The business department (BIS) is consulting on the rules governing firms’ reporting of social, corporate and green governance issues. The results will help ministers decide whether to restore a statutory operating and financial review (OFR) for listed firms.1
The government pledged to reintroduce the OFR in its initial coalition agreement. The original OFR came into force in 2005 and required firms to report their impacts but was scrapped later the same year (ENDS Report 371, pp 5-6).
Some but not all the OFR’s requirements were later introduced by the 2006 Companies Act as a “business review” that must appear in company reports. However, business reviews do not need to be audited and the quality of reporting is patchy.
BIS’s consultation, launched in August, is fairly open-ended and makes few firm suggestions. It refers to the government’s “one in, one out” rule on new legislation and says changes are “as likely to be non-regulatory as regulatory and may require further consultation” (ENDS Report 425, p 9).
However, Hannah Ellis, coordinator of the Corporate Responsibility (CORE) Coalition of NGOs, is confident that gains can be made without new legislation. There is plenty of scope to improve existing rules and enforcement, she said.
The consultation’s few direct suggestions include asking shareholders to vote on business reviews, an annual ranking system to encourage better reporting and only summarising key issues in firms’ reports, with the full details published elsewhere.
The results of the consultation will also inform the government’s thinking on carbon emissions reporting.Under the 2008 Climate Change Act, it must report to parliament by 1 December on the contribution corporate emissions reporting plays in meeting the UK’s climate change objectives. It must also introduce mandatory greenhouse gas reporting for listed firms by April 2012 or explain to parliament why it is not doing so.