Corporate Governance and Accountability

Baroness Young of Hornsey Excerpts

Tuesday 5th July 2011 Lords Chamber

[Baroness Young of Hornsey]

My Lords, I, too, thank the noble Lord, Lord Harrison, for securing this debate. I will declare my interests. I work with various organisations concerned with ethical and sustainable fashion, including Made-By, the Centre for Sustainable Fashion and Cotton Made in Africa. I am also a patron of Anti-Slavery International.

Many of us balk at the idea of introducing more legislation and complex regulation, especially when some businesses are taking the initiative. For example, the Responsible Sourcing Network has created a pledge for US and European companies publicly to state their opposition to the use of forced child labour in the harvesting of Uzbeki cotton and to refuse to use it in their products. There must also be firm action from the EU, and from the Governments and importers in those countries that trade with Uzbekistan.

Self-regulation and voluntary measures on their own are not always enough to secure the necessary support for the people and environments that are most vulnerable to exploitation. Reacting to stakeholder demands for greater transparency and responsibility, Governments in Europe and the US are legislating on corporate governance and accountability. In 2008, Denmark adopted an amendment to the Danish Financial Statements Act requiring large businesses and listed and state-owned companies to account in their annual reports for their work on CSR. Spain has made a similar move with the Sustainable Economy Act, which came into force in March 2011.

Where do we need to be? We should aim high. Sir Geoffrey Chandler, founder of Amnesty International’s business group and a former director of Shell and of the National Economic Development Office, argued that all businesses should be required to ensure that their operations and supply chains comply with the Universal Declaration of Human Rights. An important step towards this aspiration would be to include a requirement in the combined code of corporate governance that businesses should report annually on the measures that they are putting in place to achieve this, to uphold the rule of law and to ensure environmental sustainability in their international operations.

Professor John Ruggie, UN special rapporteur on business and human rights, argued for measures to advance corporate legal responsibility through countries establishing extraterritorial jurisdiction over corporations for violations of international laws and conventions. What plans for action do the Government have to improve the quality of social and environmental reporting, and how might they move towards the high aspirations articulated by Sir Geoffrey Chandler and Professor Ruggie?