The Advisory Committee on Business and the Environment (ACBE) welcomes this opportunity to respond to the consultation document from the Independent Company Law Review Steering Group.

  ACBE was set up in 1991 to provide for dialogue between Government and business on environmental issues, both of an immediate topical interest and of a longer term nature. Its role is, in liaison with other organisations to help mobilise the business community in demonstrating good environmental practice and management and to provide a link with and focus attention upon international business initiatives on the environment.

  To attempt to address the detail of all of the issues raised by the Independent Company Law Review Steering Group is beyond the mandate and resources of ACBE. We have therefore focused on the proposed links between environmental and financial performance segmented along the lines of the themes of governance, and reporting and concentrating most closely on the issues raised in Chapter 5: "Corporate Governance—Reporting and Accounting".

  We agree with the consultation document that there is a wide spectrum of shareholders with different information needs, with the shareholder who takes no active interest in the Company at one end and the sophisticated institutional investor at the other. We also agree that private investors may be being overloaded with information in the Annual Report if there is no Summary Financial Statement (SFS) alternative but it is not clear exactly which problems the committee is seeking to address or how a Statutory Prelim's document would ease that situation.

  The sophisticated private investor may access the results announcement on the same day as the institutional investor by accessing the web site. This instant access to information is far preferable, in our view, to the option of mailing the announcement, or a version of it. By post a few days later when inevitably the market will have moved on.

  We consider that the sophisticated investor will generally, and increasingly, have internet access. We believe there is no merit in posting a Statutory Prelim's document to all shareholders, which would inevitably contain rather more detailed financial information than the SFS and none of the broader issues, such as environmental performance that shareholders might be interested in. Investors who differentiate between stocks using these values as part of their selection basis will be disadvantaged by such a change and this could potentially lead to a smaller pool of investments available for selection. At a time when the increase in awareness and investment practice exceeds traditional stock selection there is the potential to reduce the competitiveness of the UK stock market. In particular, we are concerned by the proposal in 5.34 that companies might wish to offer a summary financial statement rather than the Statutory Prelims to shareholders on an opt-out basis. It seems that this would offer shareholders a choice from three documents (receiving a Statutory Prelim's document unless they opt for an SFS or a full Annual Report) and this process adds to cost rather than transparency. We acknowledge that shareholders investing in companies who only offer a full Annual Report may be being overloaded with information.

  We support fully the option for shareholders to receive financial documents and other company communications in electronic form should they choose to do so. We also support further recommendations on increasing the effectiveness of the SFS.

  At the present time exemplar companies produce an operating and financial review (O&FR) and the proposal for this to be written into statute is supported. The complexity of business in today's marketplace means that not all the information required to fully describe the performance of a company is currently contained within the financial statements and directors report. The proposed contents of the new O&FR are broadly based on the existing Accounting Standards Board guidance with a broad discretion in the way in which this is presented. We welcome the proposal that the development of good practice should be allowed to evolve over time, rather than be prescriptively imposed, but also sound a note of caution.

  With the exception of the first two suggested areas to be included in the O&FR other issues only have to be included to the extent that they are material. Additional guidance will be required to augment that which is presently used. Currently environmental (and social) concerns would not be captured unless the financial performance of the company is directly impacted or shareholders affected. This is no better than at present where only a small number of companies report significantly on the environment. If the goal of better environmental practice and performance is to be achieved, as a means of promoting overall business performance improvement (with environmental reporting reflecting that internalisation), then more must be done to encourage business. We would recommend that the new standard setting body should be given the task of considering how best these issues are integrated within the new statutory O&FR.

  Likewise, the rules on auditor review should be delegated to an appropriate standards setting body, as at present. This should also incorporate the role of the auditor in relation to information presented on a website where the prime concern will be the completeness and any variation from the hard copy reporting.

  We look forward to commenting further in November at the time of the next major consultation and to the final report of the Committee in Spring 2001.