The tenuous link between CSR performance and support for regulation: Business associations and Nordic regulatory preferences regarding the corporate transparency law 2014/95/EU

Daniel Kinderman

Business and Politics, 2020, vol. 22, issue 3, 413-448

Abstract: Do countries with high corporate social responsibility (CSR) performance support more stringent supranational regulation? Following this logic, existing scholarship claims that Nordic countries push for tougher regulations to sharpen their competitive advantage. On the basis of an examination of the negotiations over the EU Directive 2014/95/EU, a corporate transparency law that requires firms to report on their social, environmental, and human rights impacts, this paper argues that strong CSR performance does not necessarily entail strong support for regulation. Nordic companies perform well when it comes to sustainability, but except for Denmark, Nordic governments’ support for the Directive was lukewarm. To explain why, I examine the dynamics between CSR leaders, business associations, and party politics. I find that business associations are key for explaining this outcome. While some Nordic CSR leaders provided support, business associations, in which SMEs with lower CSR performance comprise the bulk of the members, were forceful opponents of regulation, unless domestic regulations are in place, in which case these associations support supranational regulations to level the playing field. I also stress the importance of partisan politics and extend the analysis to mandatory human rights due diligence. In sum, Nordic countries are much more heterogeneous than what the literature often suggests.

Date: 2020
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