The white paper Modernising Company Law recommends that directors ‘include the company’s impact on the environment which the government believes every director needs to consider first among equals’.
The move comes as part of the proposals for an operating and financial review, a narrative forward-looking report, viewed as the perfect opportunity ‘for directors to demonstrate their response to this business case’.
In an OFR directors would provide a narrative report covering the main factors underlying the companyås performance and financial provisions.
Environmental or green reporting has received mixed responses from directors with many only paying lip service. Environmental groups complain that focus is on the process rather than the social impact.
But stock market indicators show that share prices of environmentally and socially-aware companies perform better over the long-term. New research conducted by left-wing think tank Demos backs this.
Findings show that companies consider the impact on its reputation as more important than the social or environmental impact.
Rachel Jupp, author of Getting down to business, said: ‘Too often, the impact on the company is viewed as more important than the benefit to the community. In some companies, CSR has become an adjunct of the marketing department.’
The ‘tick-box’ approach to auditing CSR programmes also came under attack. Jupp added: ‘The tick box approach tends to focus too much on internal company process and not enough on the actual social benefit.’
The report recommends extending the community investment tax credit and creating a social innovation credit, extend existing award programmes and linking CSR, research and development and strategy by focusing on innovative methods to problems.
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