Transparency and Public Trust in Business

Debate between Lisa Nandy and Jenny Willott

Tuesday 8th April 2014 Commons Chamber

[Jenny Willott]

I reassure my hon. Friend that the UK’s requirements already go beyond a lot of the voluntary principles that have been in place. We have agreed in the EU stronger mandatory reporting requirements for large companies to disclose their policies in a number of areas, including in their supply chain, which my hon. Friend highlighted and in which I know the hon. Member for Wigan is interested. That is a huge step in enhancing transparency, and for many member states of the EU it is the first time that they have had such broad requirements. The UK has traditionally been further ahead in mandatory requirements on businesses. I personally feel strongly about the issue, and it was one of the first that I raised in the Department when I took on my role. I will come in a minute, if my hon. Friend the Member for Cheltenham (Martin Horwood) will bear with me, to some of the reasons why I believe there is a driver in the UK economy for businesses to act voluntarily.

The requirement to report on human rights issues is in line with the Government’s implementation of the UN guiding principles on business and human rights, which the hon. Lady highlighted. The first annual reports under the new requirements are just being published, and early signs are encouraging. I am proud that, as I have just said, the UK is leading the way in high-quality company reporting, which will really make a difference. For example, the clothes retailer H&M now not only publishes a list of all its suppliers but sets out the standards and codes of practice that it expects them to meet. Marks and Spencer uses a social enterprise technology provider, Good World Solutions, to gather feedback directly from 22,500 workers in its clothing supply chain in India, Sri Lanka and Bangladesh, ensuring that they can raise concerns without fear of reprisals or discrimination. There are companies in the UK that are doing a significant amount to tackle some of the problems that exist.

As I highlighted to my hon. Friend, we have been negotiating with our EU partners on a related proposal to improve companies’ reporting in general. The EU non-financial reporting proposals have now largely been negotiated and broadly mirror our own regulations, and I hope that they will be adopted before the European parliamentary elections in May. They will start to drive behaviour change in the EU more generally, which will provide more of a common platform for companies operating in the EU. British domestic regulations led the way and have given our companies and shareholders a head start.

[Lisa Nandy]

As the hon. Member for Cheltenham (Martin Horwood) said, the problem is that although some companies are leading the way, there are also companies that, frankly, are not paying this the blindest bit of notice. Will the Department commit to monitoring the impact of those tougher regulations to see whether they produce the results that we seek, not for those companies that are already doing it but for those that are not?

[Jenny Willott]

Absolutely. We have the firm basis of mandatory requirements because it is important that companies provide such information. I have mentioned the measures that impose compulsory requirements and, as the hon. Lady said, it is extremely important that those measures are enforced and monitored. However, we cannot change business culture through legislation alone, which is one reason why I actively encourage businesses to go beyond the regulatory requirements and consider what more they can and should be doing.

The hon. Lady highlighted that there is real consumer demand for this approach. There is increasing awareness of the power of the money that we spend in shops and on services, and of the broader impact that that spending can have across the world. Consumers have the power to influence company behaviour. People choose not to purchase clothes that they believe to have been made in a sweatshop and instead spend a bit more money somewhere else, which drives company behaviour too.

The voluntary approach is also important. Last year, we carried out a consultation to assess what Government, business and others should and could do to realise the full benefits of good corporate responsibility. One of the key findings from that consultation was that businesses increasingly see corporate responsibility as a source of competitive advantage because consumers are driving that behaviour. Businesses see corporate responsibility as essential to managing long-term success, which is positive.

Initial reporting of performance was limited, being produced by just a few pioneering companies, but that has now been replaced by more substantial reports with clearer business relevance. There has been huge growth in the number of organisations that are reporting and taking responsibility for the impact of their activities. There is a balance to be struck between ensuring that we have a solid baseline of mandatory reporting with which all companies must comply and encouraging businesses that want to go further. It is good that businesses see reporting as a competitive advantage and that there is a strong business case for reporting because it encourages more businesses to act in that way. Progress has also been driven by the work of international organisations such as the OECD and its guidance for multinational enterprises.

The hon. Lady talked about the business and human rights action plan, and the importance of business impacts on human rights is increasingly recognised, not least through the action plan. As she said, the UK is the first country to publish an implementation plan for the UN guiding principles in this area. The Foreign and Commonwealth Office and the Department for Business, Innovation and Skills are working together to deliver that implementation plan, and I reassure her that BIS is completely committed to the plan and is working closely with the FCO to ensure that we deliver. The implementation plan is important to me and to the Department, and in it we encourage UK companies to adopt due diligence policies to identify, prevent and mitigate risks to human rights, to understand the full extent of their supply chains in the UK and overseas, and to emphasise to businesses the importance of behaviour in their supply chains that is in line with the guiding principles to ensure that we see progress throughout the supply chain.

Supply chain relationships are just one example of where businesses can take positive action that will have a greater impact than UK or even EU regulations. The hon. Lady highlighted how badly things can go wrong with the absolutely shocking example of the Rana Plaza fire. The British public’s awareness of the importance of such action has increased. The business and human rights action plan provides a framework for businesses to engage with their supply chains overseas, and it equips UK companies to give their suppliers both the information they need and the commercial incentive to act in accordance with UN guiding principles, which is important for driving behaviour.

I am proud of the Government’s record on transparency. The UK company reporting framework is proving to be an example to others. When the EU non-financial reporting proposal is finally adopted, we will implement it to improve company reporting still further. Those reforms will need time to prove their worth. We will continue to engage with businesses and civil society in the debate on transparency and reporting, so that we continue to anticipate events rather than react to them. At the same time, we will continue to work with businesses that choose to go beyond regulatory requirements in taking responsibility for the wider impact of their actions, including the activities of their supply chains.

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[Lisa Nandy]

Before the Minister finishes, will she commit to look at export credits? If she cannot answer now, I will be more than happy if she writes to me later.

[Jenny Willott]

I am happy to write to the hon. Lady on export credits.

I agree with the hon. Lady on access to justice. That is a key plank of the Foreign and Commonwealth Office and Department for Business, Innovation and Skills action plan on human rights. We support access to an effective remedy for victims of human rights abuses involving business enterprises within UK jurisdiction—that is the wording. We are working with the FCO and will report on progress by the autumn. That is an important element of the action plan.

I have asked businesses, business organisations such as the CBI and the British Retail Consortium, and Which?, Business in the Community and other non-governmental organisations and consumer groups to work with BIS to make it easier for businesses to do more and go further, as the hon. Lady highlighted. Together, we will consider what further steps will enable UK businesses to engage with their global supply chains, act on human rights issues and report on the action they are taking to make it more transparent.

The Government remain fully engaged—I hope the hon. Lady is reassured by my commitments this evening—and will continue to take action. I look forward to updating the House on progress later this year.

Question put and agreed to.