MEPs must force firms to come clean on impacts

26th November 2013
news
release

MEPs must resist pressure from corporate lobbyists and UK ministers and close loopholes in new company transparency rules, a coalition of charities including Friends of the Earth is urging today. It comes on the day MEPs debate crucial amendments to proposed European legislation that would see large companies required to report annually on risks their operations pose to communities and the natural world, such as accidents, pollution and human rights.

Full reporting would oblige companies to disclose risks to people throughout their supply chains, which would help identify and prevent problems like unsafe factories that led to the deaths of hundreds of garment workers in the Rana Plaza collapse in Bangladesh this year.

It would also see companies reporting on the impacts of extracting raw materials needed to make their products, such as tin mining for smartphones that is destroying forests and wrecking livelihoods in Indonesia, a Friends of the Earth investigation has revealed.

However, vague definitions in the current legislation and lobbying to weaken it by some businesses – and the UK Government – risk undermining its effectiveness.

Friends of the Earth’s Head of Campaigns Andrew Pendleton said:

“MEPs must stand up to pressure from the UK Government and companies and require firms to report on the huge impacts their operations have on people and the environment.

“Many progressive businesses already want help to better understand and tackle problems in their supply chains, and recognise strong new transparency rules are a crucial first step towards ensuring products are responsibly made.

“But the current proposal has gaping loopholes. MEPs must ensure all large companies are required to report on activities that impact on communities and ecosystems throughout their supply chains, and not just their profits.”

Friends of the Earth is also concerned about UK Government lobbying to ensure that the majority of large companies privately owned by hedge funds and billionaires would be excluded from this legislation.

The coalition, which includes the TUC, Amnesty and Cafod and represents millions of EU citizens, has written to UK MEPs urging them to tighten up key issues as they begin finalising their position today ahead of a 17 December vote.

MEPs are being urged to back amendments to ensure:

  1. All large companies – including those unlisted on stock exchanges – report on significant harm and risks to people and the environment caused by their operations, not just risks that could affect their profits.
  2. Reporting also includes natural resource consumption, and extends beyond the company’s immediate operations to include the first phases of the supply chain where the greatest impacts usually occur. (Such as factories where goods are manufactured, mines and plantations where the raw materials for components come from.)
  3. There are effective monitoring and enforcement mechanisms, as well as guidance for companies on methodology for reporting based on international standards.

ENDS

Notes to Editors

1. An amendment to the EU Accounting Directives being discussed by EU policymakers could mean more than 18,000 large European companies disclose important information about their social and environmental impacts.

2. Lobbying to undermine the legislation. The UK inserted changes into the Lithuanian Presidency text that mean the legislation would only apply to ‘listed’ shareholder-owned companies. Liberal Democrat Business Secretary Vince Cable represents Britain at the European debating table. His party backed robust corporate reporting in its 2010 manifesto.

3. Companies like M&S and Kingfisher have been associated with UK Government attempts to weaken this kind of corporate regulation, while progressive businesses like Ikea are supporting improved transparency legislation.

4. Letter sent to MEPs Arlene McCarthy, Mary Honeyball, Rebecca Taylor, Sajjad Karim and Sharon Bowles by the CORE coalition for greater corporate responsibility.

5. Improved supply chain analysis helps businesses plan for more resource-efficient products and business models, be better corporate neighbours to live and work with, and improve financial performance too. A 2013 study of international stock exchanges found that effective legislation on sustainability disclosure was the biggest factor in determining company performance between countries.

6. According to a European Commission estimate, only 2,500 out of 42,000 large European companies formally disclose non-financial information on an annual basis, and the quality often lacks balance, accuracy and coverage of key areas such as human rights and corruption.

7. Thousands of people have joined Friends of the Earth’s Make It Better campaign, launched in November 2012, calling on Vince Cable to stand up to business-as-usual lobbyists and ensure the UK backs strong corporate transparency legislation.Friends of the Earth, working in a coalition with European Coalition for Corporate Justice – welcomes a requirement for greater company transparency but believes plans must be strengthened to apply to full supply chains and include reporting on resource use.

 

For press information please contact the Friends of the Earth media team on 020 7566 1649.

Published by Friends of the Earth Trust