Are we being served? Corporate responsibility and Lib Dem policy

September 23, 2009 12:00 AM
By Cllr Andrew Dakers in Liberal Democrat Autumn Conference 2009

Good morning conference. It saddens me to speak against a motion that brings so many good ideas to the table that I fully support. Until recently I led public affairs at the UK's leading corporate responsibility charity, which is why I want to briefly highlight some inaccuracies in the main policy paper needing correction and also to highlight a gaping hole in the motion and our party's thinking about markets and business that needs to be addressed with urgency.

Our party must produce cutting edge policy, not papers that are already out of date.

Section 7.5 of the paper for the first time starts to scope out a position for the party on Corporate Responsibility. This is long overdue and is a welcome advance.

Unfortunately this section incorrectly refers to an 'Operating and Financial Review' - the OFR - which in fact became a lighter touch 'Business Review' in the Companies Act. More work is needed.

Furthermore to suggest that all Stock Exchange and AIM listed companies should produce a Social Responsibility report to the OFR standard is madness. We Lib Dems should live in the real world. Do we really want to tie up relatively young, start-up companies in this sort of 'one size fits all' red tape? Corporate responsibility reporting that is useful is scoped to the size, sector and location of a company - and should focus on the tangible impacts of the company's operations.

Here too the paper needs more work.

Most companies that are integrating social and environmental factors deep within their business models stopped producing 'Social' Responsibility reports several years ago. Today 'Corporate Sustainability and Responsibility' is the more holistic language used (some call it CSR 2.0). The narrow focus that a Social Responsibility Report implies is quite simply old hat - we should instead refer to Corporate Sustainability and Responsibility reports.

Finally, what does this policy paper ignore entirely?

The paper forgets that in reality markets are not just about competition, but also cooperation between businesses. The negative social and environmental externalities that doing business can create will not be resolved by competition alone.

For the past decade companies that take their responsibilities seriously have run scared of our current competition law framework. In the late 90s this lost both a mechanism for companies that wanted to collaborate on social & environmental issues through voluntary agreements to get these authorised by the OFT, as well as a public interest test. These mechanisms were vital when voluntary agreements involved internalising the external costs of a product and would potentially increase the price to the end consumer.

The mess of current legislation is well illustrated by the ongoing OFT case regarding supermarkets. Blamed by the public for their low payments to dairy farmers, some supermarkets increased both their payments to farmers and the price to the end consumer. For this the OFT has fined them tens of millions.

Sure sometimes there is going to be collusive behaviour that drives excessive profiteering and is against the interests of the consumer. This abuse of market power must be cracked down on hard. However there are also great business leaders and companies - even in the finance sector - who would encourage their peers to take more voluntary action on environmental, social and corporate governance issues if they had the tools in competition law. This is particularly necessary when government is one step behind public opinion and scientific evidence - or when government would be over-reaching itself by producing yet more legislation and enforcement bureaucracy. Or when achieving the vast changes in business practices required needs sector ownership of the problem.

Unfortunately this issue of responsible collaboration was ignored by the working group. Taking this balanced view, that doesn't tarnish all business with the same brush, is so necessary if we are to shape a new era in capitalism.

All of these issues could and should be addressed by this working group. As a party we must produce policy that recognises we're all in it together: employer, owner, employee and consumer. This is why I urge Policy committee to commission more work in this area to put to spring conference.

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