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Companies Bill [Lords]

I am well aware of that, but the directors are the controlling mind of the company. I think that the hon. Gentleman is being a bit nit-picking. Companies will have to change the way in which they interact with communities and with the general environment. The point was made earlier—by a Conservative Member, I think—that there might be a need to change audit procedures if some of these proposals were to be agreed. I believe that companies will have to change anyway, and that they should be thinking now about how they will change their audit procedures in order to assess the carbon footprint of the company, and to determine how the company impacts on the environment. We had a debate in the House yesterday on the Liberal Democrats’ proposals for green taxation, and I understand that the Conservatives have also been considering proposals for environmental taxes. The logical extension of that is that if we are going down the route of taxing companies on their environmental performance rather than purely on their income, new procedures will have to be imposed on every company in order to work out its environmental impact. The audit procedures will therefore have to be looked at in any event. The point was also made about the impact of citizens on companies in relation to green and ethical funds. However, if we are serious about introducing the substantial changes that we need to tackle global warming and environmental change, all companies will need to be green and ethical. We should not be looking at separate funds in that regard. All companies should adopt such policies. The whole point of this exercise is to achieve a level playing field, with all companies operating on the same level and considering seriously their community and environmental responsibilities. That has to be done. The impact of the provision on smaller companies was discussed. The hon. Member for Huntingdon (Mr. Djanogly) claimed that the provisions would affect everyone from the corner shop to the corporation. It is a long time since I practised law, but in my experience most corner shops are not companies, but sole traders or partnerships. I am trying to remember the exact procedure that he used, but I believe that, in the last Budget, the Chancellor took measures to try make small partnerships and sole traders desist from incorporating to avoid taxation. Let as look at what is already provided for in clause 173 and consider each subsection in turn. Subsection (a) deals with"““the likely consequences of any decision in the long term””." Any company that does not consider the long-term consequences of a decision is barking mad, because it will affect the future of the company. However, some businesses might look to short-term profit rather than long-term need, so the provision will make sure that companies consider the consequences of their actions. A small company or sole trader will of course think about the long-term consequence of any action, otherwise they would not have a business. Subsection (b) deals with"““the interests of the company’s employees””." In a small business, the employer is likely to know all the employees, and that is more important. Subsection (c) deals with"““the need to foster the company’s business relationships with suppliers, customers and others””," but in a small business, the chances are that the employer is the sole buyer in the company. Subsection (d) deals with"““the impact of the company’s operations on the community and the environment””." A small company’s business operates in the community, so the employer would consider it. Subsection (e) deals with"““the desirability of the company maintaining a reputation for high standards of business conduct””." That is more important for small businesses than it has ever been. A large, multinational oil company might get away with dubious practices, but a small business in a local community is most unlikely to do so. Subsection (f) deals with"““the need to act fairly as between members of the company.””" For a sole trader, it is hardly likely to come to that. Many of those duties are already observed by good companies, but the argument about the level playing field is important because we must move forward. Today, we have learned in a report that we must cut our emissions by 90 per cent. if we are to stop climate change and have a planet on which to live. We cannot do that as individuals, no matter how many low-voltage light-bulbs we use, and no matter whether we have windmills on our roofs. That will not bring about changes in emissions. Companies must be part of the process, and to ensure that that is the case, we must change the culture of companies. Neither clause 173 nor new clause 4 goes far enough, but they are a step in the right direction. I must tell the Minister that although the provisions do not go far enough, they are an improvement. They will make companies start to think about what they have to do. I prefer new clause 4 because it goes slightly further, but there is more to do, and companies should take that on board.