Stephen Timms MP

Corporate Social Responsibility

I am delighted to be here today. I want to begin by setting out the British Government's aims for Corporate Social Responsibility, go on to give an example from my own constituency in the East End of London of what I regard as a very successful instance of corporate social responsibility. I will discuss steps the UK government is taking to encourage CSR, and steps which might be taken but which in my view should not be. And then finally set out some tentative ideas of what more might be done to develop this activity further. Because there is today an immense degree of interest in CSR – clearly an immense resource for achieving beneficial change in our communities – and it is certainly in the interests of Government to foster and perhaps to focus that resource, to make the most of it.

We have set out an ambitious goal for Corporate Social Responsibility, which is that private and public sector organisations in the UK should take account of their economic, social and environmental impact, and should then take complementary action to address those impacts, drawing on their expertise and capabilities.

So we aim as a Government to:

• Raise the profile of CSR, for example by encouraging more CSR reporting

• Focus on making CSR part of organisations' core operations, especially as regards the environment, neighbourhood renewal and adult basic skills

• Assist small and medium sized enterprises (SMEs), for example by stimulating a joint approach among their advisory bodies

• Promote greater transparency and clearer guidance on CSR reporting

• Support international CSR, for example through the continued work of bodies such as the Ethical Trading Initiative

That is the framework of objective and aims within which we have been developing our approach to CSR.

Let me tell you about the example from my own constituency. A few weeks ago, a large new Tesco Store opened in Beckton in my constituency and among its employees are over 100 local residents who were formerly unemployed. They include a man who told me he had been unemployed for 13 years following an injury at work, another who had been jobless for eight years and a number of Asian housewives who have never worked before – never had the confidence to consider working – but who have for the past few weeks been in jobs in that store.

The reason for that store making such a significant contribution to regeneration in that community is a partnership between the company, the local Council, the Employment Service, the local College and others. The Employment Service identified unemployed people who might benefit, an impressive training package was put together for delivery by Newham College and others and over three months this group of just over 100 people were intensively trained in using computers, dealing with customers, first aid and other topics. What was unique about it was that everybody getting through to the end of the training was guaranteed a job at the store when it opened in September.

I was talking to a local journalist about this and she said: "Typical. With all these high powered jobs coming into East London, the only thing on offer to local people is jobs in a supermarket".

But actually, that was not the response of the people who went through that training. The enthusiasm of those people on their training was remarkable – I visited a group of them while it was under way. A young Asian man whom I did not know came in to see me at my surgery in the summer and asked for my help in securing a visa for his fiancée to come to the UK from India for their wedding. That was an unusual request – what usually happens is that the wedding takes place in India and an application is then made for the spouse to come to the UK. So I asked him why he wasn't getting married in India. He explained to me that was out of the question because he was taking part in the Tesco training!

At the end of August, I presented certificates to those who had come through the training and it was a very impressive occasion. They were proud of what they had achieved, and rightly so, because by far the best way out of poverty is through employment. They were also very appreciative of the effort that had been invested in them. Now in my view that is how responsible development in disadvantaged communities like mine should be carried out, with serious effort to make sure that the employment opportunities being created are taken up by people in the area. A hundred people came off the unemployment register and directly into work. We are seeing this kind of approach being adopted quite widely today and I am certain that is one of the reasons why – despite everything that is happening in the world economy at the moment – unemployment fell again last month to the lowest level since the 1970s, and why unemployment in the UK is now lower than the rest of Europe, lower than Japan and lower than the United States – and it is the first time that all three of those have been true since World War 2.

But, of course, that isn't why Tesco did it – Tesco set up that partnership because its a good way to recruit staff for stores which then prove to be successful in pretty unprepossessing parts of the country. In the case of Beckton, the store is on the heavily polluted site of what was once the world's biggest gas works and it backs on to North London's principal sewage works. It is a huge site and the only thing it has been used for in the past 20 years is making Vietnam War films – Full Metal Jacket was made there because it looked so convincingly bombed out. But what Tesco has found is that the people it recruits through this approach are more committed, more enthusiastic, they respond to the trouble which has been taken to give them a chance through a real commitment to their work, which customers enjoy and which means they will stay working in the store a good deal longer than staff recruited by other more conventional routes. Lucy Neville-Rolfe from Tesco is speaking later this afternoon and she may well have more to say about this partnership approach, which her company has now applied in quite a number of places around the country.

And I think that illustrates very well the kinds of opportunities we need to be looking for in this field of Corporate Social Responsibility. It is an approach that gets away from the old idea that economic, social and environmental goals are always in conflict. What we need to work out is how progress on any one of those fronts can support progress on the others. The approach on that store has led to gains on all three fronts, economic, social and environmental. We want to see business, the voluntary sector, and public bodies all working together, not doing so grudgingly, but enthusiastically, because each sees it as advancing its own key interests to do so, as well as the interests of others.

Research conducted by NOP recently shows that 92% of CEOs across Europe accept that it is their responsibility to drive through CSR policies and practices. 9 in 10 Chief Executive Officers see innovation and creativity as key to a competitive organisation, and that two in three believe that responsible business practice can promote such innovation by increasing learning from outside and promoting a broader perspective within the organisation. One of the senior managers in one of our leading companies was asked why on earth he was spending so much time talking to environmental NGOs. "Because", he said, "when I listen to those people I can see the future." CSR is a very creative activity. The fact that responsible business practices can be a catalyst for innovation and creativity emerges as a significant justification for integrating such practices into the business mainstream.

Another important driver for business is that, increasingly, able young people contemplating a corporate career want to know what their prospective employers have to offer on CSR. They want, of course, to be confident that they will enjoy a rewarding career, but they also want to make a contribution to addressing the big challenges which our society faces – safeguarding the environment, raising standards in inner city schools, helping long term unemployed people back into the workforce. So they are asking questions about CSR, and employers have to provide some convincing answers. CSR programmes can also help to enthuse and reinforce the commitment of existing staff too, and contribute to their personal and professional development.

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. There is a big challenge here for companies and a commercially important one – one that needs to be addressed and to which people are increasingly seeing CSR as one of the answers.

CSR is having a profound effect on our society. Of the FTSE top 250 companies listed on the London Stock Exchange, 50 companies reported for the first time on social and environmental responsibility last year, 103 produced stand alone reports, 95 include ethical and social information in their mainstream reporting and 36 have independent verification of their reporting. The value of ethical investment portfolios worldwide is estimated at about £1 trillion.

The key for corporates is that this activity is not seen as PR, or philanthropy, but as mainstream to the business – justified not just by altruism but also on sound business grounds. Otherwise it will not survive. And in Government we want it to survive and flourish, because it can have such an immensely positive impact in addressing big challenges which are among the toughest we face.

Let me just outline some of the steps we have taken to encourage CSR:

• Through I think some quite imaginative and light touch regulation

• Through introducing some fiscal incentives

• Encouraging companies to report on CSR and environmental impact

The question, which the title to this seminar raises, is what can Government do to encourage CSR? Well I do not believe the answer is to pass laws to make it compulsory.

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. It is of course paramount that all organisations comply with the law. Recent events have highlighted the importance of exercising responsibility abroad as well as at home. CSR is certainly not a substitute for legal minima.

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 that 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.

But what we have 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.

There is a place for fiscal incentives too. We have boosted payroll giving by funding a £2 million promotional campaign, backed by a special ten percent supplement on all donations for three years. 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 we are aiming for £150 million a year in payroll giving within another two years.

The budget this year announced a £20 million investment in a new Community Development Venture Fund, launched recently by the Chancellor. This is being supported by an important new Community Investment Tax Credit which was in this year's Finance Bill to stimulate business involvement in disadvantaged neighbourhoods. I worked on the tax credit when I was a Treasury Minister. I believe it is going to prove very effective in just tipping the scales of commercial viability in favour of socially valuable initiatives which would have been marginal or slightly worse than marginal as investment prospects otherwise.

The tax credit encourages private investment through qualifying Community Development Finance Institutions (CDFIs). Investments will attract tax credits worth 25%, spread over 5 years. An investor putting in £100,000 will be able to reduce their 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 European state aids approval.

I said that one of our aims was to encourage reporting by companies on social responsibility and environmental matters. We published just before the summer the Modernising Company Law White Paper. It is the most fundamental review of company law in 150 years and contains new proposals to cut red tape and save small businesses around £170 million a year. The White Paper reflects the changes that have taken place over recent years and includes plans to:

• Simplify the law and reduce burdens on small firms

• Improve transparency to increase confidence in business

• Improve governance to encourage and support responsible business

It will also include new provisions to require company directors to report on social and environmental matters with a big impact on their businesses. In particular we are proposing that around the largest 1000 companies, accounting between them for some 25% of UK business activity, should publish each year an Operating and Financial Review, setting out social and environmental matters which in the view of the directors are of significance in assessing the future prospects of the company. The consultation on those proposals runs until the end of this month.

The Government produced new General Guidelines on Environmental Reporting in November 2001, and a supportive foreword to the guidelines was contributed by the Director General of the Confederation of British Industry, Digby Jones.

In addition to the steps we have taken, we have encouraged CSR to help in particular to improve adult basic skills, which we have identified as a very important area with 7 million adults lacking them. We are also backing social enterprises, volunteering, and community arts projects (alone valued at £150 million last year); and there is a whole range of regional projects led by the Devolved Administrations and Regional Development Agencies all around the UK.

To help small and medium sized enterprises (SMEs), the Government's Small Business Service has produced a handbook for SMEs and SME Advisors - as well as a benchmarking module to guide SMEs on good practice. We have also backed collaborative programmes with the British Chambers of Commerce the Institute of Directors, and Business in the Community including the extension of schemes for "business brokers" and a "Community Mark", new research into SME motivations for responsible behaviour, and collaborative work with CSR Europe on a cross-European SME reporting toolkit.

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. The Department for International Development has provided funding for the Ethical Trading Initiative.

Next week in a new initiative, I shall be hosting a breakfast seminar with the Fairtrade Foundation at the Department of Trade and Industry, to encourage major organisations to do more with products produced in conformity with the standards of the foundation. There is great concern at the moment at the impact on some of the poorest countries in the world of the collapse of the world market coffee price, and we see fair trade as a viable and important response which should be scaled up.

Apart from the British Government, the European Commission published in the summer 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. Of course, the European Parliament's Opinion favoured regulation in certain areas, such as reporting. The Commission has set up a Multi-Stakeholder Forum. It will be tasked with the aim of promoting transparency and convergence of CSR practices and instruments, through:

• Exchange of experience and good practice between actors at EU level

• Bringing together existing initiatives within the EU, and seeking to establish common EU approach and guiding principles

• Identifying and exploring areas where additional action is needed at European level

It will report back to the Commission in the summer of 2004 with its findings and recommendations. The Commission will then evaluate those findings and consider if any further initiatives are appropriate to promote CSR.

The UK welcomes the Communication Document. It is the next step forward for the CSR agenda, encouraging business and local communities to work together, to create a better society, and make a real difference. It will also help make real the vision set out in the Lisbon European Council conclusions of making the EU the most competitive and dynamic economy in the world.

The UK is taking the lead on CSR within Europe - indeed of 250 responses to the EC Green Paper on this topic; over 80 came from the UK. Our approach has been shown to work, and many of the areas for further work raised in the Communication are already being taken forward in the UK. We particularly welcome the recognition that the voluntary and business-led approach is the right one, and that more regulation is not the answer. I want to ensure that the UK continues to lead on CSR.

A recent report "Getting Down to Business" written by the DEMOS think tank, challenges government and all sectors to go further and deeper in ensuring that mainstream CSR practice reflects the real quality of best existing work. The report exhorts the Government to take on a more proactive role and I believe that we have made a good start already. For example, currently 98% of civil servants work in organisations that have Investors in People accreditation; all Government Departments have "Green Ministers" to champion sustainable development; 10 departments are now fully certified to the ISO 14001 standard of environmental management; since 2000, all departments have taken up the Prime Minister's challenge to give staff the equivalent of 1 day's paid time to volunteer per year.

And of course the whole area of government procurement is one that has enormous potential for the Government to support sustainable and socially responsible objectives. Currently a high level cross-government group has been set up to investigate these issues. Its findings will help inform the development of procurement targets and guidance within a framework for sustainable development on the Government estate.

So beyond what I have described, what more can Government do? I am just going to make some tentative suggestions today and I will be interested in observations people may have about them – there is certainly is 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, which 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. We could also look at CSR's place on the courses of business schools.

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.

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 at the moment 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.

So thank you for allowing me to set out the plans of the UK Government for this area. We see it as very important and I will be glad to hear the views that any of you may have about what Government should be doing.

Thank you.

Other speeches by Stephen Timms MP

• Packaging Industry Conference (04/12/02)
• New Local Government Network (NLGN) Conference (03/12/02)
• Corporate Social Responsibility (02/12/02)
• Launch the London Activities of Street (UK) (29/11/02)
• Role of the Government in Promoting Electronic Commerce (27/11/02)
• Winning Strategies (27/11/02)
• SEEDA Sustainable Business Awards 2002 (26/11/02)
• SEEDA Sustainable Business Awards 2002 (26/11/02)
• Asian Dreams Fashion Event (21/11/02)
• MP's Packaging Reception (20/11/02)
• Enabling e-commerce to succeed ? in the UK and Internationally (14/11/02)
• Keidanren: Corporate Social Responsibility (13/11/02)
• Social Enterprise Business Support Strategy for London (12/11/02)
• Keynote Speech: Launch of IT 4 Communities (08/11/02)
• The Politics of Bandwidth (06/11/02)
• Periodical Publishers Association (25/10/02)
• Computer Games Competitiveness Analysis launch (24/10/02)
• Procurement - The Social Enterprise Solution (24/10/02)
• Cal-IT 2002 (21/10/02)
• Payroll Giving Event (21/10/02)
• North West Education for Enterprise Conference (18/10/02)
• EMAP Retail IT Directors Club (16/10/02)
• Bridging the Digital Divide: CSR and the E-Commerce Agenda (14/10/02)
• Sectoral Sustainability Conference (09/10/02)
• Construction Industry Environmental Forum CSR Conference (09/10/02)
• Launch of Oxford Internet Institute (27/09/02)
• Corporate Social Responsibility Event with Sir John Egan (25/09/02)
• NCH Byte Night Sleepover (20/09/02)
• Knowledge Economy: New Hope Or Old Hype (20/09/02)
• Launch of the National Skills Strategy (18/09/02)
• 7799 Goes Global Conference (05/09/02)
• Social Enterprise Strategy Launch (23/07/02)
• Responsible Corporate Engagement (16/07/02)
• Textile & Clothing Industry (02/07/02)
• NCH Seminar on the Digital Divide (20/06/02)
• BiTC Awards for Excellence (19/06/02)

(the following are available from the archive)
• Broadband in the Regions (26/06/02)
• Corporate Social Responsibility (25/06/02)
• Publishing Competitive Analysis Study Launch (13/06/02)
• Making Digital Relevant (11/06/02)