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

Published online by Cambridge University Press:  10 September 2019

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.

Type
Research Article
Copyright
Copyright © V.K. Aggarwal 2019 and published under exclusive license to Cambridge University Press

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Footnotes

The author would like to thank Robert Strand for his support and encouragement, and the anonymous reviewers as well as Jette Steen Knudsen and for their very constructive comments and suggestions. The article would have been impossible without the generosity of countless interviewees – my thanks go out to all of them. The usual disclaimers apply.

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