Speech 06 July 2007
Sten Tolgfors, Minister for Foreign Trade

Statement by Minister for foreign trade Sten Tolgfors at Global Compact Leaders Summit

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Your Excellences, Ladies and Gentlemen
Freer trade and better market access for developing countries strengthens economic growth in the world, thus contributing to a gradual development of working conditions and labour standards.

Natural given and self created comparative advantages should be allowed to be used to the benefit of world economic development. Protectionist measures and limiting of market access prohibits growth and thereby delay improvement of social standards.

Trade contributes in opening up countries and economies, which is good not only for the economy, but also for democracy in the world.

Developing countries should be given market access, and the opportunity to trade themselves to prosperity. Demands can and should be asymmetrical. If Sweden had been met by closed doors by the outside world when we started to export, we would certainly have stagnated.

Corporate Social Responsibility can contribute both to a liberal trade regime in the world, and to favourable economic effects for companies.

To act responsibly is the right thing to do for companies. But there is also a strong economic rational in applying CSR. European consumers take great interest in a products price and quality, but also in the manor it has been produced. Consumers are increasingly favouring products that are produced, in what they consider to be reasonable environmental and working conditions.

If issues such as the environmental effects of production and labour standards are not addressed properly any company can quickly find it's market position changed for the worse. Consumers, share holders and media are closely scrutinizing company operations.

Social responsibility in business promotes economic success. A company with a good image stands a far better chance of success than companies with an indifferent approach to the conditions where they operate.

CSR is less and less being considered and extra cost, and more an more perceived as a vital part of companies market building strategies. The workers of today are the consumers of tomorrow, particularly in developing countries. Companies acting as responsible citizens in the local community will benefit from this.

Swedish multinational companies are interested in CSR and play a significant role in setting a good example, and I do support it. They underline their long term commitment to CSR, the need to transfer knowledge to and co-operate with local suppliers.

I do not want to see growing public interest in labour standards and environmental issues turn into protectionism - into demands for excluding paragraphs or clauses in international trade agreements. One way to avoid this is to encourage CSR. Anyone in favour of free trade and market access for developing countries need to show an alternative to protectionism, which would prohibit economic development where it is most needed.

To promote corporate social and environmental responsibility is more constructive than clauses for trade, which can easily turn into hidden protectionism.

Countries would be prevented from developing if they were confronted by demands to fulfil requirements based on standards that western countries only achieved after several decades of growing prosperity. It works the other way around, with economic development comes better standards and regulations.

Populist sentiments urging politicians to close the door to trade when serious situations are discovered may and will occur, and that's why it is very important for businesses to show willingness to act responsibly on a voluntary basis.

Governments have the responsibility to make, continuously modernize and uphold laws. If laws are not enforced, responsible companies that follow the law, and adds on additional responsibility, will be hurt by unfair competition.

There are also companies that disregard laws and regulations, and don't take any additional responsibility. Those companies are favoured if governments do not uphold the law. This should not be in any ones interest. But yet, it still occurs.

What companies can do must be regarded as a complement - not as an alternative - to the national legal system. CSR, by some, used to be seen as an additional responsibility that strained company resources. But CSR should be seen as providing tools that can help companies to act and navigate wisely in countries or regions with week governments, institutions or laws. It helps business to relate to inadequate conditions concerning human rights, environmental protection, core labour standards and corruption.

In some cases national laws are good, but not upheld, as I just mentioned. In other, sufficient laws still remain to be made. In other cases there are no government in total control of a situation or an area.

CSR is and must be business owned and business driven.

CSR is not an alternative to legislation. It is a set of actions based on company conviction and on respect for the values of the stakeholders that the company interacts with. We are talking about ethical issues, in which companies answer directly to owners and consumers.

CSR is also important in creating and maintaining real market access for countries, and their exports. The thing is, countries don't trade with one another. People - consumers - buy products and services from companies.

Consumer confidence and preference decides which companies from which countries they favour. We create the framework for trade with governmental trade agreements. But real market access is so much more.

A bad reputation, or a perceived indifferent attitude, can severely hurt a country's' or its companies' real market access.

Let's not forget that many companies have been globalised for several decades, and very early had to learn to navigate in challenging conditions.

Apart from providing the necessary legal framework and making sure that laws are abided by, governments should also encourage companies to act in a responsible way.

In the words of Harvard's Professor Joseph Nye, who also coined the term soft power: "leadership is not just a matter of issuing commands, but also involve leading by example and attracting others to do what you want& you need to get others to buy into your values." Hence Soft Power is about moral leadership. It is about encouraging and facilitating action.

Governments can include CSR in the political dialogue with other countries. This is particularly important with countries that face challenges in human rights or labour rights. Responsible practices from the corporate sector will strengthen civic society.

If several hundred thousand people in a country that lacks tradition of full respect for human rights work in companies that put a lot of emphasis on acting responsible and respectfully - this will affect the society in a very positive way. The first two principles of Global Compact focuses on the human rights dimension.

The UN's Global Compact and the OECD Guidelines for Multinational Companies encourage companies to make these approaches systematic. But only a small share of the companies around the world are systematically addressing the issues.

As SME:s becomes more involved in international trade and business ventures, they too need to think a about CSR. They need practical guidelines, because they often lack resources to employ experts of their own. Here more work is needed. Responsible business practices are important in a globalisation of the economy that combines trade liberalization with reductions in poverty and inequality.

Governments need to support the voluntary work performed by companies, and stand behind the work done in Global Compact and the OECD.

Now, Paul Hohnen will present a report to us called "Soft Power: Hard Evidence". In his view businesses are drivers and governments have a role as enablers of corporate responsibility. Paul Hohnen is a former Australian diplomat to the OECD and EU. He is an expert on international standards in the field of sustainable development and CSR.

He has been closely involved in the development or implementation of many of the leading standards, including the OECD Guidelines for Multinational Enterprises, the UN Global Compact and the Global Reporting Initiative (GRI).

Today he is based in Amsterdam and in addition to being a Special Adviser to the Global Compact and GRI, he is an Associate Fellow of the Royal Institute for International Affairs (Chatham House), London.