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Companies Bill [Lords]

I begin with the point that the hon. Member for Huntingdon (Mr. Djanogly) made about whether clause 173 constitutes reform. It is a reform because it is clearly different from the previous law, and it is welcome because it supports the development of corporate social responsibility in a way that will protect directors who believe that such matters are important from litigation, which is far more likely to arise than the possibility that the hon. Gentleman raised. I want to direct most of my comments to new clause 4 and the amendments that the hon. Member for Huntingdon tabled. As I said in Committee, I have every sympathy with the motives of those who tabled the new clause. It is important to drive forward the debate on corporate social responsibility. Unfortunately, after much thought and having considered the debate in Committee carefully, I remain of the view that clause 173 is a better way forward at this stage. Clause 173 is better for two main reasons. First, I am still worried about the problem of contradictory duties. The hon. Member for Bedford (Patrick Hall) mentioned that and I believe that the problem remains. Secondly, the new clause raises expectations that it cannot fulfil. There is a risk that it will make matters worse for good directors who want to follow a social responsibility agenda. Let us consider contradictory duties. The central problem is the requirement in the new clause for directors to"““minimise any… adverse impact… on the community and the environment””." That is different from clause 173, which simply asks directors to ““have regard to”” the environment and the community. It is impossible to minimise two things simultaneously when there is a trade-off between them. Let us consider a company that is engaged in inherently polluting activities. The way to minimise pollution and thus the impact on the environment is plainly to close the factory. However, that cannot minimise the impact on the community because of all the jobs that would be lost. That also works the other way around. To minimise the impact on the community, the factory must be run as efficiently as possible, at least as regards cost, but that might well lead to worse environmental circumstances.