UK proposals to make company directors explicitly responsible for environmental and social performance are now firmly on the agenda of corporate law reform according to supporters of the legislation.
Labour MP for Ilford North, Linda Perham, who wrote the Corporate Social Responsibility Bill 2002 , said even though it was twice defeated in parliament last year, proposals contained in the bill are firmly on the agenda of corporate law reform.
The bill was last presented to the House of Commons on October 15 and as a private members bill, had little chance of success. But Perham said the process was beneficial because the bills supporters are now in direct consultation with the Department of Trade and Industry as it overseas the Blair Governments overhaul of corporate regulation.
Well have an impact and thats what we want. There is a lot of work to do but we would rather work with government. Its very hard to get amendments through from the backbench and this way we can inform what the government does, she said.
Perhams CSR Bill would have applied to all companies registered or operating in the UK and would require them to provide annual public reports on their environmental and social impacts. Under Perhams proposals, directors would have specific duties and liabilities to consider and control the environmental and social impacts of their companies operations.
Directors would then be liable for any breaches of the proposed law and would face penalties, including imprisonment. Company and director performance requirements in the area would be spelled out and overseen by a new corporate watchdog.
The bill also provided channels for aggrieved persons to seek remedies and would be extra-territorial, applying to the foreign operations of locally based companies.
A range of non-government organizations supported the bill, including Friends of the Earth, Amnesty International, the Save the Children Foundation and Christian Aid.
The debating of the bill in the British Parliament follows other legislation across Europe acknowledging non-financial corporate responsibilities. Most recently in France the Nouvelles Regulations Economiques (NER) makes it mandatory for companies to annually report across a number of non-financial aspects of their operations. These include health, safety, work hours and other human resources indicators, impacts on local communities, environmental impacts and the application of international labour standards to the operations of foreign subsidiaries.
The European Union is also overseeing a voluntary, multi-stakeholder process supporting and encouraging corporate social responsibility.
The EC sees value for companies in adopting CSR principles but is letting it gather momentum rather than saying heres the law, go and do it, said Perham.
Perham said the biggest problem facing her bill is the current fixation with minimalist regulation.
Its a dirty day on both sides of politics about who brings in the most regulation. In Britain and elsewhere, big business is bleating about regulation even if youre talking about worker health and safety, she said.
Perhams CSR Bill was opposed by Business in the Community (BITC), an organization of over 700 companies (including 75 of the top 100 FTSE companies) which claims to be one of the longest established corporate responsibility organizations in the world.
The major business complaint about the bill was it would have the effect of encouraging the lowest common denominator, or the most basic form of CSR as companies now performing better than the proposed regulations would be able to reduce their efforts.
Perham said the bill would lift the performance of the lowest performers while not hampering the best performers.
Companies that are doing it now can see the advantages, you wont see a culture of the good relaxing, she said.
According to Perham the bill would also benefit directors by explicitly stating in what area company and director performance would be assessed and monitored.
People prefer to know what obligations they have. They like to know what they have to cost and what needs to be factored in to decision making. A legal framework is something people have access to, said Perham.