Public policy: rules and regulations

December 01, 2004

Is regulation always a burden on free enterprise? Or can it help spur greater voluntary action and create a competitive ‘level playing field’? Pragmatism is the present government’s watchword.

OFR update

The government published a revised approach to the introduction of the new statutory Operating and Financial Review on November 25. The regulations will now come into effect for financial years beginning on or after 1 April 2005 (and not 1 January 2005) and will not be enforced until one year after the duty to prepare OFRs has kicked in. It will no longer be mandatory to circulate a hard-copy of the OFR to all shareholders and the government has dropped the requirement that auditors give an opinion on whether the directors have used ‘due and careful enquiry’ in preparing the OFR. Auditors will no longer be required to review ‘the process’ followed in producing an OFR. The focus is still on what shareholders, not wider stakeholders, need for a rounded understanding of the forward-looking prospects of the business. Companies are required to “consider and include information on their environmental, employment, and social and community policies to the extent necessary for shareholders to understand how these are impacting the business and wider community”. The Accounting Standards Board has published its definitive implementation guidance, now expected by April 2005. Contact DTI 020 7215 5000 (http://www.dti.gov.uk)

Governance governing

The European Commission adopted a directive on annual accounts on October 28. The directive requires EU-based listed companies to disclose an annual corporate governance statement as part of their annual report. The directive does not make reporting on CSR issues mandatory, but it does recognise the relevance of environmental and social issues in the context of corporate governance. It entitles companies to provide in their governance statements an analysis of those social and environmental aspects necessary to understanding their development, performance and position.

Contact Reijo Kempinnen, European Commission, on 00 3 295 3358 (http://www.europa.eu.int)

Blessing in disguise

Regulation is not a barrier to doing business, it is actually an opportunity to improve the way a business operates, argues a report launched on November 8. From Red Tape to Road Signs, published by CORE, a coalition of NGOs, trade unions and academic institutions, finds that countries with high levels of competitiveness also tend to have high levels of environmental and social legislation, such as Canada and Sweden. In contrast, voluntary standards, it says, lead to fewer improvements, the costs of which are borne by the poorest members of society. The report cites among the successes of regulation a 75% reduction in sulphur dioxide emissions since 1990 and a 65% reduction in water pollution levels since 2001. Contact Deborah Doane, CORE 020 7566 1665 (http://www.corporate-responsibility.org)

Ditch the creep!

Avoiding Regulatory Creep, published by the government’s Better Regulation Task Force on October 21, calls for greater consistency and clarity to regulations, such as banking, food standards and health & safety, describing increasing regulation as ‘a hidden menace’ to business. Contact BRTF 020 7276 2142 (http://www.brtf.gov.uk)

Royal Treatment

The Companies Bill (Audit, Investigations and Community Enterprise) received Royal Assent on October 29. The new act strengthens the independent regulation of the audit profession and the enforcement of company accounting requirements. It also provides the powers for the introduction of the new OFR regulations. A new form of incorporation is now possible, community interest companies, which are commercial enterprises seeking a profit for social gain. The government intends now to consult on the remainder of its wide-ranging company law review. Meanwhile, the Queen’s Speech, which was made on November 23, announced Bills covering animal welfare, consumer credit and disability discrimination. Published draft bills include the Company Law Reform Bill and the Corporate Manslaughter Bill.

Contact DTI 020 7215 5000 (http://www.dti.gov.uk)

Corporate Citizenship Briefing, issue no: 79 – December, 2004

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