The European Commission has urged companies to show greater social responsibility by considering employee welfare and the environment alongside profits when making business decisions.

Presenting a Green Paper on Corporate Social Responsibility in Brussels yesterday, the EU Employment and Enterprise Commissioners, Ms Anna Diamantopoulou and Mr Erkki Liikanen, said that an ethical approach was good for business.

"More and more firms are realising the link between profitability and best ethical and environmental practice. Conscientious firms not only attract and retain the best workers, they can also get ahead in the technology game, vital for that all-important competitive edge," they said.

Last year saw more mergers and acquisitions in the EU than ever before, but the Commission argues that most failed to reduce costs and were carried out in a way that damaged employee morale.