§ Linda Perham (Ilford, North)I beg to move,
That leave be given to bring in a Bill to establish and provide for the functions of the Corporate Responsibility Board; to require certain companies to publish reports on environmental, social and economic matters; to require those companies to consult on certain proposed operations; to specify certain duties and liabilities of directors; to provide for remedies for aggrieved persons; and for connected purposesIn recent years—[Interruption.]
§ Madam Deputy Speaker (sylvia Heal)Order. Will the hon. Members who are leaving the Chamber please do so quickly and quietly?
§ Linda PerhamThank you, Madam Deputy Speaker.
In recent years, many people have come to understand the implications of the size, influence and power of major corporations. Fifty-one of the 100 largest economies in the world are now corporations, rather than countries, and the largest 500 companies in the world control two thirds of world trade. Clearly, business is a large and powerful player on the world stage. We also know of the major problems that companies have caused environmentally, socially and economically in many countries around the world, of which Shell's well-publicised disputes with the Ogoni people in Nigeria and Nestlé's continuing marketing of breast milk substitutes are well-known examples.
At home, too, I should be surprised if any Member has not had to deal with problems, brought to them by local people, caused by the activities of companies in their constituencies, such as shock job losses when production is suddenly moved overseas, pollution incidents, planning issues or the latest scandal in many constituencies—hidden mobile phone masts.
To argue that everything done by big corporations is bad would, of course, be ridiculous. Companies are creating jobs, developing products, providing services that we all need and investing in communities, but we need to be sure that they are serving the needs of society at large, not just their shareholders, and many people now feel that that requires changes in the law.
An important point must be made. When companies behave badly in ways that affect the richest and most powerful in society, there is a clamour for new rules and regulations. One has only to look at the readiness of the American Government to strengthen laws on financial processes after the collapse of WorldCom and Enron to see how fast we act to protect wealthy investors. That response is not wrong, but we should be equally determined to act when company activities affect the least well off, bearing in mind that the environmental and social impacts of companies' activities usually hit the poorest hardest.
When I introduced a similar Bill earlier this year, it had the backing of Amnesty International, CAFOD, Friends of the Earth, the New Economics Foundation and Save the Children. Since then, support has grown enormously. Major unions have come on board—including, I am pleased to say, my own union, Unison. More development agencies have joined, such as 226 Christian Aid, and Traidcraft—a business that has led the way in trading ethically and has taken care over the environmental and social impacts of its activities—also now supports the Bill.
The Bill that I hope to introduce today has four key principles. Its first requirement is for mandatory reporting on social and environmental impacts. Experience has clearly shown that a voluntary approach to reporting is ineffective. Three quarters of the FTSE 350 companies that were challenged by the Prime Minister to produce environmental reports in October 2000 completely ignored the call. There is a business case for mandatory reporting. The few companies that have responded to the Prime Minister's challenge would like the playing field to be levelled, as their competitors, who can currently undermine the better standards for which the best companies strive, would come under the same pressure from investors.
Embracing the corporate social responsibility agenda is likely to have a positive effect on staff recruitment, productivity, costs, innovation, quality, brand and reputation. It also protects the integrity of the free market, which is only possible when information is freely available to investors, customers and suppliers. The Bill would also change the basic duties of company directors, requiring them to minimise the environmental and social impacts of their activities.
Another major strand of the Bill is the requirement that companies must consult affected people on major projects, and all the best companies already do so. Indeed, many Government supported schemes already require such consultation, before export credit guarantees are given, for example. The Bill would spread what is currently best practice and make it common practice.
Finally, the Bill would allow stakeholders to challenge companies on the content and accuracy of their reports and on any impacts a company might have on its environment or its community. The Bill includes measures to prevent malicious complaints, but it is right that it should be possible to challenge companies' claims of environmental righteousness if they are clearly false—greenwash, as it is often known.
To protect reporting standards further, the Bill would require greater transparency and the setting up of a standards hoard. The board would include representatives of business and experts on the impacts of companies' activities, and would be charged with drawing up a framework of standards, ensuring that it provides appropriate information without being burdensome. The board could also carry out occasional checks on performance—perhaps examining a handful of reports each year—and assist with complaints about companies' reports.
The Government have accepted many of those principles in the White Paper on company law. The draft clauses already require an operating and financial review, which would have to include some environmental and social reporting, and would also widen the duties of company directors. Although the principle of those changes is right, the detailed wording currently leaves too many loopholes. For example, the proposals apply only to economically significant companies, leaving most businesses untouched.
227 The White Paper estimates that about 1,000 companies will be required to produce an operating and financial review, with a total turnover of around £1 trillion—roughly a third of the total turnover of United Kingdom business. My Bill, with its £5 million turnover threshold, would capture about 85 per cent. of economic activity by requiring just 2.5 per cent. of companies to report.
The Government's proposals also require reports on the environmental and social impacts that are relevant to the company, not necessarily those that are relevant to society—a crucial difference. I am also troubled that the proposed law requires reporting only on the company's policies on environmental and social issues, so a bad company with no policies need not report at all. Although a future companies Bill will recognise and include important points and accept the principle of mandatory reporting, it is unlikely to achieve significant environmental and social benefits. By winning the arguments for corporate social responsibility, we will secure the changes needed to protect the environment, defend human rights and safeguard the interests of shareholders, investors, workers and consumers across the world.
A wise man said recently that we are at our best when we are at our boldest. The Bill is bold; it would deliver measurable improvements to people's lives in Britain and abroad, and it would challenge other nations to follow our lead.
I commend the Bill to the House.
Question put and agreed to.
Bill ordered to be brought in by Linda Perham, Mr. Barry Sheerman, Mr. Martin O'Neil, Dr. Vincent Cable, Sir Teddy Taylor, Ms Glenda Jackson, Mrs. Jackie Lawrence, Mr. John Horam, Mr. Frank Field, Mr. Tony Colman, Sue Doughty, Mr. Simon Thomas.
CORPORATE RESPONSIBILITY (ENVIRONMENTAL, SOCIAL AND FINANCIAL REPORTING)
Linda Perham accordingly presented a Bill to establish and provide for the functions of the Corporate Responsibility Board; to require certain companies to publish reports on environmental, social and economic matters; to require those companies to consult on certain proposed operations; to specify certain duties and liabilities of directors; to provide for remedies for aggrieved persons; and for connected purpose: And the same was read the First time; and ordered to be read a Second time on Thursday 14 November, and to be printed [Bill 193].
§ Madam Deputy Speaker (sylvia Heal)Order. Members should be aware that the digital clocks on each side of the Chamber were re-programmed during the summer recess in order to give a longer warning period. The warning lights will now start to flash one minute before a time limit is due to expire, rather than 30 seconds, as previously. That applies to the end of time-limited speeches and to the end of time-limited debates. The next item of business will be the debate on urban post offices, which has a time limit of an hour and a half. I must also announce that there is a 10-minute limit on Back-Bench speeches in all debates for the rest of the evening.