The Operating and Financial Review (OFR) is back on the agenda just weeks after Gordon Brown scrapped it as unnecessary 'gold plating' on already-planned corporate legislation.
The chancellor ruffled feather in November when he told delegates at a CBI conference they would not be burdened by bureaucracy and the OFR, which would have required listed companies to report on their social and environmental performance, would not be implemented.
At the time it appeared to be a less than prudent announcement, with the environmental lobby up in arms and many in the business community left scratching the heads in bewilderment.
Friends of the Earth then threatened legal action, saying it would seek a judicial review as it felt Brown's unexpected announcement that he would dismiss the planned review was unlawful.
Now the chancellor has agreed to put the plans back on the table, consulting on whether to include them in the draft Company Law Reform Bill, currently having its first reading in the House of Lords.
The Treasury has also agreed to pay FoE's legal costs up to this point.
Friends of the Earth's lawyer, Phil Michaels said: "This was a flagrant case of the chancellor breaching the Government's own consultation policies and of carrying out an entirely one-sided, informal and unfair consultation.
"Issues around environmental and social reporting affect more than the business community - and the Chancellor has now recognised the valid rights of other stakeholders.
"This is an important victory - but one that we should never have had to fight."
Tony Juniper, FoE's executive director, added: "This reversal by the chancellor is a major victory for the environment, democracy and those companies who genuinely want to reduce their impacts on people and the planet.
"It is a defeat for lobby groups like the CBI which have become far too used to dictating government policy regardless of the wider impacts on society.
"Gordon Brown's decision to abolish the OFR was also unlawful, and that is why the Government has backed down."
For its part the CBI has shrugged of the chancellor's decision.
"The CBI strongly supported the Treasury decision to abolish the OFR," said deputy director general John Cridland.
"We welcome the extension of the DTI review and will advance our case for the continued abolition.
"As far as we are concerned nothing has changed."
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