What is the Better Business Act and why is it needed?
• The Better Business Act would amend Section 172 of the Companies Act 2006 so that companies are legally obligated to operate in a manner that benefits their stakeholders, including workers, customers, communities and the environment, while seeking to deliver profits for shareholders. The Better Business Act will transform the way we do business, so that every single company in the UK, whether big or small, takes ownership of its social and environmental impact.
• The climate emergency and social inequality are profound and pressing problems, thrown into sharp relief by the COVID crisis, that can only be solved if we harness the enormous potential of entrepreneurs, innovation and enterprise.
• Our research shows that UK voters and consumers want business to do better. Three quarters of the UK public think business has a responsibility to protect the environment and the majority favour brands that do good in the world.
What difference could the Better Business Act make to society and the environment?
• For the past half-century, business has become separated from the communities it needs to serve. The relentless pursuit of profit at all costs has contributed to a set of enormous challenges that threaten peoples’ health, wealth and the natural world. The Better Business Act will transform the way we do business, so that every single company in the UK, whether big or small, takes ownership of its social and environmental impact.
• This means freeing decision-makers in business to act in everyone’s long term interests – combining traditions of good stewardship and responsibility with new ideas to meet the challenges of the 21st century.
• The best way to do this is to change the law that governs how businesses act. It can no longer be optional for companies to consider their impact on the future. Those that don’t should be held accountable.
How is this different from the current Section 172, which already enables companies to take account of a broader group of stakeholders? Why the need for a BBA?
• Subsection 172(1) Companies Act 2006 allows directors to consider other stakeholders when making decisions, but this can only be in the course of pursuing the success of the company for the benefit of the shareholders; this is the default position of “shareholder primacy” for all companies. Therefore, when making a decision that could be less advantageous to the shareholders in favour of, for example, better environmental impact, directors are understandably likely to feel that their duty obligates them to prioritise shareholders above the environment.
• The BBA would change the default position for all companies so that directors would be empowered to advance the interests of their shareholders alongside those of wider society and the environment.
To find out more go to https://betterbusinessact.org
To investigate how to measure and improve your social and environmental impact go to https://businessonpurpose.uk/bcorp
Or email andy@businessonpurpose.uk
