social problems' (ibid: 18). If future critical CSR research thoroughly and critically discusses multi-scalar, neoliberal governance mechanisms, it may illuminate not only the contradictions of class relations, but also the patriarchy, sexism, and heteronormativity of CSR discourse and practices (cf. Macartney and Shields 2011). This would further raise the question on the extent to which discursive institutionalism is a feasible approach to the ideational and social struggles in hegemonic regime formations. As this paper illustrates, discursive institutionalism and neo-Gramscian Political Economy illuminate the contested nature of social and economic regulation, and combining them offers mediation between existing critical approaches to CSR. However, the potential ontological (in)commensurability between the two approaches needs more critical analysis than the scope of this paper has been able to offer.

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