Stephen Timms MP

Business Commitment to the Environment Awards

I salute the widespread trend in business to adopt sustainable development as part of business strategy. Not just as an add-on, still less as philanthropy  -  though that has its place  -  but as a core part of the business. Not a “nice to do” but a “must do”.

I would like to express thanks to AEA Technology, the lead sponsor of the awards. AEA is one of the partners working with Government to deliver the Envirowise programme. That has saved UK businesses £797 million since it started  -  and there are many examples of companies who have made savings like those here this evening, often through using readily available technology, or looking again at their processes. That growing environmental awareness is a key part of what we need to achieve over the next few years, and which these awards contribute to achieving.

Last autumn, DTI and Defra jointly published a framework for sustainable consumption and production, looking at how resource use and environmental impacts can be de-coupled from economic growth. This debate continues, as the coverage of the latest Sustainable Development Commission report last week showed.

The challenge of sustainability is one for everyone  -  for Government, for consumers, and especially for business. And like all challenges, it also represents an immense opportunity for new products, new processes, new ways of doing business. That is something that the winners this evening, and many companies like them, clearly understand.

Last month I launched the latest results of Business in the Community’s Corporate Responsibility Index. It is the second year DTI has supported the Index, and the number of companies taking part has risen to 139. It is another indicator that more and more businesses are recognising the value of corporate responsibility  -  the business contribution to sustainable development.

A couple of weeks ago I met the Italian Minister of Labour Roberto Maroni in London. We were continuing a very successful partnership we have developed, which has brought UK and Italian businesses together to learn from each other. We come from different starting points  -  Minister Maroni is primarily concerned with reforms to the labour market and social welfare in Italy. And the structure of the Italian economy is very different  -  a much higher proportion is made up of SMEs, for example. But our views on corporate responsibility have converged. We agree that it is most effective when it is business led, and voluntary  -  going beyond legal compliance. And we agree that for Government to attempt to regulate it risks strangling it and removing from it exactly the imagination and innovation which are among its most valuable characteristics today.

We will both be making that point at European level, as the European Commission and member states consider the report due in the summer of the Multistakeholder Forum on Corporate Social Responsibility set up in 2002. That will be followed up in the autumn by a further Communication from the Commission. So far, their approach has been very consistent with the one I have described. In the 2002 White Paper they saw CSR as contributing to the strategic Lisbon goal of making the EU by 2010 “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”. And that is in my view exactly the right context in which to consider CSR.

The best examples all consider all three aspects of sustainable development  -  environmental, social and economic. We see that in this evening’s winner of the Peter Parker award, South East Water, in the sustainable improvements at Barcombe Reservoir.

Sustainability and corporate social responsibility contribute to all the key drivers of productivity, which underpin DTI’s ambition of delivering “prosperity for all”. There are five of them  -  investment, innovation, skills, enterprise and competition. For example, there is a lot of evidence that a company’s corporate responsibility helps businesses both attract and retain a skilled workforce  -  a company’s commitment and reputation can be a key consideration in how they are viewed as an employer.

The work on competitiveness of Professor Michael Porter of Harvard University has highlighted the role corporate responsibility can play in promoting clusters and hence increasing productivity. He makes the point that “competitive success is a function of the business environment”  -  and that businesses can influence the environment through their own activities.

Regulation of course is important. We shall shortly publish the draft regulations on the Operating and Financial Review, requiring larger companies to provide more information on a wide range of issues, including social and environmental aspects. It will though remain for a company’s directors to decide where this information is material to an assessment of the company’s prospects. The OFR will introduce social and environmental factors into the way a company reports on its performance to its owners, to its shareholders. In doing so it will mean the directors of the company have to consider them. And I believe those regulations will be a good example of how light touch, non-prescriptive regulation can help in this area, rather than hinder.

I wanted to say something this evening on a topic which is taking up a great deal of our time and attention in the DTI currently, and that is innovation. Companies that make sustainability part of their innovation strategies can create new market opportunities. They can reduce costs by designing products which use fewer parts, fewer resources  -  the K-Hayler is an excellent example  -  or by making recycling an integral part of the process  -  as several of this evening’s winners have done. It has been estimated that wasted resources have a cost to UK business equivalent to about 7% of total manufacturing profit. So there is huge savings potential.

Companies that build regulatory changes into their investment plans at an early stage can significantly reduce the cost of compliance, and gain a competitive edge. I have spoken to a number of companies keen to take advantage of implementation in the UK of the EU Waste Electrical and Electronic Equipment Directive for environmental innovation. Recycling directives affecting the heavy, lead-rich glass of cathode-ray tubes and the need for better energy efficiency are driving innovation in display technologies. Manufacturers are investing heavily in R&D and production engineering to produce new, flat, energy efficient screens. Environmental challenges and the resulting regulation are impacting commercial decisions.

Now, I am not saying that we should regulate simply in order to drive innovation. But where there is an agreed environmental goal, we should look at whether the means to achieve it can be designed to be less costly, more effective, and so as to promote rather than hinder innovation. These are lessons we want to learn from a current project which is part of the DTI’s innovation review. This is looking at 3 areas  -  eco-design in display screens, which I have already mentioned, vehicle emissions, and the UK’s implementation of the European integrated pollution prevention and control regulations. In each area, information will be gathered about the impact of past regulation on innovation, new technological developments, environmental impacts and how future regulations might promote innovation. This will help us to improve future practice, and contribute to a guide for policy makers on innovation-friendly regulation.

We are keen to work with companies to design regulation in the most cost-effective way, delivering environmental aims most efficiently; outcome-based, leaving maximum scope to develop new ways to meet the environmental requirements; and designed with the needs of business in mind. That is our approach to implementing the End-of-Life vehicles Directive and the Waste Electrical and Electronic Equipment Directive which I mentioned earlier.

The best companies are thinking creatively certainly about how they can meet the requirements of the Directives, but also how they can exploit the business opportunities they create. Redcorn, here this evening, is an example of a company doing that.

There are still too many companies who see sustainability solely as a cost, and environmental improvement as something to be avoided or put off for as long as possible. They will end up paying more to comply with new requirements than those who have planned well in advance. If UK companies do not meet this challenge, those in other countries will. US, Japanese and Chinese equipment manufacturers are already planning for the WEEE Directive, and are avid for more information about how we are doing it.

Of course, it also puts the onus on us in Government to signal clearly and well in advance what the requirements will be. We are widely seen as having taken a lead in Europe in looking for solutions to the problems it poses. We have taken care to work in partnership with the businesses affected.

There are important lessons in a comparison of two of the world’s pulp and paper sectors. In the US in the 1970s, strict and inflexible regulations were imposed which forced companies to rush to adopt best available techniques quickly. They had no choice but to install proven but costly end-of-pipe treatment systems.

In Scandinavia, on the other hand, regulation permitted more flexible approaches, enabling companies to focus on the production process itself. So their companies developed innovative pulping and bleaching technologies that not only met emission requirements but also lowered operating costs. Even though the US was the first to regulate, US companies were unable to realise any first-mover advantage because US regulations failed to allow industry to find its own solutions to the problems the regulations were designed to tackle. That is a lesson we have been keen to learn.

Tomorrow, my Defra colleagues will be launching a review of the UK’s sustainable development strategy. It is essential for businesses to contribute in the three-month consultation period and to help deliver successfully our environmental and, social as well as our economic goals. On 13 May, we will be holding a conference at DTI, in conjunction with Defra, to raise awareness and encourage business involvement in developing a new strategic framework for sustainable development in the UK. We want to make sure that the framework reflects the views of those who are at the cutting edge of delivering real, tangible improvements in their products and processes  -  the views of people like you.

So congratulations to everybody who has taken part in these awards, and especially to the winners. I hope we can all keep working together across the range of concerns reflected in business commitment to the environment, in order that we can secure the environmental gains that all of us want to see.

Thank you.