78% of the public and thousands of businesses across the UK back a proposal to change the Companies Act to ensure the interests of people and planet have a place in the boardroom.
The Better Business Act coalition is calling for an amendment to Section 172 of the Companies Act 2006, which sets out the expectations placed on company directors in the UK.
Campaigners believe that a few simple changes to the legal wording could make a huge difference in changing the way businesses operate.
Changing the game
The current wording of Section 172 allows businesses to solely maximise profit at the expense of other stakeholders if they see fit, a problem known as ‘shareholder primacy’.
The changes proposed by the Better Business Act would instead see all businesses become legally responsible for benefitting their wider stakeholders (including workers, customers, communities and the environment), as well as delivering profit.
Supporters say this would force a change in investor mindset away from short-term profit-only goals – which could be good news in particular for start-ups and entrepreneurs with innovative solutions to global issues like the climate emergency.
‘We need all businesses’
Douglas Lamont, CEO of chocolate brand Tony’s Chocolonely and Co-Chair of the Better Business Act, explained: “The challenges facing our planet are widespread and urgent. Solving them is not an optional endeavour for a small coalition of the willing, we need all businesses, the government and the general public working in partnership.
“This change would see all UK businesses given the freedom to think for the long-term, to find a balance between the interest of all stakeholders, rather than leadership teams being trapped by a short-term legal responsibility to maximise profits for their shareholders whatever the cost to their employees and the planet.”
Research suggests the benefits could be extensive. B Corporations – a rapidly growing movement of purpose-driven companies that have voluntarily made the legal change – have been found to have more robust governance processes, have higher levels of innovation, are more successful at securing external finance, are more likely to maintain good relationships with suppliers, enjoy greater levels of employee retention and put greater focus on community and civic engagement than other businesses.
Change on the cards?
In April, the Better Business Act launched a new campaign, ‘Wake Up to Better Business’, at the House of Commons to garner support from a growing number of MPs and policymakers. The campaign is being backed by over 2,000 UK companies and business organisations, including John Lewis, Virgin, Iceland, Danone, innocent drinks and the Institute of Directors (IoD).
The UK public is also overwhelmingly supportive. In a national survey, 78 per cent of people agreed that the law should change to ensure businesses are responsible for looking after people and the planet.
“It’s a much needed change that cannot come quick enough,” Lamont continued. “[Our] research shows that the public agree that the Government must act.”
