Ethical Performance
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why Timms believes the best is still to come

April 2004

The world’s only corporate social responsibility minister tells EP how two new government measures will have a ‘significant’ impact on the spread of CSR

Stephen Timms may have been the UK’s minister for corporate social responsibility for almost two years now, but he feels his most significant achievements are still round the corner.

While he likes to claim some credit for what he describes as the ‘rapid increase of interest in CSR’ since he took up the post as its third incumbent in 2002, Timms believes he will be able to claim a lot more once he sets up a CSR Academy this summer.

Timms is waiting on advice on how to set up the academy from a steering group led by Clive Mather, chairman of Shell UK. But already the minister has a firm idea of how it will shape up.

It will, he says, be a real entity, not a virtual organization accessed through the internet with no physical headquarters. ‘There may well be a virtual dimension to it, but I expect there to be a place where this institution has its base,’ he says. ‘It will promote the availability of good quality CSR training but will not be a direct provider itself, and though we’re not talking about a big institution, it will be a catalyst that will allow us to look at training provision to make sure it’s of good quality and widely available.’

Although questions remain about how the Academy will be funded, and about what the input of business will be, Timms is convinced that its creation is ‘potentially a very significant government intervention’, in line with just the kind of light touch his government favours on CSR.

As the minister who – in a different department – was responsible for implementing the relatively modest UK disclosure regulation that forced pension funds to state their policy on socially responsible investment, he is a firm believer in the power of leading business by the hand, rather than prodding it forward with a pointed stick.

That’s why he feels his department’s plans to require large companies to publish annual Operating and Financial Reviews that take account of social and environmental issues where material, will also be a landmark of his tenure. Many CSR commentators argue that the OFR requirement is likely to be so weak that it will allow companies to publish as little as they want, but Timms says we may all be surprised at the leverage that this regulation will have.

‘It will make a big difference,’ he argues. ‘It will change the culture and make it much more the norm that companies provide good, dependable information on social and environmental matters. If you look at the pensions disclosure regulation, that was a very light-touch intervention by the government, but the consequences have been far-reaching. That illustrates very well that if you’re smart about this kind of thing, you can have a big impact without increasing the regulatory burden.

‘OFRs will be quite powerful levers for change in companies’ behaviour, especially in terms of the issues arising out of the reports that they will be required to produce,’ he believes.

In general, says Timms, UK companies have made a ‘lot of progress’ on social reporting in the UK, and heavy-handed regulation could encourage box-ticking rather than enthusiasm and commitment. ‘The OFR requirement is going to be quite a significant step in changing corporate culture, and it will be much more effective than any box-ticking approach,’ he says.

By the same token, Timms prefers government not to intervene directly on corporate governance issues, even though recent accounting scandals and growing public anger at executive pay levels threaten to undermine the progress made in other areas of business responsibility. He supports the decision of his boss, Patricia Hewitt, not to curb ‘fat cat’ pay with legislation and to trust in the power of investors, at least for the time being.

‘The most effective check on excess of that kind is active shareholder involvement,’ he says. ‘We have already started seeing shareholders scrutinizing executive pay and other boardroom issues, and I think that’s going to be a better way of addressing these problems.’

Thinking aloud, Timms suggests there may be a role for his department to help collect a ‘common body of information’ on the social, environmental and ethical performance of UK companies, which investors can then use to inform their voting decisions. But he is quick to stress this is only an idea, and that he has an ‘open mind’ on its usefulness.

For someone who is so careful to keep a light hand on the tiller, it would be out of character for Timms to support a service that market forces already deliver – forces that ministerial rhetoric have helped to shape.


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