Transparency and Public Trust in Business

Jim Shannon Excerpts

Tuesday 8th April 2014 Commons Chamber

[Lisa Nandy (Wigan) (Lab)]

Six years after the peak of the global financial crisis there should surely no longer be disagreement among any of us that businesses are bound by the same ethical and social responsibilities that bind us all. As the financial crash showed, business transparency is absolutely essential to society. The lack of it in the financial sector in recent years continues to have huge repercussions for people in my town of Wigan, in the UK, and across the world.

We saw in the recent horsemeat scandal that lack of transparency can have major implications for consumers in the UK, but it can have even greater implications for the lives of people across the world, as in the horrific loss of life in Bangladesh with the collapse of the Rana Plaza complex. As business has become increasingly complex, it is very hard for consumers to know, first, whether they can trust the product they are buying, and secondly, whether the business they are supporting is operating ethically. Little wonder, then, that there is increasing public appetite for action. I was surprised to hear recently that the Edelman Trust Barometer found that the public want greater regulation of business by a margin of 4:1.

But it is not just the public who want action; companies and business leaders are also behind the call for higher business standards. The Minister will be aware of the B Team, an alliance of thinkers and business leaders, including Richard Branson and Paul Polman, the chief executive of Unilever, who are calling for a plan B that, in their words, puts

“people and planet alongside profit”.

At the World Economic Forum in Davos, they called for companies to implement the highest standards in their core operations and across their supply chains, including greater transparency as a matter of course and as good business practice.

There is good reason for this. Business needs to command the support of the public, of investors and of shareholders in order to survive and to grow. However, public trust is low. Last year, an Ipsos MORI poll found that only 34% of the people questioned trusted business leaders to tell the truth. We need to see this in context; I would hate to think what they had to say about politicians. Research by Goldman Sachs and KPMG has shown that companies that have implemented responsible business practices such as transparency throughout their operations often lead on stock market performance and attract a wider and more loyal investor base from investors who are increasingly looking at these issues and want to invest in companies that have a long-term, not a short-term, outlook.

There are many examples of business leading the way in this field. As chairperson of the all-party parliamentary group on corporate responsibility, I have been pleased to meet and work with many such business leaders over the past four years. However, the Government need to play their part too, because, as many of these business leaders have told me, operating transparently is not always easy. They do so in the glare of public attention, they sometimes get it wrong, and it is incredibly complicated. Companies are often involved in extremely complex supply chains. That was brought home to me and to the wider public after the Rana Plaza disaster, where some of the multinational companies involved did not even realise at first that they had been contracting from suppliers who were based in the complex. It was only after campaigners and the media got involved that they realised they had been doing so.

Some companies are making efforts to operate to the highest ethical standards in terms of human rights and the environment—and to be open about it—but their problem is that they are in competition with businesses that do not do that. Many such businesses are based in the UK and listed on the London stock exchange, but they face no penalties whatsoever for breaching the standards the Government say they want them to meet. Like so many others, I believe it is time that the playing field was tilted in favour of those that are operating to high ethical standards, not against them.

[Jim Shannon (Strangford) (DUP)]

I asked the hon. Lady beforehand for permission to intervene on her. Does she agree that greater transparency of who owns and controls companies is necessary and that, in addition to addressing the issues she has mentioned, any new measures must address tax evasion, money laundering and the financing of terror?

[Lisa Nandy]

That is absolutely right. This goes to the heart of public trust in business, which is about transparency and a commitment to tackling such issues.

The business and human rights action plan was published jointly last September by the Foreign Office and the Department for Business, Innovation and Skills. The UK was one of the first countries to breathe life into the United Nations’ guiding principles on business and human rights. I am proud of that and congratulate Ministers for taking a lead on it. “Good Business” sets out the standards it expects companies to uphold, but so far it does nothing to demand those standards of them. We have had a decade of voluntary corporate social responsibility. Given the experience of the past year and previously—when John Ruggie set out the guiding principles, which were unanimously endorsed by the UN—it is time for the Government to take a more proactive approach.

First, I have been deeply concerned by reports from non-governmental organisations and others that companies have been given conflicting messages by different parts of Government. Although the Foreign Office has consistently warned about the dangers for UK-based companies in knowingly or unknowingly breaching human rights overseas, it appears from anecdotal evidence that BIS has been acting in direct conflict with the commitments made in the action plan.

I want to draw the Minister’s attention to one concrete example where there is evidence of that happening. The Kiobel case was brought by a group of Nigerian activists who claimed that Shell had helped the Nigerian military to systematically torture and kill environmentalists in the 1990s. The cases against Shell were filed under the US alien tort statute, which applies extraterritorially, so it enables non-US plaintiffs to bring claims against foreign companies in the US courts for acts that occur in a third country. Shell challenged that use of the alien tort statute and the UK Government intervened to support the company’s position. The court then ruled in Shell’s favour, which limits the ability of communities in developing countries to challenge corporate malpractice in the US courts in future. The Government’s intervention ran contrary to the commitment made by the Prime Minister to implement the UN guiding principles on business and human rights, which were unanimously endorsed by Governments in 2011.

Will the Minister give an assurance that her Department is completely committed to upholding the principles in the action plan, without qualification, and that it will commit to the same openness in its dealings with business as the Government say they want to see from business itself? In particular, will she ensure that businesses receiving export credit support or development partnership funding have to show that they are meeting the standards of the UN guiding principles?

Secondly, the entire action plan is predicated on the principle of transparency—none of it can be monitored or enforced without it. Nowhere is that more true than in one of the central pillars of John Ruggie’s principles, namely the access to remedy. Without transparency, people whose lives and communities have been destroyed have no effective way of getting justice. As we saw with the South African miners who took a case against Cape plc, companies will often seek to cover the impact of their actions, creating enormous difficulties for communities and their lawyers in gaining the evidence they need to put before the courts.

I must tell the Minister that without transparency requirements, there is no way to prevent such injustices. I recently met representatives of the Afro-Colombian Community Council of Opoca in Colombia. After an 11-year struggle to acquire a collective land title, it was finally granted the right to 73,000 hectares of collective land titles in September 2011, which affected about 17,500 people. They had an 11-year struggle only to discover that a mining concession, covering approximately 55,000 hectares of their ancestral territory, had been granted to AngloGold Ashanti, which is a company registered on the British stock exchange. A proactive duty on companies to disclose information would prevent such harm, while a greater commitment to transparency and—crucially—penalties for those who do not comply is the only way to enable people to access justice.

Finally, I want to tell the Minister:

“To no one will we sell, to no one deny or delay right or justice.”

That principle in Magna Carta has formed the basis of law, liberty and rights in this country for centuries. In this area at least, we are falling well short. Will the Minister commit to improving transparency and access to justice for communities harmed by the actions of British businesses abroad? At present, I and many other hon. Members in the Chamber are approached by so many people who have such a different story to tell. This is an issue of morality, good business and consumer confidence, but above all of national reputation. We should promote not the worst but the best of British business to the world. I look forward to the Minister’s response.