What is the Better Business Act?
The Better Business Act concept and strategy were initiated by B Lab UK, which acts as its Secretariat. B Lab UK is a non-profit established in 2015 to serve a growing community of over 1000 UK-based companies – Certified B Corporations – using business as a force for good.
From the concept, a coalition of businesses has been forming to request changes to the way the Companies Act operates in the UK.
What is the Better Business Act trying to achieve?
The objective of the Better Business Act is to get an amendment to the Companies Act 2006 by making a change to Section 172 of the Companies Act.
They believe (as does Switchfoot Accounting) It can no longer be a choice to align the long-term interests of people, the planet and profit.
The Better Business Act (BBA) aim is that every single company in the UK takes ownership of its social and environmental impact.
The BBA campaign wants four principles to be reflected in an amended s172:
1. ensuring the interests of shareholders are advanced alongside wider society and the environment;
2. empowering directors to exercise their judgment in weighing up and advancing the interests of all stakeholders;
3. default change to apply to all companies; and
4. requiring businesses to report on how they balance people, the planet, and profit in a strategic or impact report, where one is currently required.
What is the Companies Act 2006?
The Companies Act 2006 is the main act that regulates British company law. The act is said to be the longest piece of legislation approved by parliament, covering over 700 pages and 1300 sections.
The Companies Act is the rules and regulations for how UK company’s are run and part of the Companies Act sets out what should be included in the model Company’s articles and the incorporation process.
Why is S172 Companies Act so important?
In Section 172, the Companies Act 2006 states that directors must “promote the success of the company,” meaning that they must act in a way that benefits shareholders.
S172 Companies Act defines the range of stakeholders to whom the “success of the company” pertains.
It requires company directors to consider the following:
· The long-term consequences of decisions.
· The fostering of relationships with suppliers, vendors, customers, etc.
· The business’s impact on the environment and community.
· The desire to maintain high standards and a good reputation concerning business conduct.
· The need to act fairly concerning all company members.
· The interest of employees.
The BBA is requiring a very small change to the act they want the wording changed from “to promote the success of the company” to being a duty “to advance the purpose of the company”.
Meaning to benefit its members as a whole, whilst operating in a manner that also (a) benefits wider society and the environment in a manner commensurate with the size of the company and the nature of its operations; and (b) reduces harms the company creates or costs it imposes on wider society or the environment, with the goal of eliminating any such harm or costs. So, while it may seem to be a small change it will have a big impact.
The change to s172 will help bring company law into alignment with the UN Sustainable Development Goals and Agenda 2030 and facilitate the economy decarbonising to meet Paris Agreement goals on climate change.
Who supports the Better Business Act?
The BBA has cross-party parliamentary support and is championed by UK businesses of all sizes & across all industries.
The campaign to reform s172 is building momentum and the supporters are available on their website.
https://betterbusinessact.org/supporters/
How to sign the Better Business Act?
Signing the BBA is a simple form and pledge on their website.
https://betterbusinessact.org/act-now/
What can we do while we wait for the legal change?
There are lots of things we can do to support the change in the Companies Act
– Consider amending your articles to include objectives
– Write to your MP
– Share your pledge on social media
– Spread the word
– Publish an impact report
Switchfoot Accounting is working with a group of other accountants to put pressure on the professional services businesses that provide company formation services to change their defaults, making it easier & cheaper to amend your articles to reflect purposeful objectives.
Please get in touch if you would like to talk about how we can help you build a better business.
Please note: This is not meant to constitute professional advice. It is generic guidance only –please seek specific advice for your circumstances.