Archived press release

Government plans for new corporate reporting rules full of holes

5 May 2004

New plans to strengthen corporate reporting, announced today by Trade and Industry Secretary Patricia Hewitt, could fail to improve performance unless they are significantly toughened Friends of the Earth said today.

The plans - which were issued today for consultation - propose that all quoted companies (around 1300) must produce an Operating and Financial Review which would include the directors' overview of the company and information on the company's impacts on the environment, society and communities in which it operates [1].

However, directors only need to include such information if it "significantly affects the company and its future performance". This leaves huge loopholes where companies can avoid reporting on environmental impacts. Friends of the Earth has long argued, along with the Corporate Responsibility Coalition, that reports should include details of all a company's major impacts on the environment and on communities - rather than just those that might affect profits [2].

For example, a recent Friends of the Earth report found that around a third of all products sold in major supermarkets contain palm oil. The production of palm oil has led to massive environmental impacts. Wildlife rich forests have been replaced by huge palm plantations, and communities have been displaced. But it is very hard to argue that the damage done by supermarkets selling products responsible for such destruction would need to be reported on - as it is unlikely to "significantly affect the company" [3].

Other weaknesses in the proposed plans are that too few companies will need to report. The proposed reports will cover only around a third of economic activity. The new plans also stop short of requiring Directors to have new duties to reduce their company's adverse environmental and social impacts, and will not help communities affected by UK companies operating overseas seeking redress in British courts.

Martyn Williams, Corporates Campaigner at Friends of the Earth said

"Even under these new rules, companies will still get away with putting profits first - whatever the cost to the environment and communities. The loopholes in the rules will mean companies can fill their reports with good news while continuing to hide the bad from public view. Until companies are forced to be open about the problems they create only a few of the best will really clean up their act."

Deborah Doane, Chair of the Corporate Responsibility Coalition said:

"Any benefit derived from the requirement for companies to report could be undermined by a lack of strong standards and explicit enforcement mechanism. This makes it all the more likely business as usual will prevail, with environmental and social impacts taking a back seat."

Further information on corporate abuses can be found at: www.foe.co.uk/campaigns/corporates/resource/media.html

Notes

[1] Consultation document available at www.dti.gov.uk/financialreview.htm

[2] The Corporate Responsibility Coalition is made up of Amnesty International (UK), Christian Aid, Friends of the Earth, New Economics Foundation, Traidcraft and others, and is campaigning for new company laws.

[3] www.foe.co.uk/resource/press_releases/rainforest_destruction_in_05032004.html

If you're a journalist looking for press information please contact the Friends of the Earth media team on 020 7566 1649.

Published by Friends of the Earth Trust