The Better Business Act is a campaign initiated by B Labs and supported by over 600 companies including Danone, The John Lewis Group, and the Institute of Directors.
They believe that businesses should align the interests of their shareholders with those of society and the environment, meaning that profit should never come at the cost of human rights or sustainability, and they want to make this a commitment legal.
The Better Business Act and supporting coalition are determined to amend Section 172 of the Companies Act, which currently states: ‘a director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company’, a statement that Pinsent Mason claim has led to a ‘mindset in some boardrooms that shareholder profits are to be maximised at all costs’.
The Better Business Act campaign wants to amend the wording of this section to state that directors have a duty to ‘advance the purpose’ or the company rather than ‘promote the success’ of it.
This change may seem subtle, but it’s likely to spark a big change in mindset. At present, directors must consider the long-term ‘success’ of the business above all else, a phrase which could effectively read as ‘financial success’ or ‘profits’ and places environmental or social concerns on the backburner.
The aim is not to disregard the importance of a company’s financial success, but rather to place equal importance on the impact of a company’s actions on society and the environment and to prevent shareholder interests being prioritised over stakeholders.
Implementation of the Better Business Act would most notably impact on boardroom conversations. The BBA hope that this change will encourage businesses to formalise their dedication to better social and environmental business practices and that it will inspire ‘a more holistic approach to the challenges faced by the company’s directors’.
It will also require a change to their strategic reporting to include a description of ‘how the company has advanced its stated purpose and in consideration of its key stakeholders, community, and the environment’.
There is currently no single accepted standard of reporting for social impact activities, however there are tools such as the B Impact Assessment which can help a company measure their impact and identify areas of strength and weakness. And as the more measured and strategic terminology of ESG (Environmental, Social and Governance) overtakes Corporate Social Responsibility as the ‘corporate vehicle for positive contribution’, we are likely to see a more unified and simpler standard for reporting in the coming years.
Companies can add their names to the growing list of supporters of the Better Business Act here. They can also use the free B Impact Assessment tool to get a better idea of their current social impact and areas that might need addressed should the legislation change go ahead.
Aligning company goals to the UN Sustainable Development goals is a good way to understand how your company is best placed to support a global effort for good, and certifications such as the B Corp Accreditation and the Social Enterprise Mark are also useful to solidify and formalise your dedication to your stakeholders.
Employee volunteering can help companies to build stronger connections to their community, support causes aligned to the UN SDGs and contribute to positive wellbeing practices by giving your team time away from their desk to try something new or give back to a charity close to their heart.
If you want to learn more about how you can prepare your company for the future through employee volunteering, please let us know and we’d be more than happy to help!
Or join our community here to stay up to date with all things social responsibility.