Mr. Michael Meacher (Oldham, West and Royton) (Lab): 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.
Mr. Elliot Morley (Scunthorpe) (Lab): My right hon. Friend rightly drew our attention to the excellent points that the Corporate Leaders Group made to the Prime Minister. The Prime Minister has also received a letter from the Aldersgate Group, of which I am a member. The group includes leading businesses that want to promote sustainable development, and to see the establishment of reporting in relation to carbon allowances. Would the Minister for Industry and the Regions like to touch on that letter when she responds to the debate, and tell the House how those reports can be incorporated? That matter certainly seems to be addressed in new clause 1.
Mr. Meacher: I am sure that my right hon. Friend the Minister will respond to my hon. Friend’s request. The members of the Aldersgate Group, like others in the senior ranks of British industry, realise that that is the direction in which the international economy is going, and that, if we are to be smart, we need to be in there at an early stage, because, unquestionably, there will be a requirement to produce such a review in due course. This is not only a matter of environmental sensitivity but a good business move in relation to the bottom line.
The method adopted by the EU emissions trading system under the Kyoto protocol, which is highly relevant to the debate, is the national allocation plan. This requires each industry to reduce its emissions to a fixed lower level within a given time scale. The relevance of that is that the new clauses provide the framework by which those reductions can be achieved in two important ways. I am at one with my hon. Friend the Member for Hemsworth in strongly requesting the Government to reconsider their position on this. First, the national allocation plan, to which we have signed up, applies to all large and medium-sized public and private companies—some 36,000 in all. That is still fewer than 1 per cent. of all companies, but it is significantly more than the 1,300 publicly listed companies covered by the Bill as it is drafted. The Aldersgate Group and the 14 key representatives of the big companies who went to see the Prime Minister are all concerned about the need for a level playing field. They do not want to be disadvantaged, and they therefore expect there to be a general requirement for the whole of business, including large private equity firms and foreign-owned private subsidiaries. The new clauses cover such businesses, but the Bill does not.
Secondly, the new clauses would introduce a mandatory reporting standard. I strongly suggest that that is absolutely essential, because we have repeatedly tried to make voluntary codes of practice work. As a former Minister for the Environment, I speak with some anguish about this. We introduced a number of voluntary codes, but they were honoured more in the breach than in the observance. Voluntary codes of practice will never be observed, other than by a relatively small number of scrupulous and conscientious companies. They will certainly not be universally observed. If we want to establish a level playing field, the code of practice must be mandatory and universal.
There is also the question of placing burdens on business. We have only to open the papers today to see the CBI repeating its usual mantra. Even the hon. Member for Putney could not resist buzzing around it. Of course there is an initial outlay involved in meeting the proposals. The truth is, however, that having spent that relatively small sum, companies will start to measure their energy efficiency, their transport impacts, their waste generation, their water consumption and their greenhouse gas emissions. They will then find, perhaps to their surprise, that once they have measured the waste and inefficiency that they were inadvertently generating, they will be able to make disproportionately larger savings. That is the key point: they will get a far bigger return for their initial outlay if they are required to assess the environmental impact of their work.
Proof of that can be seen in the fact that mandatory social and environmental reporting is already being pursued in various forms in other successful competitor countries to our own, including the United States, Canada, France, the Netherlands, Norway, Sweden and Denmark. I must underline strongly that sustainability is the friend of competitiveness. It is not a burden on it. For all those reasons, I hope that the Government will reconsider their position and accept new clauses 1 and 2. This would result in a win-win situation, not only for the environment—important though that is—but for the bottom line.
David Howarth: It is a great pleasure to follow the right hon. Member for Oldham, West and Royton (Mr. Meacher), who speaks with great authority on these matters. Perhaps I should say to the hon. Member for Putney (Justine Greening) that this is the stage at which the real Opposition get to have their say.
The right hon. Member for Oldham, West and Royton related quite accurately the history of how the operating and financial review was abandoned. It is alleged that the Chancellor decided to announce, without much consultation with anyone, that the OFR was to be suppressed because he wanted to make a symbolic gesture to show that the Government were willing to deregulate in matters that affected big business. That move was so surprising because, first, it was not clear that big business wanted that gesture to be made and, secondly, because we are talking about serious matters, not just symbols.
