Minister hints at new CSR law

Legislation is essential to force firms to act more ethically and report on environmental and social issues, according to experts

"Sustainable development is unobtainable unless the current regulatory environment is strengthened," said Chris Marsden, chairman of the Amnesty UK Business Group, speaking at a CSR conference organised by the Guardian.

Margaret Beckett, secretary of state for environment, food and rural affairs, said the case for voluntary CSR was strong. The Co-operative Bank, for example, had reported annual savings of L3.5 million by reducing its paper usage. But she acknowledged that the weakness of this approach was that CSR was worth the effort to businesses only where their interests and those of society converged.

The government's role was not only about regulation, Beckett stressed. Fiscal measures such as the climate-change levy, landfill tax and aggregates tax all encouraged responsible behaviour among companies too. "But the classical instrument of regulation is, and will remain, a key tool to help set the boundaries of behaviour," she said. "We need to have minimum standards to protect society and we need a level playing field to protect responsible business."

Most firms are happy to adopt socially responsible practices - until they adversely affect profits, according to Larry Elliot, the Guardian's economics editor. "When the City asks about earnings per share, who has the whip hand: the FD or the CSR guy who says `what we're doing here is slightly unethical'?"

Elliot urged the government to legislate. "The instinct of business is to make profits as the tiger's instinct is to kill antelopes. We need barriers and restraints" he said. "The failure of voluntary CSR is the fault of the government for not setting barriers, rather than that of companies for not changing their corporate spots."

George Cox, director-general of the Institute of Directors, acknowledged that there was a place for regulation in drawing up limits, but said it could not alter attitudes. "Firms could comply with legislation but still not have CSR at the heart of their company. If you have too much legislation, firms simply tick the boxes."

James Ross, deputy chairman of National Grid Transco, agreed. "CSR must be integral into the logic of your organisation or it's nothing but clever public relations he said. "But the business case for it is strong: wasting fewer resources boosts the bottom line and protecting your firm's reputation is vital to its continuing success."