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Tony Cunningham: The Government chief scientific adviser recently said that climate change was perhaps a greater danger to the world than terrorism. Does my hon. Friend agree that, if companies in this country are developing techniques—whether it be for oil, coal, gas or whatever—in other parts of the world, that contribute to climate change, shareholders and stakeholders should know that such activity is going on?
Mr. Dismore: My hon. Friend once again makes a cogent point. There is always considerable debate about climate change. We need only reflect on the weather to see how the climate has changed—whether it be the consequence of CFCs in the atmosphere or whatever. I believe that there is now overwhelming evidence that corporate activity, particularly in the developing world—logging, for example—can have a major impact on the climate not just for individual countries but worldwide. The British public should be aware, in taking investment decisions, of what contributions companies are making towards resolving that extremely serious problem that the whole world faces.
To conclude, I remind the Minister that commitments were made in 1994, reviews begun in 1997 when the Government came into office, and the challenge was put to business in 2001—
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): My hon. Friend is making an excellent speech on an important issue. Like him, I am pleasantly surprised to have an opportunity to debate the issues today. I hope that he is pleased to know that the Government were the first to introduce a Minister with particular responsibility for corporate social affairs.
Mr. Dismore: I hope that my remarks have done nothing to detract from the Government's achievements so far. We are now examining corporate responsibility in a wide range of matters, not least corporate manslaughter. I have taken a strong interest in that matter for some time.
The Minister is right that the Government have already done a lot, but what we are discussing now is very important, going beyond the narrow confines of company law. Even though the Bill amounts to company law reform, it affects the investment decisions made by everyone who has a pension fund. It affects the way in which our big companies behave worldwide. It is an essential reform. It is now opportune, after the challenge put to business in 2001, for social and environmental concerns to be crystallised into company law. The Bill will make that happen. I strongly support my hon. Friend, who has done the House a great service in introducing the Bill. I hope that he will make at least some progress today.
1.13 pm
Mr. Barry Gardiner (Brent, North) (Lab): I am delighted to follow my hon. Friend the Member for Hendon (Mr. Dismore). We have had an interesting
Friday morning. Friday mornings are a time when the House debates matters in a way—different from during the rest of the week—that few people see. We have had both good humour and bad temper in this morning's debates. However, we are now debating provisions on which there seems to be a good measure of agreement across the Chamber.I want to focus my remarks on the importance of corporate social responsibility, reform and the wider impact of the proposals not just in our society, but throughout the world. The Government set up an independent company law review in 1998, and I commend them for that. It was intended to establish fundamental reform of the framework of core company law. The company law review published its final report in 2001, and the first part of the response was published in 2002, in the White Paper "Modernising Company Law". As I understand it, the Government remain committed to the implementation of their proposals for company law reform.
Two of the main recommendations of the company law review were, first, that there should be an accessible, codified statement of the general duties that directors owe to their company as managers and monitors, embodying a modern, inclusive view of the range of decision making and objective standards of professional skill and care, tailored to the role of the individual director. The second principal recommendation was that all companies of significant economic size should be required to produce, as part of their annual report and accounts, an operating and financial review—the OFR, as my hon. Friend called it. That recommendation is reflected in clause 1(1) of the Bill, which states that a major company must
- "prepare an operating and financial review."
Mr. Dismore: My hon. Friend is right to point out that the Bill imposes an obligation on directors to prepare the OFR. The review reports to the members of the company, but interest in it will go beyond those members. The Bill performs a neat conjuring trick, in that while remaining within the confines of company law, it will ensure that the wider public can have a greater understanding of how companies operate.
Mr. Gardiner: In a good debate, ideas feed off each other, and the intervention that I made in my hon. Friend's speech earlier has now come back to me. The wider interest that must be generated by an OFR is in the wider community's involvement as shareholders in the company. That will drive the company towards better and better practice, because it will know that when investors read the OFR and consider the wider implications of investing in that company, they will have some tough decisions to make. Investors will have to pay great attention to the sometimes damaging effects that a company can have before deciding whether to invest in it or not. That will promote better practice and companies will be forced on to their mettle to clean up their act.
A good example of that was provided by my hon. Friend the Member for Crosby (Mrs. Curtis-Thomas), who used to work for a multinational oil company. She and a number of other people were studying the plans for a new plant that was to be built in an African country. My hon. Friend felt that something was not quite right about the plans, and when the meeting broke up she kept the plans to study them overnight, and found out that there was no filtration plant at the appropriate point to stop effluent being gunked out into the local community. When she pointed that out the next day, there was a bit of a silence and the people responsible for drawing up the plans said, "That's quite deliberate". There was no law to oblige that company to include such environmental controls.
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Gerry Sutcliffe): I am sure that my hon. Friend will be pleased that the Government are supporting the UN global compact that Secretary-General Kofi Annan announced in 1999, which sets out principles for business on human rights, labour and the environment, and would cover the circumstances he describes.
Mr. Gardiner: Indeed. I wholeheartedly support the Government's actions in that respect. My hon. Friend is right to point out that those things need to be tackled internationally.
Andy King: It is important that the Government put their money where their mouth is. The Prime Minister issued a challenge to the top 350 companies in October 2000: to issue OFRs by the end of the 2001. However, only about 20 per cent. of them actually did so. We are lagging behind. Denmark has introduced mandatory reporting, as have the Netherlands, Norway and Sweden, yet the Department of Trade and Industry says only that we will soon be bringing forward OFRs. How soon is soon? It has taken six years so far—surely it is time to do something?
Mr. Gardiner: My hon. Friend makes a powerful point in support of his Bill and I agree; it is time to act. It is shameful that companies issued with that challenge have ignored not only the Government's directive, but also public will in this country. People certainly want OFRs to be set up so that there is a clear understanding of the impact of companies' practice in the areas and countries where they operate. It is a matter of the public right to know. Shareholders have the right to know what is going on so that they can make the appropriate decisions. They should be able to find out—if they want to know—how their money is being invested, and whether it is being invested in companies that behave in a socially responsible manner, as I believe the vast majority of shareholders want them to. We all have a stake in this matter; for example, those of us who share in pension funds.
Lembit Öpik (Montgomeryshire) (LD): I do not necessarily disagree with the general tenor of the hon. Gentleman's remarks, but I should like some reassurance. Will he confirm that he is not suggesting that legislation is required because we think that the majority of companies are irresponsible? From my
experience in industry, I know that Procter and Gamble was always highly responsible internationally. Does he agree that, although there are details that could be discussed in Committee, the principle is not that everyone is guilty until proven innocent? The Bill would simply ensure that companies that transgressed internationally, perhaps significantly, were publicly brought to book.
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