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Two leading CSR consultancies have warned that social reporting in the UK will take a ‘backwards step’ next year when a requirement on companies to produce Operating and Financial Reviews comes into force.
Salterbaxter and Context contend that the OFR – which requires the UK’s 1200 largest public companies to report annually on their social and environmental impacts, among other things – is more likely to stifle disclosure than improve it.
In their fourth annual review of reporting trends, they claim that because OFR regulations bring consideration of social and environmental matters into the realms of the annual report, disclosure will fall into the hands of corporate affairs executives and lawyers, who are more inclined than CSR practitioners to ‘boilerplate’ their statements with defensive legal language.
Nigel Salter, founder of Salterbaxter, argued that it is unlikely lawyers and auditors will allow much that is ‘meaningful or helpful’ to be included for fear of legal challenge. This risked frustrating a prime purpose of the regulation, which is to encourage companies to make forward-looking statements.
‘In the first couple of years OFRs are likely to be full of opaque legalese, over audited and not particularly useful’, he said. ‘Expect lots of legal caveats and generic statements.’
Salter told a London briefing of companies and investors that while the requirement to produce an OFR would prompt some firms that are not reporting on their social and environmental performance to begin doing so, it may also give half-hearted reporters an opportunity to rein back on the little that they do.
‘A lot of companies will backtrack on their reporting and use the OFR as a shield to avoid disclosing too much,’ he claimed.
Ronnie Lim, head of research at Morley Fund Management’s SRI arm, told the briefing that while the OFR regime would improve reporting at some companies, there was potential for content to be stifled by the involvement of lawyers. Charlotte Grezo, director of CSR at Vodafone, also said there would be ‘legal issues’ about what would go into an OFR.
However, Rob Lake, head of SRI at Henderson Global Investors, disagreed that CSR reporting would take a step backwards. ‘I take issue with that quite strongly,’ he said. ‘Even within the FTSE 100 there are companies that don’t have a great mass of CSR information to draw on, and the OFR may stimulate them to produce more.
‘There is a huge difference between the OFR and CSR reporting. There’s a partial overlap, but not a complete one. Some of the main companies will have enough information to transfer, but many won’t. Companies will also have to work out how to explain what the main social and environmental issues are and what they mean in business terms, which is not something all of them do very clearly in their CSR reports.’
Lake, who was a member of the independent OFR working group set up by the government, added that legal jargon was more likely in ‘other parts of the OFR than [in] the bits about social and environmental issues’, although some might resort to legalese.
Salterbaxter and Context contend that the OFR – which requires the UK’s 1200 largest public companies to report annually on their social and environmental impacts, among other things – is more likely to stifle disclosure than improve it.
In their fourth annual review of reporting trends, they claim that because OFR regulations bring consideration of social and environmental matters into the realms of the annual report, disclosure will fall into the hands of corporate affairs executives and lawyers, who are more inclined than CSR practitioners to ‘boilerplate’ their statements with defensive legal language.
Nigel Salter, founder of Salterbaxter, argued that it is unlikely lawyers and auditors will allow much that is ‘meaningful or helpful’ to be included for fear of legal challenge. This risked frustrating a prime purpose of the regulation, which is to encourage companies to make forward-looking statements.
‘In the first couple of years OFRs are likely to be full of opaque legalese, over audited and not particularly useful’, he said. ‘Expect lots of legal caveats and generic statements.’
Salter told a London briefing of companies and investors that while the requirement to produce an OFR would prompt some firms that are not reporting on their social and environmental performance to begin doing so, it may also give half-hearted reporters an opportunity to rein back on the little that they do.
‘A lot of companies will backtrack on their reporting and use the OFR as a shield to avoid disclosing too much,’ he claimed.
Ronnie Lim, head of research at Morley Fund Management’s SRI arm, told the briefing that while the OFR regime would improve reporting at some companies, there was potential for content to be stifled by the involvement of lawyers. Charlotte Grezo, director of CSR at Vodafone, also said there would be ‘legal issues’ about what would go into an OFR.
However, Rob Lake, head of SRI at Henderson Global Investors, disagreed that CSR reporting would take a step backwards. ‘I take issue with that quite strongly,’ he said. ‘Even within the FTSE 100 there are companies that don’t have a great mass of CSR information to draw on, and the OFR may stimulate them to produce more.
‘There is a huge difference between the OFR and CSR reporting. There’s a partial overlap, but not a complete one. Some of the main companies will have enough information to transfer, but many won’t. Companies will also have to work out how to explain what the main social and environmental issues are and what they mean in business terms, which is not something all of them do very clearly in their CSR reports.’
Lake, who was a member of the independent OFR working group set up by the government, added that legal jargon was more likely in ‘other parts of the OFR than [in] the bits about social and environmental issues’, although some might resort to legalese.
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