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Stephen Timms MP

Corporate Social Responsibility
Stephen Timms MP

London


Tuesday, June 25, 2002


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Thank you for inviting me today. I am delighted to be here. 16 years ago I was an employee in this building, working for its then occupant, Logica, and so there is a certain frisson to returning today as a guest! I am grateful to Geoffrey for his hospitality – last week I presented him with an award so I am grateful for his hospitality in return.

Twelve years ago, I became Leader of the Council in the Borough of Newham in East London. One of the first things that happened was I had a visit from the then also new Chief Executive of the biggest private sector employer in the area, Tate and Lyle. He was in the process of establishing the East London Partnership, which has become the East London Business Alliance. He invited me to join the Newham board of the Partnership, which I was very glad to do, - I think I'm the only individual member - and I have seen immense benefits flow to the area which I now represent as MP through the corporate social responsibility exercised by that board.

There have been lots of benefits at many different levels and in lots of unexpected ways as well as in the ways that were originally intended. So in stating a commitment to corporate social responsibility I can draw on having seen the benefits over the past decade and more.

And what I think I have learned from what I have seen is that responsible corporate engagement can bring ambition and imagination and good organisation into situations where previously there was just despair. It can bring new ideas and new approaches, new enthusiasm of the kind that gets things done. It can put caring people – of whom there are many – in touch with situations that need caring about, and there are certainly a lot of those as well.

In the case I've been involved in, the partnership has made a big contribution to raising standards of education in our area. They used to be the worst in the country. They aren't any more – and the contribution of the partnership is one of the reasons. The partnership was able to pull together at least a million pounds worth of help in kind for the refurbishment of the old Canning Town Public Hall when it was taken over by Community Links, the outstanding voluntary sector organisation. And when we were campaigning for improved transport links for the area – for example, for the international passenger station at Stratford on the Channel Tunnel Rail Link, which has now been built, it was the partnership whose heavy weight business backing made the campaign credible.

I see Corporate Social Responsibility as offering an approach that gets away from the old idea that economic, social and environmental goals must necessarily always be in conflict. What we need to work out is how progress on any one of those fronts can support progress on the others – 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 the interests of others.

A lot of businesses in increasing numbers as well as non-profit organisations accept the need for responsible behaviour as a matter of principle; but they also see it helping build brand value, foster customer loyalty, motivate staff, and contribute to a good reputation among a wide range of stakeholders. We see it as essential that this activity is seen not as philanthropy, but as mainstream to the business – justified not by altruism but on sound business grounds. Otherwise it will not survive. And we want it to survive and flourish, because it can have such an immensely positive impact in addressing deep seated social and environmental and other challenges which are among the toughest we face. Recent events have highlighted the importance of exercising responsibility abroad as well as at home.

It will come as no surprise to anybody that we are keen to encourage CSR. I am keen to take the opportunity of this seminar to ask you how we can most effectively do that. I am deeply sceptical of knee-jerk regulatory requirements in this area because of their potential to stifle the generosity and creativity which have been the invaluable hallmarks of the corporate social responsibility that I have observed over the past twelve years. But I sense we are only really at the beginning of our discovery of the potential of this kind of activity, and there may well be steps we can take in Government to encourage progress.

We have identified two main ways that Government can help:

  • We can ensure that regulatory and fiscal frameworks encourage CSR rather than stifling it;

  • We can work in partnership with business and community organisations as a catalyst for CSR.

    • This is all treated in some depth in the Government's recently published Report– Business and Society: CSR Report 2002 which was published in May.

    Notwithstanding what I have said about regulation, responsible behaviour for any organisation starts with legal compliance. The UK benefits from a tried and tested framework of laws and regulations on social and environmental issues. To ensure it remains current, this framework is constantly evolving with the aim of making responsible behaviour normal practice in all types of organisations.

    But legislation and fiscal powers cannot compel virtue. Excessive intervention risks distorting or stifling progress rather than fostering innovation. So the prospect of legislation of any kind needs to be treated with great care.

    In 1999 I was the pensions minister and we introduced, from the then DSS, the requirement that funds should report whether they have policies on socially responsible investment, and if so to state what they are. This has been widely recognised as a very good example of the sort of legislation that is helpful, with similar approaches being adopted in France and Germany. We also have proposals within the current review of company law which would also require companies to disclose significant social and environmental issues and that is something we are discussing at the moment.

    On fiscal incentives, the Government has boosted payroll giving by funding a £2 million promotional campaign, backed by a special ten per cent supplement on all donations for three years. As a result, Payroll Giving donations have increased from £37 million a year and are expected to exceed the campaign target of £60 million annually a year earlier than projected. Half a million people are now taking advantage of these arrangements, which is delivering real value to a wide range of charities.

    The budget also announced a £20 million investment in a new Community Development Venture Fund, which was launched with the Chancellor a little earlier today. This is being supported by an important new Community Investment Tax Credit to stimulate business involvement in disadvantaged neighbourhoods. This is one of the topics where we have been most active in the second aspect of Government engagement - working in partnership with others to catalyse CSR action.

    I would like to spend a moment on the tax credit because I worked on it when I was a Treasury Minister and it is in my view a very significant step in promoting worthwhile, socially responsible activity for which there will be a sound commercial basis. 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 his or her 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.

    The Government produced new General Guidelines on Environmental Reporting in November 2001 and encouraged CSR to help improve adult basic skills which we have identified as a very important area with 7 million adults lacking these skills. It is 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 Authorities 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 European Commission plans to publish a communication document on CSR next month. 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 EC Communication Document to appear on 2 July and we await it with interest and optimism.

    Our aim is that private and public sector organisations in the UK should take account of their economic, social and environmental impact, and should take complementary action to address the key challenges which arise from these impacts based on their core competences – locally, regionally, nationally, and internationally.

    Our strategy has five strands:

    • Promote activities that bring economic, social and environmental benefits;

    • Work in partnership with the private sector, community bodies, unions, consumers and other stakeholders;

    • Encourage innovative approaches and good practice;

    • Define decent minimum levels of performance, for example on fundamental issues such as health and safety and equal opportunities;

    • Encourage awareness, trust and healthy public dialogue.

    So we aim 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; and

    • Support international CSR, for example through the continued work of bodies such as the Ethical Trading Initiative which I have referred to.

    A great deal remains to be done. I think we are only at the beginning of recognising the potential for good ideas. Our aim is to maintain the momentum, recognising that CSR can simultaneously benefit economic, social and environmental goals – which are of interest to all of us.

    It is still relatively early in my holding of this office, although, as I have indicated, I have had the opportunity to deal with a number of the issues in previous ministerial roles, but it is a chance for me to reflect on how we can most helpfully take forward the aims for this area, on which we would all in all likelihood be agreed, and I am looking forward now to some discussion with you now.

    Thank you.
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