New bill changes face of CSR reporting

November 29, 2006

The government’s revision of the Companies Bill will increase directors’ reponsibility for social issues, much to the disapproval of business groups.

BBC Radio 4’s The Westminster Hour is broadcast every Sunday at 10pm. It is a form of methadone for public affairs nuts who have overdosed on The Today Programme and Newsnight.

Jon Trickett MP, promoter of the Labour rebels’ amendment on the Companies Bill, recently went on the programme. Anyone who had nodded off (10pm is quite late for a Sunday) and woke to hear him must have thought that they had turned into Rip van Winkle. Rip van Winkle fell asleep for twenty years and when he woke up he found that nothing had changed. So it is with Trickett. His views on industry have mid-eighties, anti-private enterprise feel to them. The Blairite revolution has passed him by. He said his amendment was intended to help companies. He then launched a tirade of criticism of companies from A to Z (or more accurately A to W, as he began with Asda and ended with Wal-Mart).

Two days after Trickett’s spot on The Westminster Hour, the government effectively accepted the rebels’ amendment. The response from some spokespeople for industry was near-hysterical. The amendment merely put a requirement in the Bill that had been in the OFR, shelved by Gordon Brown. Industry was comfortable with the OFR proposals. Why then the warnings of added burdens for industry? Why the claims that industry was being strangled with red tape? The spokespeople sensed the government was no longer ‘on their side’. The answer to Trickett is not to retreat on reporting. Reports must be more robust, particularly on economics. They must be less coy about the social, environmental and ethical dilemmas faced in doing business. That will do more to help business than claiming a minor reporting requirement will hobble the whole show.

Related news

Companies Act becomes law

UK-listed companies must include their dealings with suppliers in their business reviews under a new measure introduced in the 696-page Companies Bill, which received Royal Assent on November 8 to become the Companies Act 2006.

To a chorus of disapproval from business groups, Margaret Hodge, the industry minister, made the last-minute amendment on October 16, saying the government would toughen its new laws on the social responsibilities of businesses.

The bill, previously the Company Law Reform Bill, introduces duties on directors concerning issues such as the welfare of employees, the community and the environment as well as the welfare of their company, obliging them to report on these aspects in their companies’ annual business review. Now, businesses must divulge their dealings with suppliers.

Business groups were unhappy with the amendment. In a letter to Alistair Darling, the trade and industry secretary, Miles Templeman, director-general of the Institute of Directors, warned of his concern at the “unacceptable” supply chain amendment. Warning of the “significant added burdens for business” that the change would impose, he said there were “potentially serious implications if information regarded by another party as commercially confidential is disclosed”.

The amendment also failed to impress groups that are campaigning for greater corporate accountability. Friends of the Earth Head of Accountability Craig Bennett said: “It’s great that the Government has acknowledged the need for more information about human rights and environmental issues down supply chains.

But with no legal standard to work to, the results will be patchy at best.” Jon Trickett, chairman of the Compass group of mainly left-wing MPs, had tabled an amendment to introduce mandatory reporting standards. “Requiring companies to report on their social and environmental impacts and their treatment of employees and suppliers is no use if there are no standards in place to ensure that the information they provide is accurate and meaningful,” he said. “Many companies publish ‘corporate social responsibility’ reports but exclude information on activities they don’t want people to know about.”

Contact; DTI – 020 7215 5000 www.dti.gov.uk

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