Stephen Timms MP

Centre for Social Market Conference

My constituency in East London includes along its western border Green Street - arguably the most successful Asian shopping street in the UK. People come by the busload from all over Britain and from the continent as well to do their shopping in Green Street. I have watched the development of Green Street over the past 25 years. It used to be a declining, second division inner city shopping street, and all the prosperous traders were moving out. What a transformation you can see today. The new Asian Bond Street is what the Evening Standard calls it. Newham College has organised a series of fashion shows called Asian Dreams. It fizzes today with life and colour - fashion, jewellery, and new restaurants. With today's fascination for everything Asian, it has thrived. The area is being rejuvenated. And we understand very well in the DTI what good news that is for the economy - what a big contribution those creative businesses make to our goal of prosperity for all.

What I have seen in Green Street over the past twenty-five years is not just about making some people more prosperous. Investment and enterprise is the best way to boost a community like the one I represent in East London. And increasingly we want - even in places where it used to be thought that you could never get a job - even in those places and perhaps especially there, we want people to be confident about setting up in business for themselves.

When I was a Minister at the Treasury, I established the New Entrepreneur Scholarships that provide business education for people in disadvantaged areas interested in starting a business. I was very pleased to see a report published two weeks ago from the National Federation of Enterprise Agencies, about the experience of Asian women taking part in that programme. We want women as well as men to have that confidence and to be able to succeed.

What I have seen in Green Street is about renewing and strengthening our whole community. The children I meet in schools around Green Street are excited about the things they see on Green Street, the colour and the life and the buzz of it, and they are proud that its in their area.

But many businesses today want to contribute more. They want to be making a bigger contribution still - to be targeting perhaps young unemployed people and bringing them into work. They want to help raise standards of education in their area, for their own benefit as well as the benefit of the wider community. They want to contribute to tackling poverty in Britain or overseas. And that is where the modern CSR movement is making such an important contribution in Britain today. For us in Government it is one of the best allies we have in bringing about the kind of changes we need in our society.

I am pleased that the "Giving Something Back" report by the Centre for Social Markets, co-funded by my Department and Business Link, has just been published. That demonstrates that social responsibility is seen as an important factor within companies, irrespective of size, sector or location. Those companies interviewed considered that acting in a socially responsible manner could create value for their company. Yet most did not publicise their company's goals or achievements to the wider community. And not surprisingly, most considered that Government should be an enabler and supporter rather than intervening to direct business behaviour. I was interested to see in the report that faith emerges as a major influence and the reason why Asian entrepreneurs want to make a contribution back to their community.

It is no surprise that the Government is very keen to encourage the kind of activities described today as CSR, because there is such great potential for really imaginative and impressive contributions to tackling some of the biggest challenges that our society faces. Challenges which we can only ever hope to overcome if we are working together. No one sector has all the answers and through working together we can ensure that a variety of expertise and resources can be brought together in a complementary way to find the best solutions.

Improving our competitiveness and raising productivity are central to our aims at DTI, and CSR is a part of that but we need more companies to make that connection in the way they run their business.

What we need to be looking for in this field of Corporate Social Responsibility is for partnerships in which we can make progress on all three of the economic, social and environmental fronts - bringing together partners who may well have no experience of working together before but who can do so with enthusiasm because they can see how the collaboration can advance their own key interests as well as the interests of others. And it is particularly important that the business partners can see the benefits in business terms from their involvement, because if they can, then their involvement will be a sustained involvement - and we want it to be sustained and not just fleeting, because it can contribute so much.

I spoke at a seminar in Rome recently about Corporate Social Responsibility because CSR is one of the priorities for the current Italian Presidency of the European Union, and all the representatives of the Italian companies were saying - in Italian - that CSR is part of their company DNA. My Italian isn't up to much but I did understand that bit and I thought it was an attractive phrase, chiming in with our view of promoting CSR, not as an add on, not as an extra, but as part of mainstream business practice.

Take the Leeds Chamber of Commerce. Their staff helped to design and build a sensory garden for children with learning difficulties at Grafton School in Leeds. The work was undertaken as part of the Chambers' commitment to the employee-volunteering programme called Leeds Cares. The Chamber had sponsorship support and help in kind from local businesses. More than 30 staff from the office in Wellington Street in Leeds, gave up their free time to shift over eight tons of soil at the school to help improve the environment for children with autism and other special needs.

The benefits for the community are obvious - for children with special educational needs, school is more than a learning environment, it is an important part of their community. But it also provided for the business a great team building opportunity.

The winners of the BiTC Awards for Excellence Small Business Award 2003 was a company called Stormhouse - a marketing and advertising agency based in Preston currently employing nine people. It has a reputation throughout the North West as an agency that gets involved in its community not just from a business perspective but at a personal level too.

It treats incoming voluntary projects in the same way as commercial work. Staff are encouraged to search the community and local environment to find unique ideas that could act as a catalyst for gaining future work. The company is committed to CommunityMark, the SME toolkit for developing and mainstreaming community involvement. They work with schools, voluntary organisations, and campaigns. All the projects are delivered at full professional quality. It is great for those who benefit, but Stormhouse has also benefited from the networking aspect of the ventures, the extremely valuable associated PR and exposure to many potential and actual clients.

Happy Computers is a computer training company with 40 staff. I know them because some of my staff have been trained by them in the past. The company aims to donate the equivalent of 20% of profits (in cash, gifts-in-kind and volunteering) to the community. They have a strong concept of 'mutual benefit' for the company and the community.

For example, the company has a Voluntary Day scheme, allowing employees to volunteer one day a month, fully paid, for a charity of their choice; and a 'Timebank' scheme under which 100 person days is made available. Any employee can apply to draw from the Timebank for a project that has 'mutual benefit'.

In one Timebank project, Happy Computers partnered with the Pan African Development, Education and Advocacy Programme IT Community Training Centre in Kampala, Uganda. The overall aim was sustainable development, not just to provide training but also to leave behind a training centre with increased capacity, higher levels of staff skill and confidence and additional training materials.

Some people would feel that Happy Computers is over the top. But it is a successful business. It never has to advertise its vacancies but instead has a database of people wanting to come and work for it. Staff turnover is almost nil. All those are great commercial strengths for a company to enjoy.

Why are businesses doing all these things? Some of the business drivers are very clear already. Businesses are concerned about their reputation, their image, and they have found that good CSR can be very important. That comes out clearly in the CSM report. As one Manchester respondent said: "it is all about perceptions in the market place. Much of business is word of mouth". There is also the potential in CSR to develop innovative thinking - and to manage risk more effectively.

But in my discussions with companies, one driver stands out clearly above the others. Employees want to be involved in CSR. It is good for staff motivation and commitment - and for staff development. And increasingly, companies must therefore take it seriously.

It is particularly true of young people today, considering starting out on their career, and of the brightest young people above all - exactly the people who the most successful organisations need to attract into their employment. Those young people want, of course, to know that they can look forward to a financially rewarding career, but they also want to know that they will be able to contribute to addressing the big challenges which they feel so deeply concerned about: improving the environment, raising standards in education, tackling unemployment and poverty around the world. Big challenges whose outcome will affect for better or worse the conditions in which all of us and our children will be living in the future. And companies wanting to recruit those young people are finding that they have to be able to provide some answers for them about their CSR activities.

The question in my job is what role can Government play in encouraging this kind of responsible practice - to promote these partnerships to form and to deliver on social and environmental concerns. I do not believe the answer is to pass laws to make it compulsory. It would be very difficult to try and do so and in our view almost certainly counterproductive. What we are discussing today is organisations voluntarily going beyond the requirements of the law, 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. We want to encourage organisations to display virtue in their activities, but it is not possible to compel virtue through the law.

Some people argue that Government should make it compulsory for every company to publish information about its social and environmental performance. But what we must avoid at all costs in my view is for CSR is to become part of the red tape demanded of them from Government. It mustn't become just another form that they have to fill in. We don't want them to move CSR into their regulatory compliance department, as an unwelcome burden that they have to take on only because Government forces them to do so. That would be very damaging because it would stifle the enthusiasm and creativity and innovation that are the most valuable features of CSR today.

That is not to say there is no place at all for regulation. Of course, responsible behaviour for any organisation starts with legal compliance. 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. CSR goes beyond legal minimum requirements; it is certainly not a substitute for legal minima.

It is possible also for well-framed regulations to promote and encourage good corporate social responsibility. In 1999, when I was the Minister for Pensions in the UK, I introduced the requirement that pensions funds should state whether or not they had a policy on socially responsible investment and if so what the policy was. We did not compel them to have a policy, only to say if they did or not. That has been an effective, light touch intervention, which has stimulated a great deal of work on the part of investors in socially responsible investment.

We plan changes to company law that I expect to be effective too. Under the proposed Operating and Financial Review, a company will 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. It would include information about a company's relationships with its employees, its policies and performance on the environment and on social and community issues, where, in the view of the company's directors, the information is material to an informed assessment of the company's prospects. The White Paper proposals envisaged around 1,000 companies or groups preparing an OFR, though we estimate that they account for a quarter of corporate economic activity in the UK. So I believe that the Operating and Financial Review will be a step forward in ensuring more transparency and accountability.

Another key initiative has been the Community Investment Tax Credit which is encouraging corporate investment in disadvantaged areas of the UK, because we believe that kind of corporate community investment - starting up new businesses, providing new services, creating new jobs on a wholly commercial basis - that kind of investment is the best way to help people living in those areas. A qualifying investment attracts tax credits worth 25% over five years. So, for example, if an investor invests £100,000 in an investment in a disadvantaged part of the UK, then he can reduce his tax bill from other activities by £5000 per year over five years - £25,000 in total. I believe this tax credit is going to be very effective in just tipping the scales in favour of commercial viability for responsible corporate community investments that would not quite have passed the threshold of commercial viability without the help of the tax credit.

My Department also has a role to play in promoting good practice for companies operating overseas, for example, through raising awareness of the OECD Guidelines for Multinational Enterprises. This is increasingly important, as there are high expectations of business in environmental and social responsibility around the world, and in standards of corporate governance, wherever they operate. In keeping with our business led voluntary approach, the Guidelines act as an aid to business by setting standards, but serious investors are increasingly wanting to see that the companies they invest in are complying with the Guidelines.

The Corporate Challenge, recently launched by the Treasury and Home Office, demonstrates our commitment to working with the corporate sector to facilitate community involvement rather than relying on regulation. The Corporate Challenge and the associated network of champions will seek to increase corporate support for employee giving and volunteering activity. Champions will work with government to facilitate the spreading of best practice and collaboration between companies in order to increase involvement across the sector as a whole.
We are reluctant to introduce new regulation, but there are some very interesting examples of companies coming together voluntarily and imposing a code of responsible conduct on themselves. For example, the Ethical Trading Initiative includes major UK retailers with a combined annual turnover of more than £100 billion. They have drawn up a base code that they seek to ensure all the companies who supply to them comply with it, in every part of the world. The code is based on the principles set out by the International Labour Organisation - and it stipulates for example that every employee in a supplier company should be free to join a trade union, is paid in accordance with a fair minimum wage for that company and so on. This is proving a very effective way to raise standards of employment in developing countries. There is a rigorous enforcement procedure, and if companies do not meet their obligations then they will be ejected from the Initiative.

Another example is Fairtrade. The Fairtrade Foundation sets out what it describes as a fair price for coffee - above the market price, and stable - so that whatever the conditions in the international market growers will receive a price for their produce which will enable them to make ends meet and provide adequately for their families. In the DTI, we now insist that all the coffee we buy is Fair Trade coffee, and we are encouraging companies to take the same approach. The Fair Trade approach is being applied to other products too - to tea, chocolate, wine and fruit.

I want to conclude by bringing you up to date on an initiative that I think is likely to prove particularly important. Last December, I asked Sue Slipman - since appointed Financial Services Ombudsman, but at the time working with Camelot - to lead a working group to advise us on how Government might help companies develop the skills and competences they need for successful corporate social responsibility. Their report, "Changing Manager Mindsets", was in my view an extremely helpful contribution to our thinking - it can be found on the website of the Corporate Responsibility Group at http://www.corporateresponsibilitygroup.com.

Among its conclusions was to recommend: "the setting up of a CSR Academy to support the growth of CSR competencies at the heart of education, training and on-going development of both specialist and general managers". The idea of an Academy was first mooted by the think tank Demos in their report on Corporate Social Innovation in summer 2002. "Changing Manager Mindsets," recommended that the Academy should be the custodian of a framework of CSR competencies - that it should not itself provide training, but 'licence' use of the framework by others. It also recommended that it should work to give people working in CSR access to learning experiences "secondments, … learning exchanges and visits and best practice workshops" and that it should "have an active advice and support role to enable other organisations, whether in business, public or voluntary sectors and professional disciplines to develop their education and training programmes to underpin the embedding of CSR practice".

The report also called for the Academy to contribute to Government strategy for the promotion of CSR - including for UK companies operating internationally. It drew attention to the need to serve small organizations as well as large, and recommended that it should be "new and independent" and have a small core staff.

The report was published for circulation and attracted widespread support. Some concerns were expressed, however, that an Academy might support the notion of CSR being a separate profession, rather than a part of every manager's responsibility. I am keen that we should make progress as quickly as possible with establishing the Academy, with a dual role of:

· Promoting the availability of the kind of professional development which can contribute to successful CSR;

· And helping to spread the best ideas about CSR amongst all those who are interested in putting them into practice.

I have asked Clive Mather, Chairman of Shell UK, to chair a group to advise us on how best to take forward the proposal for an Academy in a way that strengthens the mainstreaming of corporate responsibility on the part of company boards and managements, with a view to the Academy being in a position to launch by Summer 2004. The group has representation from Business in the Community, the Corporate Responsibility Group, CBI and TUC, business schools and the voluntary sector as well as small and large companies. The group's first meeting was two weeks ago.

Let me also draw your attention to the "Small Business Consortium" that is currently beginning its work. Smaller companies often feel they want to get involved in their community or in improving the environment but they don't know where to start. The new Consortium is a collaborative undertaking, focused on CSR, including 10 key SME advisory organisations, such as Business in the Community and the Institute of Directors. The aim is to use existing resources, networks and tools to disseminate a clear, jargon free and consistent message about CSR to SME business advisors as well as to SMEs themselves. They are looking for collaboration from any interested parties. David Grayson, of Business in the Community, is leading the group and I would commend that initiative to you.

So, the Government aims to transform CSR from being seen as an "add-on" to being a core part of business practice for more and more UK organisations. It is not a luxury that only large companies can afford but something that firms of all sizes can get involved in - for their own benefit as well as for the benefit of others.

Many of the best ideas for tackling the big challenges in our communities are emerging today through CSR - and some of the best new business ideas are coming from the same source too. It is a ferment of innovation, experimentation, goodwill and enthusiasm - the source of a great deal of optimism about how our communities could be in the future.

I hope we can all work together in the months ahead to make the most of this fantastic opportunity, so that CSR will be a valued asset in the life of every company and of every community.

I congratulate the Centre for Social Markets on taking this important initiative and I wish you a very fruitful day today. You certainly have a very impressive programme and I thank you for giving me the opportunity to speak to you today.