Disappointment as opportunity missed for corporate social responsibility

October 20, 2006 9:00 AM

Liberal Democrats have today expressed deep disappointment at the Government's rejection of any independent verification of companies' claims of social and environmental impact in the Companies Bill debate.

Labour and Conservative MPs yesterday voted against New Clause 75 submitted by David Howarth MP in the controversial Companies Bill (formerly known as the Company Law Reform Bill). Under Liberal Democrat plans, auditors would be required to report any anomalies in the information provided by a company's Business Review.

Auditing would have provided investors and consumers with an independently verified Business Review giving potential investors and consumers reliable information to make ethical investment decisions.

David Howarth MP, who introduced New Clause 75, commented:

"There is already a £10 billion market for ethical investment in the UK. Investors and consumers clearly care about the social and environmental impact of the products that they buy and invest in but they need accurate information on whether they really are investing ethically.

David Howarth MP

David Howarth MP

"Without an auditing requirement there is a chance that cynical 'green-washing' firms will give ethical investment and consumption a bad name. The Business Review should not just be a marketing tool. Independent auditing is crucial to develop the market for ethical consumption and further develop the ethical investment market."

Susan Kramer MP, Liberal Democrat Spokesperson on International Development, added:

"Companies know shoppers will boycott goods made in sweatshops, with child labour or that are unfair to farmers.

"This bill could have been a chance to put that information in their hands. Instead, companies will be able to offer the public spin, not hard audited facts."

The Government introduced an amendment, following pressure by the Liberal Democrats and by Labour rebels, to include a company's supply chain as part of their Business Review.

Sarah-Jayne Clifton, Corporate Accountability Campaigner at Friends of the Earth, commented:

"The extension of reporting to cover supply chain issues is a welcome improvement to the reporting provisions, as is the commitment to review whether mandatory standards are needed in two years time. However, we were hoping to see the Government go a lot further in this Bill. Ultimately we believe that all large and medium-sized public and private companies should be required to produce standardised, audited social and environmental reports. This is an essential first step towards better corporate accountability. We will continue to push for these provisions as the Companies Bill returns to the Lords later this month."

Mr. Howarth commented on the concession:

"This is a welcome but not significant concession. The Government's original Operating and Financial Review had taken into account companies' supply chains, before Gordon Brown watered it down last year to produce the Business Review."

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