Performance of Companies and Government Departments (Reporting) Bill

Part of the debate – in the House of Commons at 2:02 pm on 30th January 2004.

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Photo of Angela Watkinson Angela Watkinson Opposition Whip (Commons) 2:02 pm, 30th January 2004

There is no doubt that corporate social responsibility is highly desirable, and the Opposition support fully the idea that the business activities of Government Departments and of UK companies both at home and in the underdeveloped world should have a positive effect on the economies and the environments in which they work. More important, their impact should not be negative.

The question is whether legislation is the best way to achieve those ends. The Bill is well intentioned, but it might prove to be counter-productive. Business is already overburdened with red tape, and there is a danger that yet more red tape and regulation would discourage those companies that feel that they are already doing a good job by helping to create wealth and employment. Andy King referred to companies with a good reputation. Legislation could have precisely the opposite effect to the one intended by eroding existing good will. On the principle that one volunteer is worth 10 pressed men, encouragement is likely to bear more fruit than compulsion.

The main provisions of the Bill are to require large companies—those employing more than 500 people and with a turnover in excess of £50 million a year—to report on their impacts on the environment and on society, and to expand the duties of directors to incorporate a duty of care for the environment.

I draw the attention of the House to clause 9, which details the promotion of company's objectives. Subsection (1) states:

"A director of a company must in any given case . . .

(c) take all reasonable steps to minimise the impact of the company's impact on the communities it affects and on the environment."

That seems to presume that the impact of the company's activities will be negative— if they are to be minimised, one must assume that they are negative—and it does not allow for the possibility that the company might have a positive impact on the environment and community in which it operates. I hope that some redrafting will be considered if the Bill progresses to Committee stage.

The proposal for company reports, exactly what they should report on, to whom and how that information should made available, what measures would be used to assess their findings, against what standards those findings would be judged, and in particular what sanctions might flow from such reports if they were deemed to be unsatisfactory or to fall short of those agreed standards, are all important details that are absent from the Bill. It is expressed in general terms and open to wide interpretation, and those are some of the many matters that could be thrashed out in Committee. That is why the Opposition would be happy for the Bill to proceed to Committee stage if that is the will of the House.

Similarly, the proposal to extend the duties of company directors to include a duty of care for the environment and the community requires clarification as to exactly what those duties are. The term "duty of care" could be interpreted in many ways, but it needs to be specific if sanctions are to apply following failure to fulfil those duties.

Clause 1(5) states:

"The directors must comply with any rules about the manner in which the operating and financial review is to be prepared."

That is clarified further in subsection (9), which states:

"Rules under this section may be made by regulations made by the Secretary of State."

That is an extremely wide power, and, again, I hope that that will be more clearly defined when it is looked at in more detail.

Various interest groups have contacted me, and, I dare say, every other Member, in support of the Bill and the introduction of mandatory international measures to oblige companies in law to fulfil their corporate social responsibilities. The hon. Gentleman has circulated a list of supporting companies and other bodies, including many retail and other types of companies, which illustrates that there are examples of good practice, and that business per se is not all bad.

Christian Aid has contacted me and it takes rather a pessimistic view of the activities of business and concentrates its remarks on bad practice rather than good. The other side of that coin is that to burden all businesses because of the bad practice of some could be counter-productive when some are operating very responsibly.The corporate responsibility coalition, which incorporates Friends of the Earth, the WWF, Unison, Amnesty International and many other well-known organisations, also takes that view.

But there is a third-party view from an organisation that champions corporate social responsibility in the business sector, Business in the Community, which has hit back at claims that corporate social responsibility has turned into what others might call a dangerous public relations exercise and a vehicle for opposing regulation. Mallen Baker, the development director of Business in the Community, has said:

"Corporate social responsibility is about best practice. Responsibility is inherently voluntary, so it has to be about the choices that a company makes within its set business environment. Simply complying with the law is not CSR."

The implication is that some companies would set themselves higher standards than the minimum for which the Bill might aim—although, of course, such aims remain to be clarified.

It is clear that there is a great deal to be debated, but I am aware of the shortness of time and that other hon. Members might want to speak. I shall therefore curtail what was to be a very long speech in order to allow others to make their remarks. If it is the will of the House, we shall be happy to allow the Bill to go into Committee.