Campaigning for Better Business

It’s not just profit that makes a business successful. Join the Better Business Act campaign to power exponential growth and make a change in the world 10 YEARS

In boardrooms up and down the country, Section

172 of the Companies Act 2006 has been interpreted to mean that a business has a duty to maximise profits for its shareholders. It is unlikely that this is what was meant when the change to the act was passed, but as with many things it is the action, rather than the intention, that is most relevant.

Section 172 of the Companies Act 2006, states that directors have a duty to promote the success of the company, to the benefit of its members. Specifically, that 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 for the benefit of its members as a whole, and in doing so have regard” to specified other interests and considerations.

We are all aware of the profound challenges that we face in the UK; social mobility appears to have stalled i , and our developed nation has citizens trying to choose between whether to heat their homes or have three meals a day.

In addition, climate change is having a noticeable impact on the weather, and a report in October 2022, published by WWF and Zoological Society of London ii , showed that the global wildlife population has plunged by 69% in just under 50 years, with many stating that we are living through a mass-extinction event. Although the biggest drop, 94%, was seen in Latin America and the Caribbean, the UK was singled out as one of the most nature-depleted countries in the world.

Climate scientists are now saying that there should no longer be a choice about whether to align the interests of the public with the well-being of the environment.

This all sounds bleak, but as always there are people working tirelessly to combat the challenges that we face, and we have the advantage of both the public, and businesses, being on the same page when it comes to the climate and wellbeing of workers. We can all make the choice to do better.

FOR THE GOVERNMENT TOASK COMPANIES TOBE ‘MINDFUL’ ANDCONSIDER CHANGEWITHOUT PASSING LEGISLATION;UNDERMINES A CLEAR PLAYING FIELD.

Research from the Better Business Act has shown that businesses want to change, with 76% of UK businesses wanting to be legally responsible for their impact. Three-quarters of the UK public also want businesses to be held accountable for their environmental impact.

But for the government to ask companies to be ‘mindful’ and consider change without passing legislation; leaves us all standing still. If one company chooses to increase sustainable practices and reinvest more of their profits into R&D instead of increasing pay-outs to shareholders, other companies have a clear field to undercut them and take their market share.

Although many bemoan the impact of red-tape and the interference of the ‘nanny state’; legislation creates a level playing field for all businesses to play on.

The Better Business Act is asking business leaders to urge the government to amend Section 172 and join the coalition to add four key principles to the Companies Act.

Aligned interests

The interests of shareholders are now advanced alongside those of wider society and the environment. This establishes a new principle of fiduciary duty within Section 172 of the Companies Act.

Empowering Directors

This change must empower directors to exercise their judgement in weighing up and advancing the interests of all stakeholders.

Default Change

This change must apply to all businesses by default. It must no longer be optional to benefit wider stakeholders beyond shareholders.

Reflected in Reporting

Following this change, businesses must report on how they balance people, planet and profit in a strategic report or impact report, where one is currently required.

With these amendments, businesses will be more able to act to the betterment of society, with an eye on long-term aims. It should not only address the climate issue, but also improve the opportunities for social mobility among workers, and improve wages, leading to a fairer society for all.

The plan is to continue to grow a coalition of business leaders from across all sectors, to ensure that businesses help to create a greener and fairer future. MPs are already supporting the initiative, so the more businesses that join, the more impetus the Act will have.

We know that profits are important, but there is also compelling evidence that businesses do better when they align the interests of shareholders, the planet and society. You can read more about this and other benefits of joining on the Better Business Act website. iii

The magazine has written before about the increase of market share that environmentally conscious businesses have, especially with younger people. According to research from Forbes in March of this year, members of Gen Z have an outsized impact on the shopping habits of their parents and grandparents and are demanding sustainable products. According to the same report, there is a massive disconnect between the buyers and sellers, with two-thirds of consumers saying that they will pay more for sustainable products, and two-thirds of retailers believing that people won’t pay more. This gap of understanding needs to close, and businesses need to start listening to the voices of their customers.

With the purchase power of Gen Z only increasing, and the concern about sustainability only growing with each generation, deciding to prioritise sustainability could be the key to the longevity of a business.

We are the people who know people that help people, and our members are some of the most community minded, generous people that I have had the fortune of meeting. So, I ask that you look into this proposal, discuss at your next board meetings, and decide if you can actually afford not to sign up.