FAQ: Frequently asked questions
- 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.
- 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.
- 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.
- 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. In situations where a director has to choose between the company’s intention to create positive social or environmental impacts and the interests of shareholders, the directors would no longer be compelled to default to prioritising shareholders.
- Currently, there aren’t established standards that are comparable and widely accepted for impact reporting. At the moment, corporates are faced with a range of different reporting requests, but the approach proposed by the BBA should allow a company to share one consistent piece of reporting, by presenting what is required in this law.
- The amendments proposed by the BBA require a statement in a strategic report for a financial year which describes how the company has advanced its stated purpose and in consideration of its key stakeholders, community and the environment. The BBA suggests that this would only be required for larger companies.
- The BBA would require that businesses advance the interests of shareholders alongside those of wider society and the environment. This will change the nature of conversations in the boardroom, allowing for a more holistic approach to the challenges faced by the company’s directors. For many businesses this will be a formalisation of current behaviour, and would support the current intentions of many businesses to take ownership of their social and environmental impacts.
- Under the changes proposed by the BBA, a board of directors would not lose their commercial rigour or interest in commercial success, otherwise they would flounder and potentially fail. A board would retain its focus on commercial success, while enriching strategy through a more holistic consideration of stakeholder issues.
Under company law, the directors owe their duties only to the company, and only the company, or a shareholder(s) acting on behalf of the company, can take action against a director for a breach of their duty under Section 172; the BBA would not change this position in law. The BBA amendments to the law would not create new rights for other stakeholders.
The “benefit corporation” legislation, which takes a similar approach, has now been successfully introduced in 40 US states, as well as Italy, Colombia, and Canada
To date, over 2000 businesses have joined the BBA coalition and this number continues to grow since the BBA’s official launch at the end of March 2021. Click here to meet our supporters.
As soon as the BBA comes into force, it would automatically apply. Therefore, the BBA amendments to company law would apply to all companies’ Articles of Association by default, immediately. However, there would likely be some lead time for companies to adapt, if required, before the BBA came into force.
- The BBA coalition currently consists of over 2000 businesses. The campaign concept and strategy were initiated by B Lab UK, which acts as Secretariat to the coalition.
- 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.
- Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.