DRIVING CORPORATE SOCIAL RESPONSIBILITY (CSR) THROUGH THE COMPANIES
ACT: AN OVERVIEW OF THE ROLE OF THE SOCIAL AND ETHICS COMMITTEE - HJ
Kloppers*
1 Introduction
• The Companies Act of 2011 brought significant changes to corporate
law, introducing business rescue practices, new solvency and liquidity
requirements, but did not explicitly mention corporate social
responsibility (CSR).
• Section 72 of the Act indirectly aims to integrate CSR into a company's
governance structure.
• The Act empowers the Minister of Trade and Industry to establish social
and ethics committees through regulations for certain companies based
on annual turnover, workforce size, and nature of activities.
• The contribution of the Act in the CSR context lies in the introduction of
social and ethics committees.
• This article provides an overview of the role of these committees in
driving CSR.
• It covers the scope of application, functions, standards of conduct,
liability of committee members, and their powers.
• The government's aim is to encourage socially responsible behavior in
the private sector, enhancing social legitimacy.
2 General requirements
• Companies subject to Regulation 43(1) of the Companies Regulations,
2011, including state-owned, listed public companies, and high-scoring
companies, must establish a social and ethics committee with at least
three directors or prescribed officers.
• At least one committee member should be a non-executive director not
involved in day-to-day management and not engaged in management
for the previous three financial years.
• This requirement may lead to assigning a board member the
responsibility for CSR, fostering a significant role for CSR in corporate
governance.
• The inclusion of a non-executive director enhances transparency and
counters corporate greenwashing.
• While not mandatory, involving external CSR experts and stakeholders
could add value to the committee's operation.
, • Committee members should be key personnel directly involved in the
company's CSR efforts to integrate CSR into business practices
effectively.
• The committee is authorized to request information from directors,
officers, and employees and attend shareholder meetings to discuss its
functions, ensuring CSR becomes a regular agenda item.
3 Function of the committee
The social and ethics committee has the responsibility to monitor and report
on various aspects within its mandate, as per Regulation 43(5)(a). These
aspects include:
• Social and Economic Development:
• Monitoring the company's adherence to relevant legislation and best
practices related to social and economic development, including the
United Nations Global Compact principles, OECD recommendations on
corruption, Employment Equity Act, and Broad-Based Black Economic
Empowerment Act.
• Ensuring corporate citizenship by promoting equality, preventing
discrimination, reducing corruption, contributing to community
development, and maintaining records of sponsorships, donations, and
charitable giving.
• Environment, Health, and Public Safety:
• Evaluating the impact of the company's activities and its products or
services on the environment, health, and public safety.
• Consumer Relationships:
• Assessing the company's advertising, public relations, and compliance
with consumer protection laws.
• Labour and Employment:
• Monitoring the company's compliance with the International Labour
Organization Protocol on decent work and working conditions.
• Evaluating the company's employment relationships and its
contributions to the educational development of its employees.
The social and ethics committee is responsible for ensuring that the company
adheres to these various areas and reporting on its performance.
3.1 Social and economic development
ACT: AN OVERVIEW OF THE ROLE OF THE SOCIAL AND ETHICS COMMITTEE - HJ
Kloppers*
1 Introduction
• The Companies Act of 2011 brought significant changes to corporate
law, introducing business rescue practices, new solvency and liquidity
requirements, but did not explicitly mention corporate social
responsibility (CSR).
• Section 72 of the Act indirectly aims to integrate CSR into a company's
governance structure.
• The Act empowers the Minister of Trade and Industry to establish social
and ethics committees through regulations for certain companies based
on annual turnover, workforce size, and nature of activities.
• The contribution of the Act in the CSR context lies in the introduction of
social and ethics committees.
• This article provides an overview of the role of these committees in
driving CSR.
• It covers the scope of application, functions, standards of conduct,
liability of committee members, and their powers.
• The government's aim is to encourage socially responsible behavior in
the private sector, enhancing social legitimacy.
2 General requirements
• Companies subject to Regulation 43(1) of the Companies Regulations,
2011, including state-owned, listed public companies, and high-scoring
companies, must establish a social and ethics committee with at least
three directors or prescribed officers.
• At least one committee member should be a non-executive director not
involved in day-to-day management and not engaged in management
for the previous three financial years.
• This requirement may lead to assigning a board member the
responsibility for CSR, fostering a significant role for CSR in corporate
governance.
• The inclusion of a non-executive director enhances transparency and
counters corporate greenwashing.
• While not mandatory, involving external CSR experts and stakeholders
could add value to the committee's operation.
, • Committee members should be key personnel directly involved in the
company's CSR efforts to integrate CSR into business practices
effectively.
• The committee is authorized to request information from directors,
officers, and employees and attend shareholder meetings to discuss its
functions, ensuring CSR becomes a regular agenda item.
3 Function of the committee
The social and ethics committee has the responsibility to monitor and report
on various aspects within its mandate, as per Regulation 43(5)(a). These
aspects include:
• Social and Economic Development:
• Monitoring the company's adherence to relevant legislation and best
practices related to social and economic development, including the
United Nations Global Compact principles, OECD recommendations on
corruption, Employment Equity Act, and Broad-Based Black Economic
Empowerment Act.
• Ensuring corporate citizenship by promoting equality, preventing
discrimination, reducing corruption, contributing to community
development, and maintaining records of sponsorships, donations, and
charitable giving.
• Environment, Health, and Public Safety:
• Evaluating the impact of the company's activities and its products or
services on the environment, health, and public safety.
• Consumer Relationships:
• Assessing the company's advertising, public relations, and compliance
with consumer protection laws.
• Labour and Employment:
• Monitoring the company's compliance with the International Labour
Organization Protocol on decent work and working conditions.
• Evaluating the company's employment relationships and its
contributions to the educational development of its employees.
The social and ethics committee is responsible for ensuring that the company
adheres to these various areas and reporting on its performance.
3.1 Social and economic development
