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Companies Bill [Lords]

I commend the hon. Member for Putney (Justine Greening) on her opening speech from the Conservative Front Bench. Her initial remarks led me to believe that she would be consensual—I was looking forward to more such speeches—but her later remarks made me doubt it. However, we look forward to hearing her arguments in future. I support new clauses 1 and 2, which my hon. Friend the Member for Hemsworth (Jon Trickett) moved so eloquently and persuasively. They require companies to produce a business review, which examines the impact of company policies on not only the environment but employees, the local community and suppliers. There is a long history to the proposals. It has long been understood that the best way in which to get industry fully to understand and tackle its social and environmental impacts is to require companies to measure and report on them. One cannot manage what one cannot measure. The Government therefore rightly initially drafted legislation in the form of an operating and financial review—or OFR as everyone fondly knows it—and required the leading 1,000 companies to produce one. A dispute then occurred about whether it was right to require those companies to report on their impacts unconditionally or only those that were material to the interests of the company. The Government went to extreme lengths to resolve the matter. They set up an external committee to advise them on the definition of ““materiality””. I believe that they did that to get agreement and, after due discussion and considerable delay, agreement was reached and a consensus achieved between the Department of Trade and Industry, the Department for Environment, Food and Rural Affairs—I know that because I was there—and the business and investment community. However, last December, the Chancellor suddenly announced at a CBI dinner that he was shelving the OFR legislation. There was no consultation about the abrupt U-turn and the reasons that were given at the time to justify it do not bear examination. It was argued that the statutory OFR was a prime example of gold-plating—the normal argument that Whitehall and the CBI use—EU legislation. The Chancellor said that it went beyond the requirements of the 2003 accounts modernisation directive. However, the OFR proposals predated the EU legislation by several years. Indeed, the OFR package was amended in 2004, but that was simply to ensure that it complied with the EU directive, not to enable it to go beyond it. Nor was the sudden shelving of the OFR legislation universally welcomed by industry. One had only to look at the Financial Times during that period to see a letter of protest from the Institute of Directors, no less. It is highly relevant that, more recently, top executives from among the 14 largest FTSE companies—the list reads like a roll-call of the senior ranks of British industry—headed a delegation to the Prime Minister to demand that the Government regulate against climate change. I was delighted—if slightly surprised—by that. It showed, in contrast to the rather curmudgeonly remarks of the hon. Member for Putney about the attitude of British business, that those attitudes are beginning to change—and not before time. I suspect that that is the reason why the Government are now—in another excellent development—considering producing a climate change Bill in the next Session. I very much welcome that, as someone who—along with the right hon. Member for Suffolk, Coastal (Mr. Gummer) and the hon. Member for Lewes (Norman Baker)—is sponsoring a climate change Bill before Parliament that will require an annual 3 per cent. cut in greenhouse gas emissions in order to achieve what the scientists say is necessary to stabilise climate change, namely a 60 per cent. reduction in those emissions by 2050. For the purposes of this debate, the key point—which we recognise in our Bill and I hope that the Government will recognise in their climate change Bill if it is forthcoming—is that, in order to meet the unquestionably demanding targets, it is necessary to make regular measurements, sector by sector. That includes transportation, industry and the domestic sector. The measurements must also be made on a company-by-company basis. They must ascertain whether the targets are being met and, if they are not, determine what remedial action needs to be taken to get back on track. That is why the business review, as it is set out in the new clauses as a replacement for the lamented OFR, is absolutely essential.