Address by Tarja Halonen, President of Finland, to the Autumn Meeting of the Central Chamber of Commerce of Finland, 22 November 2001

The Social Responsibility and Ethical Values of the Business Enterprise


The principles of modern society are democracy, human rights and government by law. In order to ensure sustainable development, we need well-being and security, but we also need dynamism and freedom. Harmonizing the interests of the individual and the society is humanity's classic challenge - to which our era has also added an awareness of the integrity of the environment that surrounds us.

In addition to the traditional civil and political rights, the importance of economic, social and cultural rights is receiving emphasis. Entrepreneurship is an interesting and controversial part of this entity: entrepreneurship is an element of the dynamics of a successful market economy, but at the same time can constitute a risk to the well-being of the individual and the environment. Striking a balance is to our common advantage.

I assert that a modern, democratic society is a business' best home, too. That holds true here in Finland. I believe that we should also strive to create the sort of international community that will observe the same basic principles. That would be a good seedbed for a globalization that takes the individual and environment into account.

The individual must observe the rules of ethics comprehensively. From this it follows that the individual's deeds can be evaluated on the same grounds, and that the communities he or she creates must be subject to the same rules. On this basis it is logical, in my opinion, to assert that businesses, in their own way, also have a conscience and social responsibility.

The growth in the importance of businesses as economic players is demonstrated by the fact that, of the world's 100 largest economic entities, fewer than half are now States. The world's 500 largest businesses are responsible for 70 per cent of world trade and almost a third of the world's economic production. Businesses also accumulate a great deal of knowledge of regional and local cultures. The solutions reached by businesses are important to the increase of democracy and social harmony.


Are good morals enough?


Some believe that people do not need legislation - that moral codes suffice. Others claim that people need a strict network of external norms. Most of us believe pragmatically, however, that both are needed in practice. A division between legal and illegal, between right and wrong, is needed. The two constructs are, one hopes, harmonious with each other, even if they are not quite the same thing.

Likewise, the question of national or international regulations in relation to businesses' own ethical values and principles is best stated not in "either-or" terms, but as a matter of complementarity, as "both one and the other".

In an enterprise's operations, the realization of social responsibility and the taking of generally accepted ethical values into account work to the long-term advantage of both the business and the society. Values alone are not enough, however. We also need binding legislation and international agreements to ensure the rights of workers, a minimum level of consumer protection, and safety of production, goods and services. The meaning of ethically strong business enterprises as engines of development is extremely important.

In large measure, the words social responsibility of business enterprises continue to refer to economic responsibility, through which well-being is created; but it also means environmental and social responsibility. A business' ethical values are the internal operating principles in accordance with which the firm's activity is directed. Those principles create a business operation whose responsibleness is judged daily, from different perspectives, by owners, customers, workers, official authorities, civic organizations and other interest groups.

In the operating environment of businesses, a diversity of values prevails. This also leads to conflicts in values. In today's society, we need the skill of listening and the ability to establish a dialogue. In this fashion we can obtain an adequate degree of consensus on important questions and thus at the same time discover an ability to tolerate diversity.

I've been happy to observe that this new sort of discussion is being sought in the business world. In addition to the traditional labour market parties and the government, a variety of civic organizations, the Church and other so-called third-sector players appear to be involved here.

With the arrival of internationalization, Finnish businesses have become bound more and more closely by the international regulations that direct entrepreneurial activity - as Mr Vainio noted earlier. The deregulation of international trade has created a new sort of operating environment.

Although many fundamental questions of human rights, for example, have been resolved in our own country through comprehensive legislation and good administration, there is no cause for complacency. In view of globalization, we shall also be forced to confront new situations both in Finland and, within Finnish businesses, elsewhere in the world. We thus have reason to conduct an open discussion of both the ethical values underlying business activity and the social responsibility that businesses bear, if we are to keep ourselves abreast of the times and have an impact on that social responsibility.

International organizations have been preparing rules of behaviour for the globalized economy for quite some time already. In Davos, in 1999, United Nations Secretary General Kofi Annan presented an initiative called the Global Compact, whose aim was to create common principles to guide business activity worldwide. This initiative led to a joint declaration by business leaders, labour market organizations and civic organizations at the UN's General Assembly in July 2000. The declaration brings together the Declaration of Human Rights, the UN Environmental Programme and decisions of the International Labour Organization.

The Organisation for Economic Cooperation and Development's "Guidelines for Multinational Enterprises" is a new and very interesting document that emphasizes the responsibility of businesses. Its drafters succeeded in completing it in June 2000, after years of work. The ILO's labour norms constitute the foundation for the recommendations. Those norms apply to personnel policy, the environment, the prevention of bribery, consumer protection, competition, taxation, technology and product development, among other things. The key objective is to commit multinational corporations as well to sustainable development, by means of trust and cooperation.

This autumn the Commission of the European Union published its green book Promoting a European Framework for Corporate Social Responsibility. I'm certain that such broad acceptance of the issue will reflect itself in the current discussion of the World Trade Organization's evolution - as indeed was already evident in Doha.

To enliven the luncheon discussion I might briefly - in "headline" fashion - return the attention of those present to the Global Compact's nine principles:

· Businesses must support and respect the protection of international human rights
· A business must make sure it is not complicit in human rights abuses itself. This also means in relation to governments that abuse human rights.
· Businesses must accept freedom of association and honour the right to collective bargaining.
· Forced labour must be completely eliminated.
· Child labour must be abolished effectively.
· Employment discrimination is to be eliminated.
· Businesses must support a precautionary approach to environmental challenges.
· Businesses are to undertake initiatives to promote greater environmental responsibility.
· Businesses are to encourage the development and diffusion of environmentally friendly technology.

Within their own sphere of influence, businesses should thus support and honour international human rights and ensure that they themselves are not committing human rights offences. Business enterprises must also respect the right to organize and the right to pursue labour interests collectively.

I believe that the most important thing, however, is to underscore that every business must find its own way of manifesting its social responsibility, and must make that manifestation a seamless, integral part of its operations.

The responsibility of businesses for the environment has risen to take its place alongside economic and social responsibility. Acting responsibly means that the firm takes responsibility for keeping the land, water, and air clean. Everyone who is responsible for the business' operations must consider daily what he or she, and the firm, can do in the concrete sense to further sustainable development and elaborate such means of producing of goods and services as reduce environmental impacts. The responsibility of a business is particularly important when its activity has a substantial impact on cultures, changes in the quality of people's lives, the sustainability of natural resources, or the development of the natural-resource-based economy.

How to resolve the conflict that ensues when an enterprise adheres to differing principles in different countries? Ethically based long-term operations can only be established on a clear foundation of values that obligates the firm under all circumstances - values that each person in the firm adheres to in practice, everywhere, in good times and bad.

We are not the only ones facing these challenges. This summer I was pleased but a bit amazed to see a news report in the form of an advertisement covering the Helsingin Sanomat's entire first page. In the report, Chiquita stated that it had concluded an agreement with international worker organizations that confirms adherence, on the plantations, to the ILO's general regulations. Chiquita also announced that it had gained certification for its environmental behaviour. We've come a long way. When one looks at the trend, one understands how tremendously important it is that a security concept based on weapons has been enlarged to include everyday security problems - the environment, education, social security, infrastructure, and so on. In South America, too, the change has created a foundation for strong economic development - a setting in which businesses, too, are prospering happily. In places - not everywhere, regrettably - the change in Asia has been just as fast.

Today, every international enterprise knows that generating a good economic result by producing goods and services for those who want them no longer suffices as the firm's social justification. The business must also give close consideration to how it generates that result. The value of its actions arises not simply from the economic result but also from the consequences of those actions for people inside and outside the enterprise, and from the activity's impact on the environment. These elements must be combined in a way that sustains the business and furthers its development as it moves towards the future.

Businesses are not the only players. In democratic countries, the parliament and government decide on the framework of activity. But that famous market is also directed by what is done or left undone by voluntary organizations, the trade union movement, and pension funds, which hold more than half of the world's investments. Governments or municipal decision-makers must themselves answer for the ethical implicating of their financial decisions, their purchasing decisions included. Political decision-makers are required to find solutions that correct imperfectly and detrimentally functioning markets.

Helping the development of our neighbours to the east and south is an area to which I'd like to draw attention. A significant number of Finnish businesses operate in areas where people live with substantial economic difficulties. It is important that enterprises active in these areas know their responsibility for the overall improvement and well-being of those areas and the people who live in them - as for the sustainable development of the environment and natural resources. For example, if the local economic situation worsens because of the utilization of natural resources, an attempt should be made to supplant that form of utilization with other means.

Globalization is full of threats and possibilities in the form of new sorts of entities. Globalization may also cultivate democracy and, through the chains of consumption and information, bring a message from producers to other producers, from producers to consumers, and from consumers to producers - simply put, from people to people. The network must be open and capable of leading to the replication of good practices and the nipping of bad ones in the bud. This globalization needs everyone's support. Responsible behaviour on the part of international voluntary organizations has a great role here.

The responsibility demonstrated by a business that operates on a strong ethical foundation is a success factor, but it is more than a marketing gimmick. In the case of this sort of enterprise, ethical values may truly clarify its image and create value-added for the firm itself, workers, and consumers. Ethicalness is not simply a readiness for possible troublesome questions: it presents an opportunity for sending a positive message. A business that bases its operations on firm ethical values is also certain to be a dependable investment target for people, too.

I wish the Central Chamber of Commerce success in its work in cultivating the social responsibility of businesses and advancing the open discussion of ethics.