The OFR affair has certainly brought the importance of non-financial reporting to the public’s attention. But the resulting confusion has been a distraction for companies wanting to produce accurate and in-depth accounts on their impacts.
At best, the OFR affair has brought the importance of social and environmental reporting to the public’s attention. At worst, the confusion surrounding the government’s apparent indecisiveness has been a distraction for companies wanting to produce accurate and in-depth accounts on their non-financial impacts.
After the chancellor canned the OFR in November (or “recalibrated” reporting requirements, in government speak), the government was forced to backtrack on its hasty decision by Friends of the Earth, and subsequently extended consultation on the matter until March 24. Importantly, the government allowed stakeholders to make comments on social, community, employee and environmental matters, which are now included in the new regulations, making a strong case for seeing the requirement to produce a business review as every bit as good as the pre-existing OFR regulations.
The difference here is the government is not providing any technical guidance for companies compiling business reviews, meaning that they are in effect using the ASB’s OFR standard issued in May last year. Crucially, the government is also saying it has introduced ‘safe harbour’ protection for directors, shielding them from lawsuits over untrue or misleading statements in the business reviews. This is important because without ‘safe harbour’ companies were not going to disclose anything contentious anyway.
As we have argued before, step back from the brouhaha and the real issue at stake is again whether it is indeed desirable for the state to regulate these issues. Is government regulation requiring mandatory disclosure better than investor and wider stakeholder demand driving voluntary action? There is a strong case to argue that politicians and civil society should concentrate rather more on substantive issues like climate change, world trade and poverty, and interfere rather less on generic issues like governance.
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