As we face an environmental and social crisis, we don’t have the time to slowly push for change, we must demand it, and demand it happens now.
Whether you are a traditional business, social enterprise, public body or charity we hope you sign the letter. We believe it is in the interest of us all to re-design corporate governance and reporting to create a fairer economy and reduce environmental degradation.
This letter comes at a crucial time for the UK. There are rising levels of inequality, a climate emergency and the COVID-19 pandemic.
Now is the time to send a message to our politicians.
Read the letter below:
A stronger legal framework for a business led recovery
Dear UK political leaders,
As we plan our recovery from COVID-19, there is an opportunity to build a new social contract between government, businesses and communities. There has never been a better moment for business to take the lead in building a stronger, more resilient and fairer economy. In order for this to happen, a stronger legal framework is required.
Even before COVID-19, there has been a growing movement for greater corporate governance and transparency, as well as campaigns to reform the legal framework and environment for UK businesses. In 2019 the British Academy convened leading academics to review the ‘Future of the Corporation’ and research from Social Value UK revealed that only 15% of the public believe that financial returns should be the sole indicator of a business’ success. People want social and environmental issues to be at the heart of the way we assess a business’ performance. More evidence can be found at www.howdocompaniesact.org.
As a group of business leaders, campaigners, academics and legal experts we believe greater enforcement of existing legislation will help reward the right type of businesses to lead our recovery. We also have the following recommendations for strengthening the legal framework for businesses in the UK:
1) Include purpose in business articles. The Companies Act should be made clearer, asking all businesses to state a mission or purpose that is not just prioritising financial returns with no regard for social and environmental performance.
2) Increase director responsibilities to all stakeholders. Section 172 of the Companies Act should be reworded so that all directors of companies (over £36 million turnover) are accountable to the company for their effects on all stakeholders. Companies would therefore report to shareholders (short and long term) their social and environmental value. Further transparency of director interests also needs to be enforced.
3) Enforce accounting for social and environmental value. Section 396 of the Companies Act should redefine ‘true and fair accounts’ to include social and environmental performance alongside financial return with the same level of scrutiny.
4) Enforce a duty to prevent harm. This would encourage businesses to go beyond retrospective reporting, there should be a new law on mandatory environmental and human rights due diligence. Experience from the Modern Slavery Act has shown us that transparency requirements are not enough to protect people and the environment from irresponsible business.
These recommendations for stronger and clearer legislation will generate long term reward for businesses that are behaving responsibly and allow the best businesses to lead the COVID-19 recovery. Now is the right moment to carry them through and for Britain to show leadership to the rest of the world.
Please get in touch with SVUK via firstname.lastname@example.org with any questions.
This letter has been drafted by the How Do Companies Act campaigning group