A European Union flag flies next to a union flag at the European parliament. Photograph: Martin Argles for the Guardian
A historic law finally passed in the European Parliament yesterday, under which major businesses across our continent will be required to report on social, environmental and human rights impact in their annual company report.
I first proposed this change to EU accounting directives in a European Parliament report as long ago as 1999. The long journey of the campaign provides a case study in how to win the argument for sustainability against business association lobbyists who have remained steadfast in their opposition until today.
The low point came in 2006 when Business Europe, having been given access, lobbied then commissioner Gunther Verheugen, to tear up draft proposals to be replaced with a text which rejected regulatory action. A new definition of corporate social responsibility (CSR) was adopted which effectively ruled out further dialogue.
As CSR Rapporteur in three successive European Parliament terms, I condemned the change. The major NGOs began to boycott the European multi-stakeholder forum I had forged with the European Commission. Enlightened business leaders looked the other way.
So what changed?
First, intensive campaigning by an umbrella group of NGOs - the European Coalition of Corporate Justice. My own pressure too helped to persuade Verheugen, who had campaigned as a student against corporate injustice, to avoid a legacy of failure. So in the last months of his tenure, the commissioner adopted a new open CSR definition which restarted dialogue.
Meanwhile, Denmark had adopted its own reporting law which had a 92% compliance rate in its first year. At the international level, businesses responsible in voluntary sustainability reporting in the international Global Reporting Initiative (GRI) had got together with global accountancy standard-setting bodies to make the concept of integrated reporting a global aim.
I had begun to work closely with my counterpart in the UN system, the visionary special representative on business and human rights, John Ruggie, whose concept of a "smart mix" between regulation and voluntarism was crucial in depolarising the debate in Brussels and Geneva.
Support from other quarters, including the Prince's Accounting for Sustainability Project, also helped to make businesses think twice.
This didn't stop the office of the president of the European Commission seeking to block a renewed commitment to legislate in 2011. With nothing to lose and with the full support of the three new relevant European commissioners, I said in plain terms that, with India, China, Brazil and South Africa all making some requirement for corporate sustainability reporting, it was humiliating to take part in global initiatives saying the EU would not.
Even after the new commitment was made, a letter rejecting the proposal was written by the German government, copy and pasted word-for-word from a letter written by their own German Business Association fewer than 24 hours before.
Nevertheless, steadfast support from the new commissioner responsible coming from the centre-right, Michel Barnier, matched by the championing of the proposal by centre-left governments in France and Denmark saw negotiations make progress.
In Brussels, I co-authored a parliamentary report together with an Italian Christian Democrat colleague, which put maximum cross-party pressure in support of the legal proposal. Behind the scenes, the GRI had mounted an expert lobbying operation in support, while a key business lobby group - "CSR Europe"- signalled a change in mood among at least some companies to begin to question not whether but how?
So with the clock ticking towards European elections, a compromise was struck.
It isn't perfect. Insistence from David Cameron that it would mainly apply only to listed companies reduced the scope from 18,000 to just under 7,000 European companies at a stroke.
Nevertheless, the number of companies undertaking ESG reporting will more than double compared to existing voluntary arrangements, and they will do so on their "policies, risks and results" in relation to society, the environment and human rights. The report must be included within the company's management statement. All of this represents a real step forwards to the aim of Integrated Reporting.
At one level, today's vote is an bathetic rubber-stamping of a deal already done. At another it is a landmark decision in the quest for corporate accountability over many decades. I am thankful to the network of advocates, campaigners and supporters throughout Europe and the world who have helped us get to this day.
For Guardian Sustainable Business readers, you will see the need to ensure business associations better reflect the advocacy in your own companies. But I genuinely hope that today will mark a historic date in the transition to business sustainability for all.
Richard Howitt MEP is European Parliament Rapporteur on Corporate Social Responsibility
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