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Under the UK’s coalition government, the trend towards voluntary action and light-touch regulation looks set to continue
Under the UK’s coalition government, the trend towards voluntary action and light-touch regulation looks set to continueA search of UK government websites might reasonably give cause for concern. Westminster’s official homepage for corporate responsibility – www.csr.gov.uk – is no more. What was supposed to be the voice of policy makers is now the possession of the National Records Archive.
Not that there is an awful lot to preserve for posterity. Seven junior ministers passed through the doors of the official “CSR” office, created ten years ago. None had the time or the clout to make much of the job.
That is not to say that the UK government has ignored the corporate responsibility field entirely. Nor does it mean the subject is off the official agenda now the post has been phased out.
The approach of the Labour government, in power from 1997 until May last year, was surprisingly light in touch. Expectations that the traditionally left-leaning party would bring in onerous, anti-business legislation never materialised.
Those laws that could have influenced the practice of corporate responsibility failed to pass. Pressure for a mandatory corporate responsibility bill, for example, came to naught. The operating and financial review, which would have obliged directors to report on long-term non-financial risks, also got kicked into the long grass.
Legal provisions that did come into force, meanwhile, tended towards the peripheral. Some trundle on – the facility to establish social enterprises as Community Interest Companies continues, for instance. Others, such as the anti-discrimination Equality Act, have since been revoked.
Revising the Companies Act to tighten corporate governance and auditing requirements marks one of the few areas where the statute book has had a noticeable impact. Directors in the UK, for example, now have a duty to think in terms of “enlightened shareholder value” rather than just pure profit.
The other area is the environment. Recent years have seen the UK set tough carbon dioxide emission reduction targets, as well as follow Europe into a wide-reaching cap-and-trade scheme.
But government efforts in recent years have concentrated less on legal coercion and more on voluntary action. During the Labour years, industry-focused initiatives poured out of Whitehall.
Not all have had the desired impact. The Extractive Industries Transparency Initiative, for example, which aims to encourage greater visibility in resource industry revenues, only has five compliant members after eight years. The CSR Academy was only rescued from oblivion by the timely intervention of company-led group Business in the Community.
Several voluntary initiatives have genuinely raised the bar, however, with corporate participation giving them the weight of quasi-regulation. A classic case is the non-statutory corporate governance code, which governs issues of board remuneration, accountability and shareholder relations.
Coalition corporate responsibility
It is too early to judge exactly how policy will work out under the new coalition government, which is still yet to complete its first year.
In terms of general policy direction, there is much to hearten advocates of corporate responsibility. Indeed, responsibility is one of the three pillars of the government’s public strategy (the other two are freedom and fairness).
The tone of the coalition’s programme for government also bodes well. The preamble to its economic policy speaks of “green growth” and a “more responsible economic model”.
Major legislative intervention is unlikely, however. The early signs suggest the touch of the pro-business, anti-state coalition will be even lighter than that of its predecessor government.
To date, the only firm legislative proposal with real teeth is a commitment to reintroduce the operating and financial review.
In terms of employment law, UK workplaces will most probably be free from government dabbling. The repeal of the Equality Act suggests legislation will keep within the minimum dictates of European law.
Where progress could occur is in the environmental space. The prime minister, David Cameron, pledged to make his the “greenest government ever”.
The recent spending review provides further signs of hope. Key policy instruments such as feed-in energy tariffs and the CRC (formerly Carbon Reduction Commitment) Energy Efficiency Scheme governing carbon reductions have survived.
Despite the government drastically cutting back on public spending, low-carbon initiatives have attracted new funding. The coalition has committed £1bn for the country’s first carbon capture and storage facility, £60m for offshore wind and £1bn for a green investment bank.
What seems certain is that the government’s preference of a voluntary approach to corporate responsibility will not change any time soon.
The coalition’s idea of responsibility deals, for instance, seems to be all carrot and very little stick. In essence, the approach relies on corporations negotiating voluntary action plans with government on issues of public concern.
The white paper on health policy, released in November 2010, is the first to evoke the collaborative approach. In it, the government calls on the food industry to tackle obesity and other nutrition-related issues. Only if business fails to act will government look to regulate.
“The government clearly sees an important role for private philanthropy to meet social ends,” says Richard Muir, associate director for public service reforms at UK thinktank the Institute for Public Policy Research.
That vision is most evident in the coalition’s plans for a “big society”. In the spirit of cost-cutting, the coalition hopes to encourage individuals, charities and other non-state actors to step up and participate. The list includes companies.
“There’s a lot of debate to what the big society actually means in practice … but it’s definitely a policy imperative,” says Mike Tuffrey, director of specialist consultancy Corporate Citizenship and an elected member of the Greater London Assembly.
Whatever it does mean – small government, active citizenship or private philanthropy – business leaders claim to like it.
More than three in four companies say they could do more to increase strategic support for the communities where they operate, according to a survey by Business in the Community.
Retail giant Sainsbury’s has gone as far as to appoint a handful of full-time “business connectors” to facilitate long-term, strategic partnerships with local communities. The move follows its desire to make its stores “hubs for the community”.
Small government scepticism
But not all are happy with the government’s hands-off, anti-regulatory stance.
“If you can avoid regulation and companies deliver, then that’s fine. But will they deliver?” asks the IPPR’s Muir.
That remains the big question behind the big society. Sceptics abound. Without the threat of legislation, they argue, companies will be unlikely to go the extra mile.
Even progressive business voices raise concerns. There is too much red tape and too little centralised support or strategy to foster effective local corporate-community partnerships, the Business in the Community survey finds.
The real challenge is much wider, however. The UK is going through a time of austerity. Public finances are being slashed, corporate budgets are shrinking and many voluntary groups are fighting just to stay afloat.
The willingness might be there among many companies to contribute to a big society. Whether they have the resources to do so remains a separate question.
UK October 2010 spending review: key features
CRC Energy Efficiency Scheme: Modified so that revenues will go into the public purse rather than being recycled to participants, effectively turning a previously revenue-neutral scheme into a carbon tax. The move is anticipated to raise £1.02bn by 2014-15. First allowance sales for 2011-12 emissions deferred from 2011 until 2012.
Carbon capture and storage: £1bn in public funding to secure the first CCS project. The government is committed to funding four CCS projects, although it is not yet clear where the additional funding required will come from and whether it will be sufficient to attract business interest.
Offshore wind: £60m to upgrade offshore wind manufacturing facilities at port sites. Funds also available for research into offshore wind turbines.
Green investment bank: Due to be established in 2013-14, as initial £1bn in public funding could potentially be supplemented by additional funding from the sale of government-owned assets. However, significant investment from the private sector is still needed if the UK is to obtain the investment levels required to move to a low-carbon economy.
Green deal: A replacement for Warmfront scheme, saving the government about £345m by 2013-14. The green deal will allow householders to improve the energy efficiency of their house at no upfront cost.
Feed-in tariffs: Any changes to FITs for renewable energy microgeneration will be delayed until the next formal review. Changes are expected, as the government’s focus turns to more cost-effective carbon-abatement technologies.
Source: Comprehensive Spending Review: Renewable Energy and Environmental Measures, Deloitte UK