Facing up to responsibilities.

Corporate responsibility is almost by definition a voluntary activity.

But there is inevitably much debate as to whether corporate responsibility is something that could or should be governed by legislation.

We believe legislation regarding what companies should do would be a retrograde step. To make it compulsory, as has been suggested in a recent private members’ bill, would require the redefinition of corporate responsibility to something many companies might fail to recognise. Compulsory corporate responsibility runs the risk of enforcing the lowest common denominator.

Introducing legislation to this environment would stultify developments and force companies to adopt defensive positions to mitigate potential liabilities. There are no agreed standards to regulate against.

However, we do believe there is potential to consider how we can enable companies to be as transparent as possible in their corporate responsibility. We support the kind of approach outlined in the white paper just published following the government’s review of company law. The proposal that ‘economically significant companies’ should publish an operating and financial review endorses existing best practice and focuses attention where action will be most cost-effective.

The alternative runs the risk of legislatively separating corporate responsibility issues from the business. We should not legislate for corporate responsibility in a way that would make it a pedestrian issue of legal compliance, rather than a dynamic matter of business sustainability. The desires of stakeholders, in particular customers and employees, are much keener motivations to excellence than regulation.

Related reading