WEDNESDAY 4 DECEMBER 2002

RT HON LORD HOLME OF CHELTENHAM CBE

  120. In that regard, of course, whether there are targets or not, in many respects action is only going to come about through the partnership arrangements, the Type IIs, in particular. Your website has listed some 300 such partnership arrangements. What is going to happen for the future now, in terms of (a) ensuring that those partnerships are delivered, and (b) in terms of ensuring a global business and sustainable development overview of these targets? Your organisation, the Business Action for Sustainable Development, was founded specifically for the Summit, therefore it is not continuing, as such. Who now takes on the baton of ensuring that business, in agreeing these, is not a green-wash, if you like, is now going to implement these, and also is going to work on further partnerships, because we were promised in the Summit that business and government would work on further partnership arrangements and not just left the slogans on what was agreed at the Summit itself?
  (Lord Holme) The Business Action for Sustainable Development, as you rightly say, probably was effective, although you do not share my views as to its effectiveness, but it was probably effective to the extent that it said that it would dissolve itself at the end of the Summit and not try to establish yet another organisation. But the two main pillars of Business Action for Sustainable Development were the World Business Council for Sustainable Development and the International Chamber of Commerce; they have reached a memorandum of understanding whereby they are going to continue to work together on these issues and try to provide some of the momentum that there is a danger of being lost, I agree with you. As to your first point, about partnerships, I think it is very important to continue to demonstrate good practice, I hesitate to say best practice, but good practice, because, contrary to what a lot of people might think, partnerships are actually very difficult to do well. Because if you think how difficult a joint venture is between companies who share the same culture, think of a partnership where you have, for instance, a university, an NGO, a business, maybe a local government, different cultures, different timescales, different perspectives, so to do it well is not just a rhetorical thing, "Let's have a partnership," it takes a lot of work and a lot of effort. And whatever criticism is addressed to business, businessmen tend to want to get real about those things and say, "If we're doing it, let's do it well." So I think that the role of sharing good practice, best practice, is extremely important. Now there is some suggestion that the UNCSD might do some of that, there is also a proposal within the International Chamber of Commerce to continue to maintain this sort of database on an ongoing basis, updating it, of people who are doing it well, so that that is available as a sort of learning experience for those who might benefit from it.

  121. That would be quite vital, would it not, in terms of auditing what comes out of the Summit, it is vital that the business community takes on board the need to continue that monitoring, continue that auditing and demonstrate to the wider community all the things it is achieving in this field; you would agree with that, even though Business Action itself is not going to do that?
  (Lord Holme) I have just said that I agree with it.

  Mr Challen

  122. We are both members of the parliamentary CSR group, so we know that there is an extensive debate about whether corporate social responsibility should be reporting mandatorily or voluntarily, and it seems to me, your paper that you have sent to us, "Key Business Messages", from Johannesburg, that really BASD is quite happy with the current situation. But I am rather struck by a comment in here which talks about corporate governance and says: "The agreements on transparency and good governance are strongly supported as these are the norm in the business sector." If I put it to you that actually it is not the norm but there are a great many number of companies, as we have seen in the last two years, that have failed completely to report accurately their financial affairs, never mind anything else, that actually there is a great case for making CSR itself mandatory, because there is even more likelihood in that field that many companies will want to try, if you like, to fiddle the books?

  (Lord Holme) Let me just speak personally. This is a UK matter, as you say, now, we have proposals here in the UK for mandatory reporting on CSR, there is no conceptual problem on the part of business with that, I think it is just very important to get it right. We have Lord Haskins' report on regulation, saying that things should be proportional, and so on, we have a whole set of principles on regulation. If we are going to have companies report, let us (a) make sure they are reporting the right things, and (b) make sure that it is not done at the expense of voluntarism. There has been phenomenal progress made in the last five or ten years, as any objective observer would say. Now you can take the view that that is a glass half empty, and in a sense it is, not all companies are reporting, not all FTSE 100 companies are reporting fully on these issues, some are reporting extremely well and extremely fully and doing it of their own free will. So the balance to be struck all the time is between trying to get what I will call a compliance-plus attitude, in which companies are competing to do well in this area, seeing it as a source of long-term stability and competitive advantage, versus a sort of reductionism, that says "We don't trust them so we're going to make them do X, Y and Z." And so I have to say that if Parliament, in its wisdom, decides that it wants to have the right sort of reporting, and a lot of thought needs to go, as I said earlier, into the social element of that, because if anybody tells you it is easy to report on social performance, it is not. It is extremely difficult to agree what should be reported on, let alone how it should be reported on, but if there were a broad, aspirational thing which said that companies ought to report in this area, many companies that I would respect are already doing it, and some would no doubt then do it as well.

  123. I am sure that is true, but in this document, in "Key Business Messages", which the Committee have been sent prior to this meeting, from the BASD, it is a list of messages from Johannesburg, it does say on page 3, that companies would not be attracted to invest in countries where regulation is lax, which obviously could put their investments at risk. Surely this Summit was an opportunity for businesses, which are regulated, to try to establish a level playing-field. You have said yourself that businesses in the United States do not have the same, let us say, enlightened attitude to CSR as we do here in Europe. So surely this was a lost opportunity for businesses amongst themselves to push a message about globalisation, which was about the globalisation of CSR, so that our companies and our businesses are not threatened by bad practice, in laxly-regulated countries elsewhere?
  (Lord Holme) I do not disagree with that, but just keep in mind all the time that, on the whole, it is the larger and more often attacked companies who have made the most progress in this area. You have a very big question about how you transfer this to SMEs and how you move it down the food chain of companies. One of the ways that some people have dealt with this is by saying, "Oh, well, we're only really talking about multinationals, that they should report in a certain way." Others say, as with the Linda Perham Bill, "Well there should be CSR reporting in the UK," others say it should be done on a Europe-wide basis. From the point of view of a simple businessman—and I have other lives, like being a Member of the other place—but from a business point of view, what people really want above all is clarity and simplicity and to know where they are; what they do not want is to have armies of lawyers working their way through compliance documents. And if there are armies of lawyers working their way through compliance documents I will tell you who will do best out of it, it will be the very large companies who are best equipped to employ armies of lawyers working on compliance. And at the end of the day what we really want is not their compliance, what we want is companies engaged in trying to raise their game and go in for compliance-plus. So all these are really just reservations around the question of how you do what you are talking about.

  124. So was that more or less in favour of regulation, or a voluntary approach?
  (Lord Holme) I am very fiercely opposed to the wrong sort of regulation.

  Gregory Barker

  125. Lord Holme, in the last session, I do not know if you had arrived yet, but I strongly criticised Friends of the Earth for focusing in their submission very strongly on corporate accountability while completely ducking the issue of corruption, which in sub-Saharan Africa particularly is absolutely systemic, and to my mind one of the greatest barriers to sustainable development. Nevertheless, certainly in years gone by, many international businesses have been complicit in supporting corrupt regimes, and while we hear more about improved business practice the fact remains that certain businesses still remain engaged, albeit tacitly, either in supporting working with corrupt regimes or individuals lower down the system. What is your group doing to stamp out that practice?

  (Lord Holme) Since the subject of Rio Tinto has come up, we have a clear commitment that nobody will give—

  126. Sorry, when I said your group, I was meaning Business Action for Sustainable Development, not Rio Tinto.
  (Lord Holme) We have been great supporters of the Soros Initiative, which I am sure, again, this Committee knows about, and was perhaps one of the failures of the British Government at Johannesburg. There were more companies supporting the Soros Initiative than there were countries, and so it was, in a sense, a failure of diplomacy on the part of the British Government. For those who do not know about his initiative, it was that companies should report their revenues in detail in the sort of developing countries you are talking about, so it is quite clear, if any money has gone missing, where it has gone missing. And that seems to me an admirable step forward, it is supported by a number of large British and other companies, the British Government set itself a mission of finding other governments who would align themselves with this very practical way of dealing with what is still, I am afraid, a big problem in some places, but it has not got very far. And one thing I have certainly urged politically is we keep up the pressure on the Government to try to find other countries who will come along with us, because, of course, we now have the OECD Anti-Corruption Code, which is being transformed into legislation here, which is a very good step forward, which certainly companies that I am involved with would support. Transparency International, who are one of the supporters of the Soros Initiative I have just been talking about, see that openness of royalties and taxes paid as one of the ways of putting pressure on corrupt host governments. The final thing I would like to say is that one of the most promising things out of Johannesburg, which has still yet to be proven, is the formation of NEPAD, where African governments themselves have recognised that there is a relationship between foreign direct investment, overseas development assistance and cleaning up their own governments, and that those three things have to go together if you are going to make a success of it. I would simply say that companies have a great interest in this working, because it does not suit companies to have an unlevel playing-field. I think, if you are a small engineering company, faced with having to get your products out of a small harbour somewhere in the world, there are very great pressures on you to conform to the local culture, and in that sense your observation is true, that companies are sometimes complicit in corrupt systems. But the sorts of measures I have been talking about would give us all a more level playing-field to operate on.

  Chairman: Thank you very much indeed for giving us evidence, Lord Holme. That was extremely valuable and we are grateful both for your written evidence and your oral evidence, despite the difficulty in hearing each other. Thank you.