First test of UK’s new corporate environmental and social law falls short

24 March 2011

The UK’s Financial Reporting Review Panel (FRRP) has announced the outcome of its first investigation into a company’s compliance with supposedly groundbreaking new legal requirements for companies to report on environmental and social issues.

Environmental law organisation ClientEarth claims that both the manner of the FRRP’s investigation and its outcome are lacking, and provide no clarity about how the law is to be interpreted by companies.

In July 2010 ClientEarth made a complaint to the FRRP arguing that mining giant Rio Tinto’s annual reports did not comply with the law because they did not include major environmental, human rights and community concerns.

In the FRRP’s announcement:

  • The FRRP shies away from making a statement about whether or not Rio Tinto’s reports complied with the law.
  • The FRRP states that it closed its inquiry after Rio Tinto’s directors ‘agreed’ to include some, but not all, of the information called for in ClientEarth’s complaint in their latest annual report.
  • The FRRP makes no statement as to whether or not this information is required by law, as asserted by ClientEarth.

A number of key issues that ClientEarth raised with the FRRP have not been addressed in Rio Tinto’s new report, yet the FRRP has not made it clear how it was decided that these should not be included in the new report. The inquiry was conducted entirely behind closed doors.

Ben Bundock, legal advisor on company transparency, ClientEarth, said: “The closed-door and consensual manner of this investigation and its conclusion don’t provide any clarity as to what this law means for all UK companies. It fails to send a strong message to other companies that to comply with the law they must report about their environmental and social impacts with detailed and balanced information.

“Unless there is a change of approach, we won’t see the goals of the Companies Act achieved.”

ENDS

Media contact: ClientEarth communications office
t. +44 (0) 203 030 5951 | m. +44 (0) 7538 418460 | e. This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Notes to editor

1 The Financial Reporting Review Panel (FRRP) was established in 1990 as part the Financial Reporting Council. The FRRP has been authorised by statute for the purpose of ensuring that UK companies’ accounts and reports comply with relevant legal requirements.