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The Companies Bill, which will introduce a limited range of light-touch
measures to encourage corporate responsibility in the UK, will finally
receive royal assent this month.
The Bill, which went for final discussion in the House of Lords on 2 November, contains three sections concerning CSR – all of which remained essentially unchanged during its remaining Report and Third Reading stages in the House of Commons last month.
The most significant CSR-related clause requires listed companies to publish a forward-looking annual ‘Business Review’ that can, if the company feels appropriate, take account of social and environmental issues affecting the business. Businesses are also encouraged to look at supplier relationships in the reviews, but as EP went to press it was not clear when the new reporting regime would start, whether guidance would be issued for reporters, and how thorough any guidance might be.
The government inserted a reference to suppliers into this part of the Bill at a late stage last month. This drew criticism from the Confederation of British Industry, but most observers feel the amendment was of little significance.
Another clause will require directors to have regard for the interests not just of shareholders but also customers, suppliers, the community and the environment. This duty is already enshrined in common law, but will now be stated explicitly for the first time in primary legislation.
The third CSR-related measure gives ministers reserve powers to force institutional investors to declare how they have voted at company annual general meetings. This is expected to lead to more shareholder activism.
The Bill was never intended to usher in strong regulation on CSR, but is far weaker than once appeared likely, because the government scrapped its long-held plans to require companies to produce annual Operating and Financial Reviews. These would have required companies to disclose more information on their social and environmental performance than the Business Review regime will entail. In CSR circles the Bill is therefore likely to be remembered mainly for the anger and bewilderment this move generated, not just among non-governmental organizations but also among corporate supporters of the OFR.
Corporate social responsibility minister Margaret Hodge last month held up the faint prospect of a resurrection of the OFR by stating that the Business Review regime would be reassessed in two years’ time to see whether it had improved disclosure. But Julian Oram, head of trade and corporates at ActionAid, said: ‘What’s worrying is that ... there will be no yardstick against which companies reporting on these issues will be measured.’
The Bill has met with a lukewarm response from the corporate sector, which has grown weary of the legislation’s ten-year gestation. ‘A lot of companies, quite frankly, are at the stage of saying “just tell me what it is when it’s done”,’ said Patricia Peter, head of corporate governance at the Institute of Directors.
See also editorial comment
The Bill, which went for final discussion in the House of Lords on 2 November, contains three sections concerning CSR – all of which remained essentially unchanged during its remaining Report and Third Reading stages in the House of Commons last month.
The most significant CSR-related clause requires listed companies to publish a forward-looking annual ‘Business Review’ that can, if the company feels appropriate, take account of social and environmental issues affecting the business. Businesses are also encouraged to look at supplier relationships in the reviews, but as EP went to press it was not clear when the new reporting regime would start, whether guidance would be issued for reporters, and how thorough any guidance might be.
The government inserted a reference to suppliers into this part of the Bill at a late stage last month. This drew criticism from the Confederation of British Industry, but most observers feel the amendment was of little significance.
Another clause will require directors to have regard for the interests not just of shareholders but also customers, suppliers, the community and the environment. This duty is already enshrined in common law, but will now be stated explicitly for the first time in primary legislation.
The third CSR-related measure gives ministers reserve powers to force institutional investors to declare how they have voted at company annual general meetings. This is expected to lead to more shareholder activism.
The Bill was never intended to usher in strong regulation on CSR, but is far weaker than once appeared likely, because the government scrapped its long-held plans to require companies to produce annual Operating and Financial Reviews. These would have required companies to disclose more information on their social and environmental performance than the Business Review regime will entail. In CSR circles the Bill is therefore likely to be remembered mainly for the anger and bewilderment this move generated, not just among non-governmental organizations but also among corporate supporters of the OFR.
Corporate social responsibility minister Margaret Hodge last month held up the faint prospect of a resurrection of the OFR by stating that the Business Review regime would be reassessed in two years’ time to see whether it had improved disclosure. But Julian Oram, head of trade and corporates at ActionAid, said: ‘What’s worrying is that ... there will be no yardstick against which companies reporting on these issues will be measured.’
The Bill has met with a lukewarm response from the corporate sector, which has grown weary of the legislation’s ten-year gestation. ‘A lot of companies, quite frankly, are at the stage of saying “just tell me what it is when it’s done”,’ said Patricia Peter, head of corporate governance at the Institute of Directors.
See also editorial comment
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