UK social taxonomy debate sees CSR compared with carbon offsetting

Representatives from MSCI, Shell, KPMG and CBRE Group attended a recent meeting on the potential new framework

Attendees at a meeting to discuss the potential for a ‘social taxonomy’ in the UK urged policymakers not to use companies’ CSR credentials as a “barometer for social good”. 

Minutes from the meeting, hosted last month by the country’s All-Party Parliamentary Group on Environmental, Social and Governance (ESG), show that representatives from private-sector giants including MSCI, Shell, KPMG, City of London Corporation and CBRE Global Investors participated in the discussion, which centered on whether regulators should create a set of definitions for socially-beneficial business activities.  

The UK Government is already developing a green taxonomy, which will mirror similar efforts in the EU. Last June, it unveiled the Green Technical Advisory Group (GTAG) that will advise it on the framework. A consultation on its proposed technical screening criteria is expected in coming days.  

But now the UK is potentially considering following Europe’s lead in creating a parallel social taxonomy. The bloc published a report on what its version of a social taxonomy could look like last week. 

The minutes from February’s meeting do not identify specific speakers, but highlight comments from attendees about the need to focus on companies’ operations, supply chains and lobbying activities. 

“That sort of activity are [sic] where the company’s biggest social impact lies,” said one speaker. “It does get very complex in supply chains, but for a social taxonomy to achieve anything it is probably the first step towards standardisation or maybe a little bit more maturity about how companies report and think about their impact.”

Social good, CSR programmes, all great stuff; but for me they are very akin to offsetting without having any real carbon reduction strategy,” said another speaker. “You can have a pretty horrid supply chain and not any regard for human rights but have a fabulous CSR programme and a lot of greenwashing to make the business look good.” 

The EU is proposing a social taxonomy that focuses on workers, consumers and communities covering child labour, gender equality, consulting with affected community and access to clean water. It looks set to automatically exclude tobacco and certain weapons companies.    

Attendees at the meeting discussed whether particular sectors or business activities should be viewed negatively in a UK social taxonomy “because of the negative impact of their products”, with tobacco, fizzy drinks and confectionary producers being namechecked. It was suggested that the framework could instead “look at the performance of companies within a specific sector” and identify best practice. 

“It would be dangerous and impractical if a ‘good’ index excluded certain companies because of some of their products,” argued one speaker.  

Another said: “We should not be labelling entire companies. It is not the Fairtrade label… If we look at companies as a whole, we are going to get a lot more unwieldy than it currently is [in the proposed green taxonomy], with ideas around specific activities that have positive social impacts.” 

On whether the social taxonomy should be separate to the green taxonomy, one participant warned that there would be “virtually no eligible activities”. “If you do ones that do social good without creating environmental harm while meeting minimum safeguards you get rid of nearly everything. You might be left with a very limited number of things that people can funnel money towards.” 

However, the general consensus was that it makes sense to have two standalone taxonomies. 

MP Alexander Stafford, who chairs the APPG, said that the UK must learn from the “mistakes” made by the EU, whose green taxonomy has become highly controversial in recent months as it has been watered down to include fossil fuels following pressure from governments and industry.   

“The EU is forging a path. Obviously, in the UK we are no longer part of the EU, but what they do matters incredibly to us. I fear that the UK is slightly lagging the EU, but we need to keep a close eye on what other countries are doing and learn from their mistakes.”