Whilst I am of course delighted at news this week that Brentford appears to be leading the way nationally in corporate community investment, the financial crisis has thrown up real uncertainties over the past few years as to how embedded responsible leadership is in the business community, particularly the financial sector. As a candidate I experienced first hand how the crisis provided the backdrop (and the recession) that was central to debates throughout the recent General Election campaign. Thus it should give cause for hope that the thread running through the Coalition Agreement published yesterday is “responsibility”. In fact the word gets some 15 mentions in the document and sits alongside Freedom and Fairness as one of the Coalition’s core values. But what does the Agreement mean for the Corporate Responsibility movement?
Liberal Democrat and Conservative election manifestos
The Liberal Democrat General Election manifesto had disappointingly little to say about Corporate Responsibility (CR). Along with reforms in the financial sector it committed to: “restore a public interest test so that a broader range of factors than just competition can be considered by regulators when takeovers are proposed and we will ensure that the outcome of takeover bids is determined by the long-term shareholder base.” (pg 26) In yesterday’s agreement this had become: “We will review the range of factors that can be considered by regulators when takeovers are proposed” (pg 10).
More significantly the Lib Dem manifesto committed to: “reintroduce the Operating and Financial Review, dropped in November 2005, to ensure that directors’ social and environmental duties will have to be covered in company reporting” (pg 26). This has made it into the Coalition Agreement. It will be a boon to CR consultancies, but what it will drive in practice only time will tell, and much will depend on the scope of its application.
The relative blandness of the Liberal Democrats’ proposals in this area was no great surprise. Rightly the party has always seen its approach to Corporate Responsibility as one of embedding CR throughout all policy areas. However the paper ‘Are we being served?’ to the party’s Autumn 2009 conference was the party’s first foray into considering CR as a discrete discipline (pgs 20-21) and its conclusions were unimaginative and in one place technically inaccurate.
In a speech to the conference I challenged the paper directly and called for more work to be done to acknowledge 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.” I had observed running my own company and through conversations with the many companies I came into contact with at Business in the Community that: “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.”
In contrast, the Conservatives have given a lot of thought to CR as a discrete issue and it has been a key aspect of the repositioning of the party. The conclusions of the party’s ‘A light but effective touch’ (2008) led to work on two ‘Responsibility Deals’ (voluntary agreements by another name). The Public health Responsibility Deal report ‘We’re all in this together’ (2009) acknowledged business concerns about competition law constraints: “One of the problems of encouraging co-operation among businesses to achieve social goals is the approach taken by the competition authorities to any evidence or suggestion of cartels or collusion. What business requires is a clear steer from Government that co-operation to address health issues can take place in a carefully regulated forum. Recommendation 6.4: Government attention must be given to competition issues that arise from actual and potential industry voluntary agreements. Where businesses can work together to deliver health improvements, Government should find a way of providing a safe haven for companies to discuss solutions that would otherwise risk contravening competition law.” (pg 19) This approach already exists and operates successfully in the Australian competition law framework.
Business in the Community made a detailed submission to the waste Responsibility Deal working group on the competition law issue. The final Conservative General Election manifesto referenced this Responsibility Deal: “We will introduce a Responsibility Deal on waste – a voluntary arrangement among producers to cut back on the production of waste and improve its disposal – as we move towards our goal of a zero-waste society.” (pg 97)
Unfortunately for a Coalition that wants to roll back the state and repeal legislation there is no reference to Responsibility Deals in the Coalition Agreement. We can only hope the Coalition Agreement commitment to “investigate further ways of improving corporate accountability and transparency” (pg 10) provides the window of opportunity for the Department for Business, Innovation and Skills (BIS) to start thinking more creatively in this area under the leadership of Secretary of State Vince Cable MP.
Coalition Agreement
The big picture is one of banking reform and a green economy: “We will support sustainable growth and enterprise, balanced across all regions and all industries, and promote the green industries that are so essential for our future. This document shows how, with radical plans to reform our broken banking system and new incentives for green growth…” (pg 7).
The opening statement and analysis that “there has been the assumption that central government can only change people’s behaviour through rules and regulations.” (pg 7) makes clear there will be a shift to voluntary approaches rather than diktat as the new government will “encourage social responsibility” (pg 8).
Many Corporate Sustainability and Responsibility reports now follow the Business in the Community (BITC) model of: Workplace, Community, Marketplace and Environment, so I have chosen to look at the Coalition Agreement through this same lense.
WORKPLACE
BITC describe the ‘workplace’ as “The environment into which individuals are recruited and developed both professionally and personally, with full entitlement to employment rights”. With nine commitments in this area across a broad range of issues there is a lot that campaigners can celebrate:
– “We will review employment and workplace laws, for employers and employees, to ensure they maximise flexibility for both parties while protecting fairness and providing the competitive environment required for enterprise to thrive.” (pg
10)
– “We will promote equal pay and take a range of measures to end discrimination in the workplace.” (pg 18)“Promoting” equal pay is very different to establishing legal obligations in this area.
– “We will extend the right to request flexible working to all employees, consulting with business on how best to do so.” (pg 18)
– “We will undertake a fair pay review in the public sector to implement our proposed ‘20 times’ pay multiple.” (pg 18)This pay multiple seems excessive to me and I’m baffled that Will Hutton felt it was worth lending his name to this exercise. At ‘20 times’ you could have a low paid worker on £10k/annum full time and the Chief Exec on £200k/annum. Interestingly the Royal Navy apparently has an ‘8 times’ de facto pay multiple. This seems much more equitable to me and more likely to stop the gap between rich and poor continuing to widen in this country.
– “We will look to promote gender equality on the boards of listed companies.” (pg 18) “Promotion” of gender equality does not seem any stronger than the approach of the last government, but at least it gets a mention!Perhaps this could be a Key Performance Indicator that companies are compelled to report on under the new Operating and Financial Review?
– “We will simplify the rules and regulations relating to pensions to help reinvigorate occupational pensions, encouraging companies to offer high-quality pensions to all employees, and we will work with business and the industry to support auto enrolment.” (pg 26)
– “We will give public sector workers a new right to form employee-owned co-operatives and bid to take over the services they deliver. This will empower millions of public sector workers to become their own boss and help them to deliver better services.” (pg 29)
– “We will reform Access to Work, so disabled people can apply for jobs with funding already secured for any adaptations and equipment they will need.” (pg 30)
– “We will seek ways to support the creation of apprenticeships, internships, work pairings, and college and workplace training places as part of our wider programme to get Britain working.” (pg 31) Rather lacking on specifics. I hope the new Government ensures that there is sufficient resource at a local level for economic development units (or similar) to provide the practical support SMEs need if they are to offer apprenticeship and internship opportunities.
COMMUNITY
“Community is related to a group of people or geographic locations, and community issues are the key social issues affecting them. ‘Community impact’ refers to the immediate and longer terms effects of a company’s activities in the wider community, which are directly related to the corporate policies, core products and services and individual initiatives of the business,” say BITC. With unemployment and public disgruntlement at the benefits system perhaps at an all time high, changes in this area were the consistent theme across the 18 key ‘Community’ commitments that I identified:
– “We will introduce new powers to help communities save local facilities and services threatened with closure, and give communities the right to bid to take over local state-run services.” (pg 12) This will be good news for the Prince’s/ BITC’s Pub is the Hub initiative.
– “We will implement the Sustainable Communities Act, so that citizens know how taxpayers’ money is spent in their area and have a greater say over how it is spent.” (pg 12) Let’s hope the new Government now gives a considered response to the many great ideas put forward by local authorities in the first round of the Sustainable Communities Act process.
– “creating a new programme, ‘Troops for Teachers’, to recruit ex-Service personnel into the teaching profession” (pg 15)
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“The Government believes that we need to encourage responsibility and fairness in the welfare system.” (pg 23)
–
“We will end all existing welfare to work programmes and create a single welfare to work programme to help all unemployed people get back into work.” (pg 23)
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“We will ensure that Jobseeker’s Allowance claimants facing the most significant barriers to work are referred to the new welfare to work programme immediately, not after 12 months as is currently the case. We will ensure that Jobseeker’s Allowance claimants aged under 25 are referred to the programme after a maximum of six months.” (pg 23)
–
“We will reform the funding mechanism used by government to finance welfare to work programmes to reflect the fact that initial investment delivers later savings through lower benefit expenditure, including creating an integrated work programme with outcome funding based upon the Departmental Expenditure Limits (DEL)/ Annual Managed Expenditure (AME) switch.” (pg 23)
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“We support the National Minimum Wage because of the protection it gives low income workers and the incentives to work it provides.” (pg 23)
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“We will support would-be entrepreneurs through a new programme – Work for Yourself – which will give the unemployed access to business mentors and start-up loans.” (pg 23)
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“We will draw on a range of Service Academies to offer pre-employment training and work placements for unemployed people.” (pg 23)
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“We will develop local Work Clubs – places where unemployed people can gather to exchange skills, find opportunities, make contacts and provide mutual support.” (pg 23)
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“We will introduce a ‘rehabilitation revolution’ that will pay independent providers to reduce reoffending, paid for by the savings this new approach will generate within the criminal justice system.” (pg 23)
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“We will support Teach First, create Teach Now to build on the Graduate Teacher Programme, and seek other ways to improve the quality of the teaching profession.” (pg 28)
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“We will support the creation and expansion of mutuals, co-operatives, charities and social enterprises, and enable these groups to have much greater involvement in the running of public services.” (pg 29)
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“We will take a range of measures to encourage charitable giving and philanthropy.” (pg 29)
–
“We will introduce National Citizen Service. The initial flagship project will provide a programme for 16 year olds to give them a chance to develop the skills needed to be active and responsible citizens, mix with people from different backgrounds, and start getting involved in their communities.” (pg 29)
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“We will use funds from dormant bank accounts to establish a ‘Big Society Bank’, which will provide new finance for neighbourhood groups, charities, social enterprises and other non-governmental bodies.” (pg 29)
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“We will take a range of measures to encourage volunteering and involvement in social action, including launching a national day to celebrate and encourage social action, and make regular community service an element of civil service staff appraisals.” (pg 30)
MARKETPLACEA raft of measures will affect marketplace rules for all sectors, hopefully shaping a fairer and more responsible market. These should support
BITC’s Marketplace Responsibility Principles, albeit with the heavy hand of regulation in some areas:-
“We take white collar crime as seriously as other crime, so we will create a single agency to take on the work of tackling serious economic crime that is currently done by, among others, the Serious Fraud Office, Financial Services Authority and Office of Fair Trading.” (pg 9)
–
“We will seek to ensure a level playing field between small and large retailers by enabling councils to take competition issues into account when drawing up their local plans to shape the direction and type of new retail development.” (pg 10) This is potentially great news for anyone concerned at how out of town shopping centres have encouraged the decline of our high streets.
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“We will give the public the opportunity to challenge the worst regulations.” (pg 10)I suspect this may also provide a route for SMEs to tackle head on unnecessary bureaucracy. Larger enterprises often have lobbyists to make their voice heard.
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“We will review the range of factors that can be considered by regulators when takeovers are proposed.” (pg 10)Will this see a return of the public interest test?
–
“We will reinstate an Operating and Financial Review to ensure that directors’ social and environmental duties have to be covered in company reporting, and investigate further ways of improving corporate accountability and transparency.” (pg 10)
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“We will take forward measures to enhance customer service in the private and public sectors.” (pg 13) They could do worse than look at existing standards in Customer Service Excellence and get them more widely adopted.
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“We will end the testing of household products on animals and work to reduce the use of animals in scientific research.” (pg 18)
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“We will crack down on irresponsible advertising and marketing, especially to children. We will also take steps to tackle the commercialisation and sexualisation of childhood.” (pg 20)
–
“We will regulate lobbying through introducing a statutory register of lobbyists and ensuring greater transparency.” (pg 21)
A range of marketplace reforms are proposed that are sector specific. The food and drinks sector seems to come only second to banking for the new regulations that they can expect to shape their part of the marketplace. Whilst, of course, many individual firms and sectors have done a good job of voluntary self-regulation, many of these regulations could be seen a result of a sector’s failure to self-regulate effectively:
Arms trade
– “We will support efforts to establish an International Arms Trade Treaty to limit the sales of arms to dangerous regimes.” (pg 22)
Banking and finance
– “The Government believes that the current system of financial regulation is fundamentally flawed and needs to be replaced with a framework that promotes responsible and sustainable banking, where regulators have greater powers to curb unsustainable lending practices and we take action to promote more competition in the banking sector. In addition, we recognise that much more needs to be done to protect taxpayers from financial malpractice and to help the public manage their own debts.” (pg 9)
– “We will bring forward detailed proposals for robust action to tackle unacceptable bonuses in the financial services sector; in developing these proposals, we will ensure they are effective in reducing risk.” (pg 9)
– “We want the banking system to serve business, not the other way round. We will bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry.” (pg 9)
– “We will take steps to reduce systemic risk in the banking system and will establish an independent commission to investigate the complex issue of separating retail and investment banking in a sustainable way; while recognising that this will take time to get right, the commission will be given an initial time frame of one year to report.” (pg 9)
– “We will create Britain’s first free national financial advice service, which will be funded in full from a new social responsibility levy on the financial services sector.” (pg 9)
– “We will provide more protection against aggressive bailiffs and unreasonable charging orders, ensure that courts have the power to insist that repossession is always a last resort, and ban orders for sale on unsecured debts of less than £25,000.” (pg 12)
– “We will give regulators new powers to define and ban excessive interest rates on credit and store cards; and we will introduce a seven-day cooling-off period for store cards.” (pg 12)
– “We will oblige credit card companies to provide better information to their customers in a uniform electronic format that will allow consumers to find out whether they are receiving the best deal.” (pg 12)
– “We will introduce stronger consumer protections, including measures to end unfair bank and financial transaction charges.” (pg 13)
– “We will review what action can be taken against ‘vulture funds’.” (pg 22)
Construction
– “In the longer term, we will radically reform the planning system to give neighbourhoods far more ability to determine the shape of the places in which their inhabitants live, based on the principles set out in the Conservative Party publication Open Source Planning.” (pg 11)
– “We will create a presumption in favour of sustainable development in the planning system.” (pg 18)
Energy
– “We will increase households’ control over their energy costs by ensuring that energy bills provide information on how to move to the cheapest tariff offered by their supplier, and how each household’s energy usage compares to similar households.” (pg 13)
– “We will continue public sector investment in carbon capture and storage (CCS) technology for four coal-fired power stations.” (pg 16)
– “We will deliver an offshore electricity grid in order to support the development of a new generation of offshore wind power.” (pg 16)
Food and drinks
– “We will introduce, as a first step, an Ombudsman in the Office of Fair Trading who can proactively enforce the Grocery Supply Code of Practice and curb abuses of power, which undermine our farmers and act against the long-term interest of consumers.” (pg 13)
– “We will introduce honesty in food labelling so that consumers can be confident about where their food comes from and its environmental impact.” (pg 13)
– “We will ban the sale of alcohol below cost price.” (pg 13)
– “We will review alcohol taxation and pricing to ensure it tackles binge drinking without unfairly penalising responsible drinkers, pubs and important local industries.”
(pg 13)
– “We will overhaul the Licensing Act to give local authorities and the police much stronger powers to remove licences from, or refuse to grant licences to, any premises that are causing problems.” (pg 13)
– “We will allow councils and the police to shut down permanently any shop or bar found to be persistently selling alcohol to children.” (pg 13)
– “We will double the maximum fine for under-age alcohol sales to £20,000.” (pg 14)
– “We will permit local councils to charge more for late-night licences to pay for additional policing.” (pg 14)
– “We will promote high standards of farm animal welfare.” (pg 18)“Promote” is a far weaker than the “enforcement” that many believe is required.
Football
– “We will encourage the reform of football governance rules to support the co-operative ownership of football clubs by supporters.” (pg 14)
Gambling
– “We will stop wasteful spending by National Lottery distributors by banning lobbying activities and restricting administration costs to 5% of total income.” (pg 14)
– “We will use cash in dormant betting accounts to improve local sports facilities and support sports clubs.” (pg 14)
Media
– “We will impose tougher rules to stop unfair competition by local authority newspapers.” (pg 12)
– “We will enable partnerships between local newspapers, radio and television stations to promote a strong and diverse local media industry.” (pg 14)
Water
– “We will examine the conclusions of the Cave and Walker Reviews, and reform the water industry to ensure more efficient use of water and the protection of poorer households.” (pg 17)
ENVIRONMENT
Let’s face it, all the mainstream parties, including the Conservatives and Liberal Democrats talk the talk on environmental sustainability. Most of the key commitments below are by now pretty familiar. The challenge is implementation – and fast – as well as inspiring other countries to follow Britain’s lead:
– “The Government believes that business is the driver of economic growth and innovation, and that we need to take urgent action to boost enterprise, support green growth and build a new and more responsible economic model.” (pg 9)
– “We will push for the EU to demonstrate leadership in tackling international climate change, including by supporting an increase in the EU emission reduction target to 30% by 2020.” (pg 16)– “We will seek to increase the target for energy from renewable sources, subject to the advice of the Climate Change Committee.” (pg 16)
– “We will create a green investment bank.” (pg 16)
– “We will replace Air Passenger Duty with a per-flight duty.” (pg 16)
– “We will also take measures to improve energy efficiency in businesses and public sector buildings.” (pg 16)
– “We will establish a full system of feed-in tariffs in electricity – as well as the maintenance of banded Renewables Obligation Certificates.” (pg 16)
– “We will work towards an ambitious global climate deal that will limit emissions and explore the creation of new international sources of funding for the purpose of climate change adaptation and mitigation.” (pg 17)
– “We will introduce measures to make the import or possession of illegal timber a criminal offence.” (pg 17)
– “We will work towards full compliance with European Air Quality standards.” (pg 17)
– “We will work towards a ‘zero waste’ economy, encourage councils to pay people to recycle, and work to reduce littering.” (pg 17)
– “We oppose the resumption of commercial whaling, will press for a ban on ivory sales, and will tackle the smuggling and illegal trade on wildlife through our new Border Police Force” (pg 18)
– “We will ensure that UK Trade and Investment and the Export Credits Guarantee Department become champions for British companies that develop and export innovative green technologies around the world, instead of supporting investment in dirty fossil-fuel energy production.” (pg 22)
– “We will increase the proportion of tax revenue accounted for by environmental taxes.” (pg 31)
– “We will mandate a national recharging network for electric and plug-in hybrid vehicles.” (pg 31)
– “We will reform the way decisions are made on which transport projects to prioritise, so that the benefits of low carbon proposals (including light rail schemes) are fully recognised.” (pg 31)
– “We will establish a high speed rail network as part of our programme of measures to fulfil our joint ambitions for creating a low carbon economy. Our vision is of a truly national high speed rail network for the whole of Britain. Given
financial constraints, we will have to achieve this in phases.” (pg 31)
RESPONSIBLE GOVERNMENT
There are a raft of measures directed at re-building trust in the way central and local government operate – and MPs. I have picked out some of the highlights below. I will be particularly interested to see how the 10:10 campaign commitment to a 10% reduction in emissions in the next 12 months across the Government Estate is realised. Will the downsizing of the Civil Service help or hinder progress here?
– “We will promote small business procurement, in particular by introducing an aspiration that 25% of government contracts should be awarded to small and medium-sized businesses and by publishing government tenders in full online and free of charge.” (pg 10)
– “we need immediate action to tackle the deficit in a fair and responsible way, ensure that taxpayers’ money is spent responsibly, and get the public finances back on track.” (pg 15)
– “We will set out a plan for deficit reduction in an emergency budget. We have created an independent Office for Budget Responsibility to make new forecasts of growth and borrowing for this emergency budget.” (pg 15)
– “We will reduce central government carbon emissions by 10% within 12 months.” (pg 16)
– “We will give an Annual Energy Statement to Parliament to set strategic energy policy and guide investment.” (pg 16)
– “We will ensure that food procured by government departments, and eventually the whole public sector, meets British standards of production wherever this can be achieved without increasing overall cost.” (pg 18)Disappointing that principle is sacrificed at the altar of cost. But at least this makes explicit that responsible production and procurement is sometimes just more expensive – a reality that is too often brushed under the carpet.
– “We will promote improved community relations and opportunities for Black, Asian and Minority Ethnic (BAME) communities, including by providing internships for underrepresented minorities in every Whitehall department and funding a targeted national enterprise mentoring scheme for BAME people who want to start a business.” (pg 18)
– “The Government believes that we need to throw open the doors of public bodies, to enable the public to hold politicians and public bodies to account.” (pg 20)
– “We will strengthen the powers of Select Committees to scrutinise major public appointments.” (pg 21)
– “We will bring forward early legislation to introduce a power of recall, allowing voters to force a by-election where an MP is found to have engaged in serious wrongdoing and having had a petition calling for a by-election signed by 10% of his or her constituents.” (pg 27)
– “We will introduce extra support for people with disabilities who want to become MPs, councillors or other elected officials.” (pg 27)
– “We will make the running of government more efficient by introducing enhanced Departmental Boards which will form collective operational leadership of government departments.” (pg 28)
What’s missing?
As I set out in my opening reflections, the gaping hole in these measures is reform to competition law that considers its interaction with voluntary agreements as a means of advancing responsible business practice – particularly when sometimes more responsible practices demand an increase in the cost of goods or services to the consumer. As I said at the Liberal Democrats conference last Autumn: “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…. 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.” So Vince, you can look forward to my first letter to you in your new role – and make no mistake there’s still plenty of out of the box thinking to do if trust in business is to be rebuilt for the long term.
Andrew Dakers was Head of Public Affairs at Business in the Community (2008/9) and Liberal Democrat Parliamentary Candidate for Brentford & Isleworth Constituency (2005 and 2010). He campaigns for competition law reform under the banner of ‘The Cooperation Incubator’. Extracts from ‘The Coalition: our programme for government’ (2010) are Crown copyright.