The report calls on the internet industry to voluntarily create better parental controls "as a matter of urgency".
"The internet industry should ensure that customers must make an active choice over what sort of content they want to allow their children to access," Reg Bailey, the author of the Independent Review of the Commercialisation and Sexualisation of Childhood, said in his report (108-page / 2.47MB PDF).
"To facilitate this, the internet industry must act decisively to develop and introduce effective parental controls, with Government regulation if voluntary action is not forthcoming within a reasonable timescale," the report said.
"In addition, those providing content which is age-restricted, whether by law or company policy, should seek robust means of age verification as well as making it easy for parents to block underage access," the report said.
The report was based on evidence gathered from surveying more than 2,000 parents, 500 children, and feedback from representatives of the advertising and media industries and other organisations.
Bailey, who is chief executive of the Mothers' Union charity and who was commissioned by the Government to make the report, said that music videos should be subject to age verifications because they are often too explicit for children.
The Government should consider removing a current exemption in the UK Video Recordings Act. The exemption means music videos can be sold without an age rating or certificate.
"Such age rating information may also help to ensure that parental controls on televisions, computers, phones and other devices start to filter music videos more effectively than at present," Bailey said in his report.
Regulators across the media, communications and retail industries should work together to create a single website that parents can visit to raise concerns about content, the report said.
"This will set out simply and clearly what parents can do if they feel a programme, advertisement, product or service is inappropriate for their children; explain the legislation in simple terms; and provide links to quick and easy complaints forms on regulators’ own individual websites," Bailey said in the report.
"This single website could also provide a way for parents to provide informal feedback and comments, with an option to do so anonymously, which regulators can use as an extra gauge of parental views," Bailey said.
All websites of companies that market products or services to children should display a 'one-click' complaints button on their homepage to make it easier for parents to get in touch, the report said.
Parents are concerned about TV content that is shown before the watershed, Bailey said. The watershed is the time within TV schedules after which programmes containing content deemed for adults can only be shown.
The UK's media regulator, Ofcom, should give "greater weight" to the views of parents when determining what is acceptable to be shown before the watershed.
"Ofcom should extend its existing research into the views of parents on the watershed," Bailey said in his report.
"Broadcasters should involve parents on an ongoing basis in testing the standards by which family viewing on television is assessed," the report said.
Ofcom and broadcasters should submit annual reports to show that they have been accountable to the views of parents, the report said.
Bailey called on retailers to take more responsibility for censoring sexualised content on publications.
"Publishers and distributors should provide such magazines in modesty sleeves, or make modesty boards available, to all outlets they supply and strongly encourage the appropriate display of their publications," Bailey said in his report.
The report also calls on the Advertising Standards Authority (ASA) to apply tougher standards to where it allows on-street advertising that contains sexual imagery to be located.
"The Advertising Standards Authority should place stronger emphasis on the location of an advertisement, and the number of children likely to be exposed to it, when considering whether an on-street advertisement is compliant with the CAP code,"
A social responsibility clause within the Committee of Advertising Practice (CAP) Code, which details rules for non-broadcast adverts, says advertisers should consider the location of schools before placing ads.
Companies should not pay children to promote brands, the report said.
"The Committee of Advertising Practice and other advertising and marketing bodies should urgently explore whether, as many parents believe, the advertising self-regulatory codes should prohibit the employment of children under the age of 16 as brand ambassadors or in peer-to-peer marketing – where people are paid, or paid in kind, to promote products, brands or services," Bailey said in his report.
The report calls on the ASA to consult with parents and regulate adverts based on their views. The ASA should also consider classifying a child as always being under 16, the report said.
Retailers and trade associations should devise a voluntary code of good practice that would set standards for retailing to children, the report said.
Bailey said it was "reasonable" to give industry and regulators time to act on his recommendations, but called on the Government to review progress in 18 months to make sure action was being taken.
"A stocktake, to include an independent assessment of progress, should report on the success or otherwise of businesses and others in adopting the recommendations of this Review," Bailey said in the report.
"If the stocktake reaches the conclusion that insufficient progress has been made, our view is that the Government would be fully entitled to bring forward appropriate statutory measures. Parents would want no less," Bailey said.
The Mothers' Union widely backed the report by its chief executive Bailey but said that it was concerned that the report relied too heavily on self-imposed action.
"We cannot agree with the Review that a purely consensual approach will be the most effective, and that further regulation or legislation would necessarily disempower parents," Rosemary Kempsell, Worldwide President of Mothers‟ Union said in a statement (5-page / 178KB PDF).
"As the Review points out several times, parents want help and support to address the commercialisation and sexualisation of childhood; and Government intervention is one way of achieving this," Kempsell said.
"We should not be afraid to challenge industry when the welfare of our children, and their future, is at stake," Kempsell said.