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Stephen Timms MPCorporate Social Responsibility |
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Thank you for inviting me here today. Corporate Social Responsibility is certainly on the agenda for many organisations in the UK. It may at first sight seem rather puzzling that CSR should be part of a ministerial brief for competitiveness. But actually it fits well, because corporate social responsibility is a highly creative activity. The dialogue between enlightened companies with their expertise and their resources and effective NGOS with their passion and commitment is a very fruitful dialogue for innovation, for new ideas. And innovation is the lifeblood of our economy and of our competitiveness. CSR is an approach that helps us to get away from the old idea that economic, social and environmental goals are always and invariably in conflict. What we need to work out is how progress on any one of those fronts can support progress on the others. We want to see business, the voluntary sector, and public bodies all working together, not doing so grudgingly, but because each sees it as advancing its own key interests to do so, as well as advancing the interests of others. We can't afford any longer to see economic success as being necessarily in conflict with social and environmental goals, and we don't need to. We need to see how creating a fairer society and a dynamic economy go together. The policies we need for social justice and environmental improvement can go hand in hand with the policies needed to create a successful modern economy. And that is the essence of sustainable development:
Environmental and social issues are having an increasing impact on business performance and shareholder value. Their effective management– alongside traditional financial and economic risks – is becoming fundamental to business success. A recent survey showed that 68% of consumers do not trust companies. And in the USA, since Enron, there has been a 15% fall off in consumer confidence in business in the USA. It is of course of paramount importance that all organisations comply with the law: recent events have highlighted the importance of exercising responsibility abroad as well as at home. And the requirements of the law will develop over time. But we see CSR as voluntarily going beyond legal minimum requirements, drawing on enthusiasm and expertise within an organisation to address challenges which for whatever reason the organisation has become aware of in the course of its activities. Very often that will be through some of these very creative partnerships involving participants from sharply contrasting parts of the economy, working together for an objective, which can be shared between them. It is a very strong message from this Capital Caring report that the majority of London businesses are up for this! Over three quarters agree that their organisation should do more than the law requires on the environment and over half think they should do so on social objectives. And I agree with the report's conclusion that there is a "huge bank of goodwill in the London business community" The key is that this activity is seen not as PR, not as philanthropy, but as mainstream to the business – justified not just by altruism but also on sound business grounds. The question in my job is what Government can do to encourage those partnerships to form and to deliver because we don't want to rest on our laurels. And I don't believe the answer is to pass laws to try and make these activities compulsory. But we do need to do more – and I note from the report that only about a fifth of London businesses feel they have been under pressure from the Government to change their attitude to social responsibility, which rather suggests I need to be working harder! Mind you I did note that we seem to be getting through to more of the survey respondents on these issues than the media or the public. Of course, there is a place for regulation. There are standards set down in law for environmental protection, health and safety, minimum wage and so on and every organisation is rightly compelled to comply with them. But what we are discussing today is organisations voluntarily going beyond those regulatory requirements, developing ideas which build on their own particular strengths and interests, and contributing as a result to social and environmental gains as well as to their own proper economic self interest. Again, in this voluntary sphere, I am not saying that there is no place for regulation. When I was the pensions minister in 1999, I introduced the requirement that pension funds should state whether or not they had a policy on socially responsible investment and if so what it was. That has been an effective, light touch intervention, which has stimulated a great deal of work around the social and environmental consequences of investment. In the current consultation on company law reform we are looking at measures to improve corporate reporting on social and environmental matters. So we take the view well framed regulation can play a helpful role. On fiscal incentives, we have boosted payroll giving by funding a £2million promotional campaign, backed by a special ten percent supplement on all donations for three years, which the Chancellor announced last week, is being extended. Payroll Giving has increased from £37 million a year to £72 million last year – well ahead of the campaign target. Half a million people are now taking advantage of these arrangements, delivering big gains for a wide range of charities. And the target now is for £150 million. The budget this year announced a £20 million investment in a new Community Development Venture Fund, which was recently launched by the Chancellor. This is being supported by an important new Community Investment Tax Credit in this year's Finance Bill to stimulate business involvement in disadvantaged neighbourhoods. It encourages private investment through qualifying Community Development Finance Institutions (CDFIs). The way it will work is that investments will attract tax credits worth 25%, spread over 5 years. So an investor putting in £100,000 will be able to reduce its tax bill from other activities by £5000 per year for 5 years. The scheme is now in its final stage of development and aims to be operational in a few months, after obtaining state aids approval. We have been supporting international efforts to address issues like worker's rights in producer countries, and the Ethical Trading Initiative whose corporate members include high street names with a combined turnover of almost £100bn – working together to bring international procurement in line with principles set out by the International Labour Organisation. In the Modernising Company Law White Paper, under the proposal for an Operating and Financial Review whose production would be mandatory for large firms, a company would be required to provide more qualitative and forward looking information and on a wider range of issues than have traditionally been covered by company reporting. This would include information about a company's relationships with its employees, its impact on the environment and on the wider community, where such information is, in the view of the directors, material to an informed assessment of the company. The requirement to publish an OFR would be limited to around 1,000 companies or groups, though we estimate that they account for a quarter of corporate economic activity in the UK. There is a view that making social and environmental reporting mandatory is the only way to advance the CSR agenda. The CORE Bill, introduced by my colleagues Linda Perham in the last parliamentary session, and widely supported by NGOs and others, aimed to require companies with a turnover of more than £5M per annum to publish annual reports explaining the significant environmental, social, economic and financial impacts of their operations. But what I believe we need to avoid at all costs is moving corporate social responsibility into the realm of regulatory red tape, because that would merely stifle the creativity and innovation, which are the most valuable feature of CSR today. The worst development from every point of view would be the promotion of a "tick box" mentality to reporting, which would be a dead hand on the creativity which is evident today. So beyond light touch regulation, what can Government do on promotion? I am just going to make some tentative suggestions today and I will be interested in observations people might want to make about them – there is certainly no commitment at this stage on our part to proceed with any of them but they are ideas we are reflecting on. I think the key will be in helping with spreading the best ideas so that they can be developed as widely as possible across the country. We already support a variety of awards for effective corporate social responsibility and that is a good way to get the message across. Perhaps we should be looking at more regional awards to take advantage of the growing strength of the regional networks being gathered together through the Regional Development Agencies. There might be other things we should do on a regional level too, such as promoting networks or clusters of businesses that have made CSR work and are willing to spread the message. There might be a place for some form of CSR Academy, which would promote good ideas, link up the people working on them and perhaps contribute also to the professional development of people working in CSR. It would need to be a dynamic and perhaps a virtual institution, different from a conventional educational establishment but I think there might be a role for such a thing. We could also look at CSR's place on the courses of business schools. I am pleased that Sue Slipman has agreed to chair a Working Group that will look at these issues and report back next year. I would certainly welcome your thoughts on this notion. The Governor of the Bank of England has expressed interest in the idea of hosting a gathering in London for representatives of cities around the country where there is interest in forming these partnerships between public, private and voluntary sector organisations to address social and environmental challenges – so that civic, corporate and community leaders could meet to compare notes and exchange ideas about what is working well in each of their areas. A number of corporate organisations have made the point to me that they are suffering from questionnaire fatigue – that there is a huge variety of different organisations asking them questions about what they are doing on social and environmental matters, all of them asking slightly different questions and posing them from a slightly different standpoint, and it would be very helpful for them if there was some kind of convergence to rationalise the amount of work they are being asked to do – and that might be an exercise in Government we could assist with. And of course, the European Commission has just published a communication document on CSR. The Commission has indicated that its approach will largely follow our own view – that it should be primarily a business driven agenda. The Commission has set up a Multi-Stakeholder Forum. It will report back to the Commission in the summer of 2004 with its findings and recommendations. The Commission will then evaluate them and consider if further initiatives are appropriate to promote CSR. So those are a number of the ideas we are reflecting on at the moment in the Department of Trade and Industry. There is a great surge of interest in this area and it is for us in Government a resource which we need to tap into if we are to succeed as we are determined to in addressing the big social and environmental and economic challenges which face us in the months ahead. This is an area we are enthusiastic about working on with others to achieve our shared objectives. I look forward to hearing your views on these issues. Thank you. |
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Other speeches by Stephen Timms MP
(the following are available from the archive) |
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