Legal Provisions For Csr Under Usa Accounting Essay


Due to the social and environmental concerns that arose in the late 1960s and early 1970s, the US government passed laws to address the issues. The legislation adopted included pollution and hazardous waste control (e.g. Federal Water Pollution Control Act, The Clean Air Act Amendments of 1977), the workplace (e.g. The Occupational Safety and Health Act of 1970, The Equal Employment Opportunity Act of 1972) and consumer protection (e.g. The Consumer Product Safety Act, The Federal Hazardous Substances Act) (Hess, 2001). While companies had to meet the requirements set by the state and federal government, there was no requirement on reporting their performance to the public. Reporting came to the forefront again in the 1990s when companies used CSR reports as damage control. For example, Exxon-Mobil used CSR reporting after the Valdez oil spill, as did Nike after accusations of violating child labour standards in Southeast Asia. The problem with this is that without comparability and consistency standards the current reports merely represent biased marketing campaigns. [1] 

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In reaction to early regulation, there was a purposeful move by corporations to set up government affairs positions to administer their relations with Washington. Corporate lobbyists engage policy makers to define legislation that is advantageous to their business. In turn, supervisory body groups representing the public lobby congress to ensure that social, environmental and economic development concerns are measured against corporate concerns. As a result, the internal CSR movement is well defined, regulated and disseminated in an effort to influence the public and Congress. [2] 

In USA, the Corporate Social Responsibility (CSR) team in the Bureau of Economic and Business Affairs leads the Department's engagement with U.S. businesses in the promotion of responsible and ethical business practices. The mission of the CSR office is to: [3] 

Promote a holistic approach to CSR to complement the EB Bureau's mission of building economic security and fostering sustainable development at home and abroad.

Provide guidance and support for American companies engaging in socially responsible, forward-thinking corporate activities that complement U.S. foreign policy and the principles of the Secretary's Award for Corporate Excellence (ACE) program.

Build on this synergy, working with multinational companies, civil society, labour groups, environmental advocates, and others to encourage the adoption of corporate policies that help companies "do well by doing good."

In sum, U.S. progress to date has been partial and issue-specific.  There is no signal of enough force to prompt most U.S. corporations to develop human rights policies and procedures except for the largest, brand-facing companies, many of which have these in place anyway. But the United States cannot afford to ignore the issue. It needs to adopt a more sound approach so that the goal of ensuring corporate respect for human rights in a more targeted and efficient manner can be achieved. For example, the conflict minerals provision, while well-intended, is massively expensive to implement, and it is unclear whether it will attain its fairly narrow goals. Attacking each human rights issue in such a ponderous way isn't feasible. We need measures that lead companies to adopt systems that take human rights, writ more broadly, into account throughout their decision-making, from procurement to product design to investment choices. Moreover, the United States government has played an important role in developing industry-specific guidelines on human rights through its role in founding the Fair Labour Association and the Voluntary Principles on Security and Human Rights.  Such efforts should continue.

The human rights bodies in the Congress should hold hearings that regularly touch on the U.N. Guiding Principles and the nexus of business and human rights. The State Department should continue to leverage opportunities to heighten awareness of the agenda in other government agencies. [4] 

The U.S. society currently encourages socially responsible businesses to take only those profit-making actions that improve, or at least not harm, society, rather than create wealth for a privileged few. [5] While businesses may have the best of intentions to meet society's expectations, they struggle to do so because society's values are constantly changing and business adjusts to keep its relationship with society stable. [6] 

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The above discussion might lead one to the conclusion that any of the phenomenons of corporate social responsibility must include the relationship between social ideologies and both the ideological and operational aspects of a business ethic. Thus, corporate social responsibility is conceptualized as the degree of fit between society's expectations of the business community and the ethics of business. [7] 


The country like USA is very much concerned about the issues related to CSR. As we know, that United Nation had already taken the steps in the form of UN Global Compact. UN Global Compact is the draft which is not applicable as a binding law but it is voluntary. The principle laid down under the UN Global Compact are humane and for the welfare of the society. Many other countries are in favour of compulsory law for the CSR. USA and respective states of USA have already initiated in this direction.

In the year 2010, The State of California presented a senate bill no. 657 for the amendment of the Civil Code of the state of California by the name of the California Transparency in Supply Chains Act of 2010, which was approved by the governor on 30.09.2010.

Section 1714.43. (a) (1) Every retail seller and manufacturer doing business in this state and having annual worldwide gross receipts that exceed one hundred million dollars ($100,000,000) shall disclose, as set forth in subdivision (c), its efforts to eradicate slavery and human trafficking from its direct supply chain for tangible goods offered for sale. [8] 

Any "retail seller" or "manufacturer" doing business in California and having at least $100 million in annual worldwide gross receipts is subject to the Act. The Act defines "retail seller" as an entity listing retail trade as its principal business activity code on its tax return. Similarly, a "manufacturer" is an entity that lists manufacturing as its principal business activity code on its tax return. [9] A company is considered to be "doing business in California" if (i) it is organized or commercially domiciled in California; (ii) its sales in California for the applicable tax year exceed the lesser of $500,000 or 25 percent of the company's total sales; (iii) the real property and the tangible personal property of the company in California exceed the lesser of $50,000 or 25 percent of the company's total real property and tangible property; or (iv) the amount paid in California by the company for compensation exceeds the lesser of $50,000 or 25 percent of the total compensation paid by the company. [10] 


Any company subject to the Act must post a "conspicuous and easily understood" link on its web site to a statement that shall, "at minimum, disclose to what extent, if any" the retail seller or manufacturer:

Engages in verification of product supply chains to evaluate and address risk of human trafficking and slavery (specifying whether the verification was conducted by a third party).

Conducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains (specifying whether the verification was an independent and unannounced audit).

Requires direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business.

Maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and human trafficking.

Provides company employees and management who have direct responsibility for supply chain management with training on human trafficking and slavery, particularly with respect to mitigating risk within the supply chains of products.

In the event the retailer or manufacturer does not have a web site, consumers must be provided with a written disclosure containing the above information within 30 days of submitting a written request.


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The act is a disclosure law and does not force any substantive regulation on supply chain activities. Nor, unlike the "conflict minerals" provisions of the Dodd-Frank regulatory reform law, [11] does it compel any positive obligations on companies to carry out diligence concerning the existence of slavery or human trafficking in their supply chains. Nonetheless, as a matter of corporate social responsibility as well as public image, companies may wish to consider whether it is appropriate to adopt policies or procedures to mitigate the risk that slavery or human trafficking exist in their supply chains


As a result of U.S. Securities and Exchange Commission investigations in the mid-1970s, over 400 U.S. companies admitted making doubtful or illegal payments in excess of $300 million to overseas government officials, politicians, and political parties. The abuses ran the scale from corruption of high foreign officials to secure some type of constructive and encouraging action by a overseas government to so-called facilitating that were made to ensure that government functionaries discharged certain ministerial or clerical duties. One major example was the Lockheed corruption scandals, in which officials of aerospace company Lockheed paid foreign officials to favour their company's products. [12] Another was the Banana gate scandal in which Chiquita brands had bribed the President of Honduras to lower taxes. Congress enacted the FCPA to bring a halt to the bribery of foreign officials and to restore public confidence in the integrity of the American business system.

The Act was signed into law by President Jimmy Carter on December 19, 1977, and amended in 1998 by the International Anti-Bribery Act which was designed to implement the anti-bribery conventions of the Organisation for Economic Co-operation and development.

The Foreign Corrupt Practices Act of 1977 (FCPA) is a U.S federal law and known primarily for two of its provision one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and other concerning bribery of foreign officials.

As stated earlier, the U.N. Global Compact's 10th Principle states that "businesses should work against corruption in all its forms, including extortion and bribery." [13] This clause clearly involves all the companies which are establishing and managing effective ethics and compliance programs that protect the payment of the bribes. This itself is a very significant challenge as the corruption is found everywhere even in the companies and it is really difficult to through it out. But, from the perspective of CSR, working against corruption means something more. From this perspective, corporation should be motivated and shall form an environment in which they want to operate. With respect to corruption, socially responsible corporations can be a positive influence in developing countries. There are some signs and evidences by which it can be found that corporation with an appropriate anti-corruption attitude can potentially assist in combating the enabling environment that supports corruption that harms the country's citizens. [14] Resent trend shows that USA including other OECD countries with anti-bribery law is reducing their investments in the countries where corruption has turned into a very bad situation. This reduction in investment not only causes the harm to the country which is having high corruption rate but also it forces the corporations to take preventive steps, such as not to enter into a new market, which is a great loss to the corporation and the host country. When the companies from the nations that are party to the OECD anti-corruption treaty decline to invest in a nation with high levels of corruption, those investments are made by corporations from nations where anti-bribery laws are not enforced. Now, the challenge is how to encourage the investment in corrupt and dishonest countries and the light of hope is CSR, where the possible advantage from investment can be done because they encourage management to adopt a different mind-set towards anticorruption. Rather than being stuck in the compliance stage where the corporation focuses only on what it should not do, a CSR perspective encourages corporations to seek to actively solve the problem and work with other stakeholders to find solutions. Thus, a CSR perspective pushes corporations to not just avoid harm from their actions, but to take actions viewed as positive for society.

Transparency International's guidance on reporting on the U.N. Global Compact's 10th Principle provides significantly more detail. This guidance places indicators into three different categories: [15] 

(1) "Commitment and Policy: how your organization has committed to a zero-toleration of corruption;"

(2) "Implementation: how your organization's commitment has been put into practice through detailed policies and systems;" and

(3) "Monitoring: how your organization monitors progress and has a continuous process for improvement."

The CSR community is not merely determined for establishing the ethical principles corporations should follow when conducting business, but is focused on the process of ensuring that corporations are actually living up to those principles and working with relevant stakeholders to ensure continuous improvement in a constantly changing environment.

CSR in France

The idea of corporate social responsibility is an old one, whose origins can be traced, in particular, to the paternalism of certain employers (such as Koechlin in Mulhouse and Schneider at Le Creusot) in the late nineteenth century. Even codes of conduct, which today are one of the instruments for the advancement of social responsibility, are not a recent phenomenon: since the beginning of the twentieth century, professional organisations and commercial undertakings as well have been adopting texts containing social standards that employers must observe. An analysis of these first codes of conduct shows that, in most cases, they were adopted in the wake of major failures, the undertakings' objective being to 'put their house in order' rather than have the State do so with a heavier hand.

In most cases, socially responsible practices are regarded as commitments that have only purely moral value and are incapable of producing any legal effects. An analysis of French positive law, however, shows that social responsibility is exercised within an increasingly precise legal framework, particularly because the law encourages undertakings to adopt standards of social responsibility. These promptings may be addressed either to the investment funds, which then bring economic pressure to bear on the undertakings, or directly to the undertakings themselves. The first laws to cover the notions incorporated in CSR, though without this term being explicitly mentioned, appeared in France in the middle of the 1970s with a law on social reporting 1977. [16] Without referring specifically to CSR as such, this law already required that the social reports that were compulsory for companies with more than 300 employees should apply 134 specific measures and indicators, and these reflected notions are now commonly used in relation to CSR. Thus the social report required by this 1977 law opted deliberately for a social vision that focussed entirely on employees and social policies (Igalens and Joras 2002). However, it was mainly after 2000 that the body of legislation began to develop.


The turning point was undoubtedly the law of 15 May 2001 on new economic regulations.2 With the adoption of this "NRE" law (loi Nouvelles R´egulations Economiques), which today affects more than 700 listed companies, France was the first country to make it mandatory for listed companies to account for the social and environmental consequences of their activities. When the French Council of State later fixed by decree the information that the business report should contain regarding social responsibility, the legislative arm gave themselves the means to oblige these listed companies to be transparent in their activities. More obligations followed on from this decree in the social and environmental areas: numbers hired, types of contract, information on staff cutback plans, organization and length of the working week, pay scales, health and safety conditions, labour relations and reports on collective agreements, training policy, employment and professional integration of the disabled, community work, these were the main social areas where companies had to account for their actions. With regard to environmental areas, they had to be in a position to notify their consumption of resources and any measures taken to improve energy efficiency such as nuisance control and waste treatment.

In France, the Loi sur les nouvelles régulations économiques (New Economic Regulations Act) of May 2001 added a new Article L 225-102-1 to the Commercial Code, making it mandatory for the board of directors or executive board of listed companies to present a yearly report to shareholders 'on the manner in which the company takes account of the social and environmental consequences of its activities'. Thus, starting with the financial year ending 31 December 2002, all listed companies in France must prepare annual reports, taking account of the three aspects of sustainable development: economics, the environment and social affairs. [17] 

Since 2001, French listed companies had to report on a rather comprehensive and precise framework of environmental, social and governance indicators. It sparked the extra-financial reporting trend in France. Actual efforts have progressively been made over the last decade by French listed companies, especially the largest ones. However, to fill the reporting gap between listed and non-listed companies, the legislative framework had to be reviewed. [18] 

Consequently, during the "Grenelle de l'Environnement", a large multi-stakeholder forum on sustainability issues and public policies supporting CSR for France, an agreement has been reached to broaden this reporting process and make it more reliable. After tough and long discussions between civil society and business representatives, a bill has been passed and has been transposed into the French Commercial Code, in July 2010. It took 2 years of negotiations and the publication of the decree precising the information to be reported (in May 2012) to actually implement the Act. It enacted that all companies, private and public, exceeding more than 500 employees, have to report on the social and environmental consequences of its activities. This extra-financial information will have to be embedded in the annual management report, approved by the Board of Directors, verified by a third-party body and given to the annual general meeting. The mandatory information concerns the whole financial scope of the firm.

Yet this Act aims at forcing companies to progress in reporting their environmental and social information: there is no sanction (such as fines), requirements are on a "comply or explain" basis and the implementation is progressive. The only juridical risk for companies is that if a company fails to comply any stakeholder could go the court and claim the missing information. Listed companies will apply these requirements as of FY 2012. This Act will be reviewed after three years and is under the pressure of the European Commission, which prepares its own recommendation for 2013, to extend the reporting of extra-financial information.


This Act is consistent with the approach of integrated reporting: companies have to include in their annual management report «information on the way in which society takes account of the social and environmental consequences of its activity as well as its societal commitments for sustainable development. The top management signs and is accountable for this report. It also forces company to match their extra-financial reporting schedule with the financial reporting schedule.

For businesses: The Grenelle II Act modifies several Codes applying to the different possible legal forms in France. For instance it modifies the Commercial Code (article 225-102-1) which applies to limited companies. The requirements also apply to partnerships limited by shares, European companies, cooperative societies, agricultural cooperative societies, mutual insurance companies, credit institutions, investment companies and financial companies. However, it does not apply to limited liability companies and private limited companies (less restrictive forms of limited company), general partnerships, property investment companies and joint-interest organizations.

For public authorities: the article 226 of the Grenelle II Act includes extra-financial reporting requirements for public authorities.

Companies will have to consolidate the extra-financial information for all of their subsidiaries, as long as the parent company exceeds the thresholds even for their non-French subsidiaries.

Reliability: an "independent third-party body" (such as the statutory auditors but also bodies approved by the COFRAC, the French accreditation body) has to verify the information disclosed. An inter-ministerial decree will detail the specifications of its mission. Due to the potential high cost for such missions, the decree is likely to focus on a verification of the reporting process and not a verification of the data. This decree is likely to be consistent with the verification guidance from the ISAE 3000 and the AA1000. This body is appointed either by the CEO or at the annual general meeting for a maximum of 6 years (eg: the body may be named for only 1 year). The opinion of the body is documented in a report which deals with the honesty of the information provided by the company, the explanations provided when an information is not reported (comply or explain rule) and the due diligences performed. The report is included in the annual management report.

Transparency: the principle of the "comply or explain" prevails and companies need to get a certificate of compliance from their independent third-party body. The body will also check if the company reports the mandatory information or explains why it does not (gap analysis). [19] 

The Act does not set sanctions if companies fail to comply on time. However, given that the requirements are part of the Commercial Code, shareholders have the right to take legal actions; if it turns out for instance that environmental liabilities were high and were not disclosed.


France is one of those countries which opted for the mandatory approach rather than the incentive approach. She is good example of a dual approach to organizational social responsibility can be, conceived as a redefinition of relations between political, economic, and social actors. Ultimately, after certain period of time, this country will reap the fruits of the CSR.