Iceland and John Lewis are among over 400 UK businesses demanding new principles of environmental and social responsibility be added to company law for directors.
The businesses want an amendment to Section 172 of the Companies Act, which addresses a director’s responsibility to promote the company’s success. The proposed new legislation, dubbed ‘The Better Business Act’, would require directors to advance shareholders’ interests “alongside those of wider society and the environment”.
The so-called ‘Better Business Act Coalition’ also includes BrewDog, Innocent, Quorn, Mindful Chef, Danone, The Body Shop, Tony’s Chocolonely and the Institute of Directors.
The coalition is due to present its proposals at a parliamentary reception for the government at 3pm today, with backing from a cross-party group of MPs.
“Leaders of businesses of all types and sizes are coming together united by a clear purpose – to set a higher standard for ourselves and create a clear and consistent regulatory framework that puts aligning the needs of all stakeholders – our shareholders, our people and our planet – as its central principle,” said Innocent CEO Douglas Lamont, the coalition’s co-chair.
“With this in place we are confident we can accelerate the much-needed journey towards a fairer and more sustainable future for all.”
The Better Business Act would require business to report on how they balance “people, planet and profit in a strategic report or impact report, where one is currently required”, a spokesman for the coalition said.
It would “apply to all businesses by default. It must no longer be optional to benefit wider stakeholders beyond shareholders.”
The proposed amendment also seeks to “empower directors to exercise their judgement in weighing up and advancing the interests of all stakeholders”.
Jon Geldart, director general of the Institute of Directors, said: “Directors have a crucial part to play in creating and running better and more sustainable businesses.
“As we emerge from the pandemic, the IoD is pleased to back the Better Business Act, which will empower directors to advance the purpose of their businesses in a way that benefits all stakeholders.”
The coalition said a May 2020 poll had found 72% of the UK public believed business should have a legal responsibility to people and the planet, alongside maximising profit, while 76% thought business should have a legal responsibility to protect the natural environment.
It said independent analysis had also shown evidence of improved business outcomes for companies run in line with the proposed principles, including faster turnover growth.
Chris Turner, executive director of B Lab UK and campaign director for the Better Business Act, said: “The world needs business at its best – creating good jobs, helping fix big problems and adding value to society.
“The best way to do this is to change the law that governs how businesses act. The Better Business Act is a unique opportunity to demonstrate UK leadership on the global stage – creating a competitive advantage, driving innovation, accelerating progress to net zero, and aligning with the government’s ambition to build back better.”