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Expectations from the Crisis
Financial crises have a habit of leading directly to increased regulation. In the current environment, it is clear that the existing regulatory environment will undergo significant change. So what kind of change can we expect, and how will this impact CSR and sustainability programmes and in particular, directors' responsibilities?
Certainly, we will see significant increases in transparency requirements. As the funding gaps of companies’ pension schemes become more acute, and as these funds, in greater numbers, fail to deliver against their obligations, we will see greater regulatory oversight and transparency demands across public and privately held organizations. If compensation is not directly regulated at the senior levels, we should at minimum expect to see increased compensation disclosure regulations.
We may even see compliance with the UK Combined Code move from being voluntary “with explanation”, to being mandatory. We will see far greater scrutiny from regulators (we may even see whole new regulatory bodies established) of company’s disclosures under the "comply or explain" principles, and should expect “or explain” clause to disappear over the coming years.
We can conclude that CSR and sustainability reporting is not going away, and will increase in importance. In fact, the UK Labour government has recently confirmed that it intends to push ahead with its aggressive greenhouse gas (GHG) reductions targets of 80% reductions through 2050.
Directors should expect to see greater emphasis on their oversight over issues relating to CSR and sustainability. Today many companies already provide a range of regulator-required reports, covering the range of environmental, health and safety, employment of other law. CSR and sustainability reporting will need to bring these disciplines together to provide consolidated reporting along with financial information currently provided. This will include a greater emphasis on historical performance, trends and stated future targets.
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