Leading business figures have called for reform of company law to give sustainability the same legal standing as profit and growth.
Major changes must be made to boardroom rules to enshrine sustainability in company law that currently rewards profit as the sole corporate objective, at the expense of all other considerations.
More than 20,000 businesses and the vast majority of UK public polled in a nationwide survey are backing a change to company law that would see the interests of people and the planet sit alongside those of shareholders when making boardroom decisions.
As a result of poor business conduct and widening societal inequality over the past three years, the proportion of the public who support giving businesses additional responsibilities to people and the planet alongside profit has increased five points from 72 per cent since the same research was conducted in 2020.
In the polling and in focus groups conducted alongside it, voters cited the cost of living crisis, the treatment of Amazon’s workers and the excessive windfall profits of energy companies as examples where an overriding profit motive had driven poor decision making. Current legislation allows businesses to solely maximise their profits at the expense of other stakeholders, and many see it as their responsibility to do so.
The Better Business Act is calling for an amendment to Section 172 of the Companies Act, which sets out the ‘job description’ for company directors to ensure they align social and environmental impact with shareholder returns.
Voters increasingly feel that the current law is not fit for purpose: just one in ten believe that businesses should have a legal responsibility to solely maximise their profits. Over two thirds would support the Better Business Act’s proposed changes.
The public support comes on top of a chorus of business voices campaigning for change to the law. A coalition of nearly 2,000 businesses recently campaigned in London to convince the government to wake up to better business. They include Virgin, Iceland, Suez and many more. Other members of the coalition who have already made the proposed legal change include Patagonia, innocent, Kin & Carta, and Danone UK & Ireland. The Institute of Directors, the Impact Investing Institute and ShareAction are among leading voices calling for change.
“We know business is about profit. But the values of biggest, fastest, cheapest no longer resonate and are no longer tenable,” Mary Portas, co-chair of the Better Business Act campaign, said. “We need a new value system in which businesses don’t just grow and mindlessly make more money, but thrive. They have to find ways of creating profitable solutions for the problems people and planet face, rather than profiting from them. That’s every business’ brief today. And this small change to the law could drive a big impact.”
Douglas Lamont, co-chair of the Better Business Act campaign, added: “The challenges facing our planet are wide-spread 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. All businesses must be given an unambiguous, legal framework that requires them to step up and be part of the solution. 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. It’s a much needed change that cannot come quick enough — today’s research shows that the public agree that the Government must act.”