Focus: Corporate Responsibility - Dismay at Government 'backtrack' over reporting

New guidelines will remove the obligation on directors to review social and environmental impacts, writes Anita Pati.

The Operating and Financial Review, which would have required companies to report on their social and environmental impacts, will be repealed tomorrow and replaced with a less prescriptive Business Review that will not need auditing.

After the Chancellor announced the OFR's demise at a speech to the Confederation of British Industry's annual conference on 28 November, many NGOs, trade unions and companies expressed their dismay at the change of direction.

The Department of Trade and Industry had spent seven years consulting with NGOs and business to establish mechanisms that would have required companies to report on their impacts. Public limited companies would have had to produce an OFR as part of their annual reports from 1 April this year.

It is widely believed the move came about to appease CBI members that felt the OFR would be too restrictive.

On 7 December, Friends of the Earth threatened to seek a judicial review to challenge the Chancellor's decision, and is hoping to serve papers today.

Then, on 14 December, an alliance of 40 charities and other organisations, including Oxfam, Amnesty International UK, ActionAid and Friends of the Earth, wrote a letter to the Treasury.

This voiced concerns over the replacement Business Review, which would remove directors' obligations to report on social and community issues that could affect a company. The review is out to consultation until February.

Julian Oram, policy officer for ActionAid and one of the signatories, said: "By getting rid of the OFR, the Government is backtracking on its previous commitment to promote corporate accountability. The UK cannot help make poverty history if the Treasury appeases minority interests at the expense of the vast majority of stakeholders."

Sarah McCarthy-Fry, Labour MP for Portsmouth North, tabled an Early Day Motion the following day, which stated: "This House agrees with concerns raised by trades unions, City investors, business leaders and charities over moves to abolish the OFR without due consultation; it further notes the importance of the OFR for greater corporate transparency.

Paul Eagle, co-ordinator of the Corporate Responsibility Campaign, said the EDM was intended to embarrass the Government.

"We want there to be some indication in Parliament of the degree of disquiet about the sudden way in which it removed this first stab at providing a vehicle for reporting on impacts," he said.

But a DTI spokesman said: "The Government is not afraid of altering a decision where it makes sense to do so," adding that the new requirements were largely identical but less prescriptive.

KEY POINTS

- The Operating and Financial Review will be repealed tomorrow and replaced by the Business Review, which will not be audited and is less prescriptive

- The OFR would have made it mandatory for businesses to report on social and environmental impacts

- NGOs are concerned at the Chancellor's sudden decision to cancel the OFR

- Friends of the Earth threatened a judicial review to challenge the decision, claiming it was unlawful

- Sarah McCarthy-Fry, Labour MP for Portsmouth North, tabled an Early Day Motion expressing concerns and calling for greater corporate transparency.

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