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The Better Business Act is a campaign - not (yet) law - which pushes for a change in UK law to ensure every company in the UK aligns their interests with those of our wider society and the environment. It has the support of over 1,000 UK businesses and organisations and is led by B Lab UK, which forms part of a global non-profit network whose focus is on business being used as a force for good.
Below we outline in more detail what is proposed and how it dovetails with what some boards are already choosing to consider.
A campaign which calls for the UK government to reform directors’ duties under section 172 of the Companies Act 2006.
Section 172 currently requires directors to act in a way they consider most likely to “promote the success of the company for the benefit of its members (i.e. shareholders) as a whole”.
The BBA seeks to redraft this so that board decision-making doesn’t focus solely on shareholders – instead aligning the interests of people (including shareholders), the planet and profit. The key is to ensure businesses are legally responsible for benefitting workers, customers, communities and the environment while delivering profit.
The BBA would redraft section 172 to incorporate the following four principles:
The campaign has drafted suggested amendments to the Companies Act 2006 which can be found here.
Protecting people and the planet are at the core of the BBA campaign and, given the ongoing impact of the COVID-19 pandemic (on society and the economy), cost-of-living crisis and global warming, it feels like a welcome and much needed initiative to help improve the world we live in.
We already have Certified B Corp accreditation in the UK which requires companies who apply for such accreditation to “widen the lens” of their decision-making to focus on societal and environmental factors and impacts, as well as shareholder interests. What the BBA would do is enshrine in law an obligation on all directors of any company to carry out business with such wider considerations in mind.
Many businesses (whether Certified B Corps or not) have already started to shift their focus from shareholder profit to the protection of society and the planet more generally.
For example, Faith in Nature (producers of natural, sustainable, cruelty free beauty products) has made the ground-breaking decision to appoint a “Nature Guardian” to its board. They are a non-executive director who will give “Nature a voice and a vote”. For a detailed outline of the steps they have taken to achieve this, have a look here at their Nature on the Board - An Open Source Guide.
There are also voluntary (although planned to be compulsory) requirements for UK listed companies and larger corporates to think about climate-related risks and opportunities in their reporting. Our article here provides an overview.
Appointing Nature to the board is a step in the right direction as are other initiatives like Certified B Corp accreditation and voluntary climate-related reporting. However, without change to section 172 in line with the BBA proposals, there will be no legal obligation on smaller private UK companies to change the way they operate to consider the interests of a broader stakeholder group and the planet.
For the moment it is likely that community pressure and the reputational implications of not taking environmental, social and governance matters seriously will keep climate matters at the top of the business agenda. The legal action started by ClientEarth (a shareholder) against Shell’s board of directors for failing to properly prepare for the net zero transition is an interesting example.
Contributor: Rachel Kelly
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2023. Specific advice should be sought for specific cases. For more information see our terms & conditions.
09 January 2023
News 29 NOVEMBER 2023