WDM is an outstanding organisation - independent, clever in its campaigning, meticulous in its research, and angry. Its important work deserves our support.
John Pilger, author and activist
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During 2006, the UK Government undertook the most far-reaching review of company law for 150 years. WDM ran a campaign seeking to influence the outcome of the Companies Bill, as it was entitled, through an alliance with the Trade Justice Movement (TJM) and the Coalition for Corporate Responsibility (CORE), the two largest UK organisations campaigning for trade justice.
The campaign was successful in strengthening the requirements of the new law and in laying the foundations for further progress towards corporate accountability in future.
Background
The Government has recognised the need to encourage more responsible business practice and has argued for an approach based on Enlightened Shareholder Value (ESV). This assumes that, given appropriate information about a company's activities, investors will make investment decisions based on ethical considerations and that this in turn will stimulate responsible business behaviour.
The ESV approach, as conceived by the Government, relies on voluntary reporting by companies and on voluntary ethical investment strategies by investors. This hands-off, market-driven strategy reflects the Government's characteristic reluctance to regulate where it will affect the corporate sector.
It fails to recognise that sometimes directors see a short-term business interest in disregarding environmental issues or the interests of workers or communities in order to turn a quick profit. If the government strategy fails to achieve its goals, it runs the risk of actually undermining those directors and businesses that do take their business seriously, allowing them to be undercut by less scrupulous competitors. Further, it fails to take into account the impact of UK business operating overseas.
Demands
The CORE / TJM alliance lobbied Government to strengthen the requirements of the bill. The key demands submitted to the consultation process were for:
- a legal requirement for companies to report on their social and environmental impacts
- a duty on company directors to take reasonable steps to minimise any significant adverse impacts on workers, local communities and the environment
- a commitment by the Government to examine the barriers which prevent UK companies from being liable for abuses committed overseas and to make recommendations
Campaign Results
The alliance's campaign achieved some significant improvements to the legislation during its passage through parliament.
Stronger social and environmental reporting requirements
Thanks to over 100, 000 UK voters contacting their MP in 2006 through emails, postcards, letters and local lobbying, the Government strengthened the requirements in the legislation on social and environmental reporting so that the 1300 companies quoted on the UK stock market must report on environmental matters, employees, social and community issues and risks down company supply chains where they are necessary to understanding the company’s business.
Directors' duties on Environmental and Social Matters
Directors of UK companies now have a duty not only to maximise profits but also to consider the impacts of their business operations on the community and the environment. This is the first time that the such responsibilities have been written in UK company law, and we know of no other country in the world that demands in law this kind of responsibility from company directors.
The Government also put in place a link between the reporting requirements and the directors’ duties in the Companies Bill, making it clearer that the reports must show how directors are performing on their duties to society and the environment, bringing responsibility for reporting to the Boardroom level. A new provision to the law now recognises that some companies can be run for purposes other than to make profits. Lastly, the Government have committed to publishing advice on how directors’ should interpret their duties, helping them understand exactly how they should take social and environmental matters into consideration.
Widespread support for the campaign
Campaigning effort by the alliance and its supporters brought about a major increase in awareness about the abuses committed by British companies overseas and the need for laws to prevent these, laying the groundwork for more progress in the future.
- Parliamentary Petition: Over one-third of all MPs (225) signed Early Day Motion 697 – the Parliamentary petition tabled by Sarah McCarthy-Fry MP supporting its proposed amendments to the legislation.
- Debates: Alliance concerns about the social and environmental provisions dominated all the debates in Parliament and have been represented by MPs across the political spectrum.
- Postcard campaign: MPs reported that the alliance postcard campaign is one of the biggest they have ever come across.
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