Mining giant complaint could change impact reporting

The UK government’s commitment to the proper reporting by companies of their social and environmental impact is under review with a test case centering on mining giant Rio Tinto.

The legal obligation for large publicly listed companies to report on social and environmental issues was introduced in the Companies Act of 2006. Now, in a UK first, the legal campaigner ClientEarth is testing the teeth of the legislation by bringing a complaint against the reporting of Rio Tinto to the Financial Reporting Review Panel (FRRP).

ClientEarth claims that there is a large amount of documentation from government agencies, NGOs, journalists and others that contradicts the statements of Rio Tinto’s annual reports. The organisation argues that, if verified, this would make Rio Tinto’s reports non-compliant with UK law.

Director of programmes at ClientEarth, Karla Hill, said this test case was important because there was a need to ‘properly understand’ the limits of the law, especially given the current government consultation on how to improve company reporting.

The Future of Narrative Reporting consultation, which closes on 19 October, is meant to form part of the Coalition Agreement commitment to ensure that directors’ social and environmental duties have been covered in company reporting.

‘The FRRP could well be called upon to play a central role in monitoring company reporting in the future, so it is essential that the FRRP is willing and able to enforce the law,’ said Hill.

‘The regulator needs to take an active role, and if necessary test the law in the courts.’

Co-ordinator of the Corporate Responsibility Coalition, Hannah Ellis, said the ClientEarth report to the regulator demonstrated the need for ‘useful information’ in company annual reports and ‘illustrates the need for change in the law to occur’.

She also highlighted the need for a set of standards to be put in to place for companies to report to – something that relates to the pioneering work social enterprises have been undertaking around social accounting and Social Return on Investment.

‘There has been a huge amount of thinking in the sector over the last ten years on this and out of left field has come this political opportunity that could potentially transform the way environmental and social reporting is done in the UK in the future,’ said Ellis.

‘I don’t think it could be a more important time for the sector.’

FRRP director of panel operations Carol Page confirmed that the Rio Tinto referral was the first of its kind for the panel and it was taking it ‘very seriously’. However, the panel would not comment on cases until a decision was reached which could take some time.

Also, in its most recent annual report, the FRRP said it expected to get more cases of this kind and was surprised not to have more referrals already, especially in regards to environmental issues.

A Rio Tinto spokesperson said: ‘Rio Tinto takes its regulatory obligations very seriously and we fully observe our duty to be truthful and accurate in our reporting.’