Law branded inadequate as FTSE100 companies fail on social reporting

High ranking companies on the London Stock Exchange are failing to meet their obligations to report on social and environmental issues, new research reveals today.

A leading social enterprise is among those making the revelations an election issue, claiming that company law is not working.

The legal obligation for large publicly listed companies to report on social and environmental issues was introduced in the Companies Act of 2006. But research by the Corporate Responsibility Coalition (CORE) claims the law is not working.

CORE is a group of 130 civil society organisations including leading social enterprise Traidcraft.

Traidcraft senior policy advisor Fiona Gooch said: ‘The purpose of releasing this research is to say to all political parties, “What are you going to do about this inadequate implementation of the Companies Act?”.’

The research is entitled The reporting of non-financial information in annual reports by the FTSE100 and was authored by social auditor and Middlesex University professor Adrian Henriques.

It found that eight per cent of the 105 companies that appeared in the FTSE100 from January to September 2009 did not have an easily identifiable ‘business review’. The business review is the section of the annual report where company directors are meant to prove that they have considered environmental matters, company employees, supplier relationships and social and community matters.

The research also found that 17 per cent made no reference to environmental issues and eight per cent failed to include any social issues, while 14 per cent failed to include any social issues other than labour.

Gooch said that while the law did not require company directors to act on social and environmental issues the obligation to consider them as part of a business review was a ‘step forward’ and a ‘marker in the sand’. The government now needed to make sure ‘it became a reality’ through better monitoring and standardised implementation.

‘If small businesses like social enterprises can do this [social and environmental accounts] well, than why can’t big businesses?’ asked Gooch. ‘Both government and these companies are missing a trick because we at Traidcraft gain invaluable information from this process of looking at our social and environmental impact which enables us to manage our business better.’

Social Enterprise has been running a year-long campaign looking at the state of social reporting in the social enterprise sector through the RBS SE100 Index.

The first data report will be released and our impact and growth champions will be crowned in early June.