Letter to Gordon Brown: December 2005

14 Dec 2005 – Sophia Tickell

The Chancellor of the Exchequer
HM Treasury
1 Horse Guards Road
LONDON
SW1A 2HQ

14/12/2005

Dear Chancellor,

We the undersigned – representing ethical investors, charities, faith groups, think tanks and academic institutions – are writing to express our concerns over HM Treasury’s intention to abolish the operating and financial review (OFR) for listed companies, and replace it with a scaled-down Business Review.

We are troubled that this announcement was apparently made with little consultation or consideration for the views of those, such as ourselves, who saw the OFR as a vital tool for gauging a company’s progress on issues such as employee relations, social impacts, environmental performance and overall business strategy.

As you are aware, the OFR was crafted over seven years of rigorous democratic debate between civil servants, business, investors, trade unions and charitable sector organisations – including several signatories to this letter. The outcome was a reporting framework that, although not ideal in the eyes of many, provided a useful starting point for listed companies to report on their wider business risks and impacts.

From the information HM Treasury has been able to provide, it appears that the Business Review would fail to provide such a framework, by removing the previous obligation in the OFR for company directors to report on social or community issues that might be reasonably deemed to affect the company. There is also no longer an obligation for directors to report on the policies of a company in relation to employees, the environment, and social and community issues, and the extent to which those policies have been successfully implemented.

Without such requirements, many of the relationships between companies, their employees, the environment, local communities and human rights issues will not appear on the public radar, leaving investors and consumers in the dark and increasing the risks that cases of bad corporate governance will go unnoticed until a scandal arises.

The manifesto of the Make Poverty History campaign, which your department has shown support for to date, explicitly states the need for Britain and Europe to make companies accountable for their social and environmental impact, both here and abroad.

It is now the accepted wisdom that accountability requires transparency, and transparency is only possible where there are robust standards of reporting that allows investors, directors, managers, employees, consumers, regulators and civil society groups to understand fully the relationships between a company and its various stakeholders.

We therefore believe that removing the OFR represents a step back in the UK Government’s fight against global poverty. We urge the Government to re-instate in the Business Review those elements from the OFR reporting framework that would have had a positive impact on sustainability.

Finally, we would like to refer you to the issues raised by Friends of the Earth in their recent letter to your office, in which they question the procedural basis for this shift in government policy. We are calling on the Treasury to respond positively and swiftly to these concerns, and to facilitate Friends of the Earth’s request, under the Freedom of Information Act, for the relevant documentation on the consultations, considerations of evidence and process leading to this decision.

Yours sincerely,

Richard Miller, Chief Executive, Action Aid UK
Deborah Arnott, Director, Action on Smoking and Health (ASH)
Kate Allen, Director, Amnesty International UK
Deborah Seamark, Association of Sustainability Practitioners
Chris Bain, Director, CAFOD
David Bergman, Director, Centre for Corporate Accountability
Professor Jan Bebbington, Centre for Social and Environmental
Accounting Research, St Andrews University
Professor Rob Gray, Centre for Social and Environmental
Accounting Research, St Andrews University
Daleep Mukarji, Director, Christian Aid
Deborah Doane, Director, Corporate Responsibility (CORE) Coalition
Nick Hildyard, The Corner House
David Collison, Senior Lecturer, University of Dundee
Miles Litvinoff, Co-ordinator, Ecumenical Council for Corporate Responsibility (ECCR)
Petter Matthews, Executive Director, Engineers Against Poverty
Adrian Wilkes, Chairman, Environmental Industries Commission
Steve Trent, Director, Environmental Justice Foundation
Professor Sheldon Leader, Department of Law, University of Essex
Alex van der Velden, Executive Director, Fair Pensions
Peter Madden, Chief Executive, Forum for the Future
Tony Juniper, Director, Friends of the Earth
Simon Taylor, Director, Global Witness
Guy Thompson, Director, Green Alliance
Dr Camilla Toulmin, Executive Director, International Institute for Environment and Development
Craig Smith, Senior Associate Dean, London Business School
Daphne Norden, Medical Mission Sisters (MMS) in England
Paul Lincoln, Chief Executive, National Heart Forum
Stewart Wallis, Director, New Economics Foundation
Monica Blagescu, Acting Director, One World Trust
Barbara Stocking, Director, Oxfam GB
Elizabeth Haigh, Head of Rathbone Greenbank Investments
Mark Mansley, Strategy & Communications Manager, Rathbone Greenbank Investments
Perry Rudd, Head of Ethical Research, Rathbone Greenbank Investments
Michael Coldham, ECCR Board Member representing the Religious Society of Friends (Quakers)
Louise Donkin, Joanna Frew and Ben Gilchrist, Directors, SPEAK Network
Denise Boyle, St. Patrick’s Missionary Society
Sophia Tickell, Chair, SustainAbility
John Christensen, Director, Tax Justice Network International Secretariat
Richard Murphy, Senior Adviser, Tax Justice Network
Paul Chandler, Chief Executive, Traidcraft
Louise Richards, Chief Executive, War on Want
Robert Napier, Chief Executive Officer, WWF-UK