The Better Business Act: Transforming The Way We Do Business
How do you catalyse change? We spoke to the Better Business Act team to learn more.
“I don’t think we can overestimate the impact of every single company in the UK, whether big or small, taking ownership of its social and environmental impact.”
At April’s parliamentary reception for the Better Business Act, Caroline Lucas MP had this rallying cry for all UK businesses to do better. Since launching just over two months ago, over 550 UK businesses have answered her call and pledged their support for this revolutionary amendment. Among them are industry giants like Danone, Ben and Jerry’s and innocent, alongside smaller businesses - like Following the Footprints.
What is the Better Business Act (BBA)?
The Better Business Act calls on the UK Government to amend Section 172 of the Companies Act to ensure that UK businesses are legally responsible for benefiting workers, customers, communities and the environment while still delivering profit. The goal? To empower decision makers within UK business to take ownership of their social and environmental impact.
The Better Business Act’s objective is to amended Section 172 of the Companies Act to reflect four key aims:
To align interests between shareholders, wider society and the environment.
To empower directors to exercise their judgement in weighing up and advancing the interests of all involved stakeholders.
To catalyse default change across all businesses, in all industries, making it no longer optional to consider only shareholders and not stakeholders.
To reflect this change in how businesses report their balance between people, planet and profit - via strategic or impact reports.
With initiatives like B Corp rapidly gaining pace, there’s a global shift towards a ‘triple bottom line’ within businesses. Recent research by NatWest showed that 85% of Small-Medium Enterprise (SME) bosses say that they believe that their customers want them to embrace sustainability. That’s big, and gradually all businesses are realising that the need to consider social and environmental impact isn’t going anywhere, and customers really do care. However, change isn’t happening quick enough, and shifting priorities must be reflected in UK law. That’s where the Better Business Act comes in.
How will it work?
The amendments proposed by the BBA encourage a statement of consideration for the environment in a strategic report for a financial year. Additionally, for companies above the audit threshold, it has been mentioned by Bates Wells that under this bill the Government would bring forward secondary legislation setting out more detailed rules about how they should report their impact.
Want to see an example amendment to Section 172 of the Companies Act? Check this out.
With B Lab UK as Secretariat to the act, and co-chairs like Douglas Lamont, CEO of innocent, the BBA is well placed to trigger change. However, amending the Companies Act is no small feat, and catalysing nationwide impact is an intricate task.
We spoke to the BBA team to ask some burning questions…
👉 The BBA is based on the premise that the ‘triple bottom line’ approach to business is the only solid foundation for a sustainable economy. This has been widely discussed as necessary. What was the trigger for the BBA coalition and campaign? Why now?
For the past half-century, business has become separated from the communities it needs to serve. 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 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.
👉 Currently, what is required by businesses to comply with this act?
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.
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.
👉 Many companies will choose to outsource the measurement and tracking of their environmental and social impact to third parties, and will want their impact certified. How does B Labs envisage this impacting the number of applicants wanting to achieve B Corp status?
The principles behind the Better Business Act align with those of B Corp certification, as these are companies that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to align profit with purpose. And while the BBA campaign concept and strategy were initiated by B Lab UK, which acts as Secretariat to the coalition, the campaign is focused on building and growing a broad-based coalition of businesses, reflective of all sectors, sizes and regions.
👉 The BBA aims to create widespread change in businesses across the UK. What other actors and actions are needed in parallel with the BBA being passed to create this change?
We need to create awareness and understanding of Directors’ duties and responsibilities, and we are pleased to have received the support of the Institute of Directors (IoD) in advancing these. We also recognise the need to educate the legal and accounting professions with regard to the implications; and of course, the investment community – including analysts, institutional and retail investors – will be vital to delivering transformative change.
👉 Why is it important for SMEs to be part of this coalition alongside larger companies?
SMEs are a significant part of the UK economy, according to the Federation of Small Businesses, representing some 99.3% of the total number of UK business, three fifths of the employment and around half of turnover in the UK private sector. We cannot ignore the importance of SMEs, since the goal of the Better Business Act is to have every single company in the UK, whether big or small, aligning people, profit and planet at the heart of their purpose and the responsibility of their directors.
👉 If the BBA is passed, what changes in businesses throughout the UK do you wish to see as an outcome over the next 5 years?
We see the BBA aligned with and complementing the Government’s Build Back Better agenda of an economic recovery based on the creation of good jobs and a reduction in carbon emissions. We see the BBA as supporting progress toward the UK’s carbon reduction target. We will see the Better Business Act transforming 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.
👉 How can businesses continue to best support the BBA, besides joining the coalition?
In addition to them signing up as supporters, we are urging businesses to extend and amplify the purpose and message of the BBA along their value chains and through their various communications channels, and to share information with employees and equip them with the BBA narrative. We’ll also be setting out plans and tactics for business leaders and employees of BBA coalition companies to engage with Parliamentarians to complement our ongoing advocacy work.
The Better Business Act, if passed by the UK Government, would be a world first, and a catalyst for change that cannot be underestimated. With the government’s ambitious announcement of a 78% reduction of carbon emissions by 2035, every business in the UK has a responsibility to act fast, and act now.
Want to get involved? Sign your business up for the coalition:
Read more about the BBA here:
The Planet as stakeholder: Why the UK needs a Better Business Act
UK has golden opportunity for an era of responsible capitalism
Setting ourselves higher standards: Why I support the Better Business Act
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With thanks to Tom Poldre, Hannah Gibbs, and the Better Business Act team for their insights and action.