How can business and financial policy get us out of the economic crisis and value greater societal resilience?

Friends of Europe launched its new initiative on the role of the private sector in the European project, which will run through 2023 and culminate at the State of Europe high-level roundtable.

This Policy Insight was the first event of our three-step journey on the private sector as a shareholder – rather than stakeholder – in a Renewed Social Contract, in which Friends of Europe will delve into what this change in responsibilities entails. 

The first high-level debate of the initiative, in partnership with Mastercard, brought together Gerassimos Thomas, European Commission Director-General for Taxation and Customs Union; Eimear Creaven, President for Western Europe at Mastercard; Pierre Wunsch, Governor of the National Bank of Belgium; and Laura Sullivan, Executive Director of WeMove Europe.

The debate delved into the role of the private sector as an active shareholder of the European social contract in light of the numerous crises facing Europe, as well as how behavioural taxes could help protect the environment and promote social values. The debate was also the occasion to hear from corporate leaders about why banks and companies today make sustainable behaviour part of their business practice.

The conversation was kickstarted by Wunsch, stating that “firms are there to produce stuff, following the rules set by authorities. But at the end of the day, firms also have to be good citizens,” stressing the responsibility of the financial sector in supporting society in developing sound fiscal policies.

Examining the role of authorities and markets will be an important part of emerging from the economic crisis, but companies themselves have a major part to play, he explained. This means there is “a bit of a role for the state” in promoting responsible behaviour, “but firms should also play their role. We are part of society, not observing at a far distance.”

This also means accepting criticism, Wunsch warned. “Whatever decision you take, there are going to be people who disagree with you.” He said the National Bank of Belgium itself had faced accusations of being “an unelected power” when it decided to communicate about the need for climate action.

Creaven built on this by arguing corporate behaviour should reflect strong leadership and a clear, sustainable vision. “Business is not going to do well in a fractured society, a failing climate,” she explained. Behaviour then means “doing well by doing good,” reiterating Mastercard’s motto.

“In the end, business needs to be incentivised to take risks and there should be a conversation about how to do this,” she accepted. “But business is not defined simply by the bottom line.”

In the “convergence of crises” brought by COVID-19, Russia’s war in Ukraine, the cost of energy and the cost of living, she argued that “this is absolutely the moment to ask: what is our role?”

“We have been very impressed with the direction Europe has taken in managing these crises,” she said. “We have a real opportunity to take a strong role, for instance, in the digitalisation of Europe and protection from cyber-attacks.”

“This is not just about philanthropy. It is about doing what is good for society,” she stressed. “It is really important we make this the DNA of companies.”

The public sector voice was represented by Thomas, who was introduced as the ‘tax man of Europe’. “In the Commission, we are planning a major reform of corporate taxation. This will include a focus on behavioural taxes and help us to move away from fossil fuels.”

“We have proof that taxation can change behaviour,” he explained, pointing to a “massive” switch in consumer habits when tax on cigarettes was increased in the EU a decade ago. However, he stressed that, overall, “when it comes to the environment, we have not changed the tax burden.”

Taxation can bring about change quickly, as well as raising sorely needed government revenue after years of health, energy and geopolitical crises, Thomas said. About half of all tax levied around the EU today is income tax, with 25% consumption taxes and just 10% corporate tax.

Delving deeper into the role of taxation in incentivising the private sector and corporations to be positive actors in a healthy social contract in Europe, Sullivan said: “Our children will ask why we have 50% income tax and 10% corporate tax. We are all structured into a system from the 1970s. This has to change.”

This means supporting “progressive regulation” and transparency, she argued. “So much cynicism and euroscepticism is driven by a perceived corporate capture of Brussels.”

The next events of our three-step journey on the private sector as a shareholder – rather than stakeholder – in a Renewed Social Contract will be held in the spring and fall of 2023.

Related content:

• Shaping Europe’s digital future: considering the impact of the Digital Services Act – Friends of Europe
• Digitalisation and democracy: The role of digital in the new social contract – Friends of Europe
• Making sense of transitions in an age of crises: a new social contract for a new era – Friends of Europe