Corporate social responsibility (CSR) is changing: new risks for multinationals and investors

Paris, 17th June 2014

Kepler Cheuvreux and Affectio Mutandi have unveiled the first report to look at the materiality of the legal, social and reputational risks facing businesses (especially multinationals) and investors. The increasing need to allow for ESG issues, and the “judicialisiation” of such issues, exacerbated by the digital activism revolution, present a challenge for due diligence. Investors and socially responsible investment are the main collateral victims of these new risks.

Main lessons from the report. Stakeholders are learning to combine (voluntary) soft law with (binding) hard law to invoke corporate responsibility where businesses fail to respect their commitments in social responsibility matters, particularly in developing countries (e.g. Nike/Kaski, Samsung, Eramet, Rana Plaza, Auchan). NGOs are citing the Guiding Principles of the UN and the OECD to confront controversial companies. Investors and asset managers holding securities issued by these businesses (e.g. Dutch and Norwegian investment funds) face questions about the responsible nature of their investments and calls to exert their influence with the companies or projects that they support.

Civil Society 2.0 is exacerbating the reputational and legal risks relating to ethical commitments. The possibilities for mobilisation offered by digital technology are exposing businesses and investors to unprecedented demands and social pressures, which might lead some of them to avoid certain sectors or countries when making investments (e.g. Israel), and in the medium term could even result in class actions or restrictive regulations, notably with the Open Governance principles and online petitions. To reduce the risk of reputational attacks or legal action, corporates and investors must adapt their due diligence and tighten up their specifications. New shareholder commitment strategies by investment management firms are a step in this direction. The clout wielded by such firms in financing the economy requires them to exercise their influence by always setting out their expectations with regard to ESG issues.

Stéphane Voisin of Kepler Cheuvreux commented: “Companies are increasingly being questioned about the judicialisiation of their social responsibility commitments. We analyse how voluntary commitments can become legal obligations, and we assess the key importance of managing risks in the face of digital mobilisation.”

Pierre-Samuel Guedj, Chairman of Affectio Mutandi, added: “Material risks arise for financial companies when OECD-type commitments evolve into binding law. This implies ever greater due diligence and commitments with regard to the investments made.”

Methodology of the report. In the report, we focus on regulatory and social change. We analyse the former by identifying relevant soft law tools and their interaction with hard law, which represents a new risk factor. Our analysis of the mobilisation techniques deployed by stakeholders, notably those made possible by the digital revolution, focuses on a sample of NGO actions at international level. The data collected on these changes enables us to tease out useful principles for describing the factors that trigger and aggravate reputational, legal and social risks.

About Affectio Mutandi

Founded by Pierre-Samuel Guedj and Yann Queinnec, Affectio Mutandi is the leading consultancy focusing on social, regulatory and reputational strategies, at the interface with stakeholders, covering corporate communications, crises, influence, public affairs, social responsibility, legal risks and relations with NGOs.

For further details, please go to:

Press contact

Pierre-Samuel Guedj
[email protected]
+33 6 80 45 18 86

About Kepler Cheuvreux

A leading European research house and brokerage focusing on equities and non-financial research, Kepler Cheuvreux has a presence in 13 financial centres in the EU and the US. Its Equity and Credit teams reflect its unique commitment to the UN-supported Principles for Responsible Investment by incorporating ESG issues into their research models and into the service they provide to local and international investors.

For further details, please go to:

Press contact

Stéphane Voisin
[email protected]
+33 6 83 64 50 99