Retail guru Mary Portas was among business leaders who yesterday told MPs that the damaging P&O Ferries scandal would have been avoided under ethical business legislation.
Businesses ranging from Iceland to Anglian Water visited parliament to campaign for a Better Business Bill to be included in the Queen’s Speech, which would be aimed at preventing scandals such as P&O Ferries’ decision to make 800 crew redundant and replace them with cheap agency labour.
Led by ethical business entity B Lab, which awards B Corps status to firms that meet certain social and environmental standards, it would replace section 172 of the Companies Act 2006, which sets out that the default purpose of companies is to benefit their shareholders, with a mandatory triple bottom line purpose for all companies.
Instead, businesses would have to give equal weight to climate, environment and social impact alongside the duty to make a profit for shareholders.
The meeting at parliament yesterday saw the campaign gain the backing of Labour leader Keir Starmer and several Conservative backbench MPs. Talks were held with business minister Paul Scully, which campaigners described as “encouraging”.
Retail consultant and broadcaster Mary Portas is chair of the B Lab campaign, which so far has enlisted about 1,000 businesses, including Iceland, The Body Shop, Suez, Innocent Drinks, Anglian Water, law firm Bates Wells, alongside representative bodies such as the Institute of Directors, the Chartered Management Institute and the CBI.
Portas said: “As things stand, the Companies Act still allows some companies to pursue profits at the expense of workers, communities and nature.
“We saw this most clearly recently with the horrendous behaviour of P&O Ferries executives. We need to update our laws so that a decision like that can never be made in a British boardroom ever again.”
Innocent Drinks CEO Douglas Lamont, who is co-chair of the campaign, said: “As the Companies Act currently stands company directors have the option to profit maximise for shareholders whatever the cost to others, we think it is time that legal hiding place is removed.”
Dr Roger Barker, director of policy and governance at the Institute of Directors, said: “The Better Business Act is both reflective of what many companies are already doing and the expectations that modern society have for business.”
He called the suggestions “an obvious next step in the evolution of good corporate governance.”
John Foster, director of the CBI’s Policy Unit, said: “With corporate purpose and responsibility now taking on an even greater emphasis following the crisis in the Ukraine, politicians and business leaders alike should view the principles underlining the Better Business Act as the starting point in the debate about how company law can be used to enable more firms to have meaningful societal impact.”
A poll commissioned by B Lab in 2020 found that 72% of people agreed that businesses should have a legal responsibility to the planet and people alongside the duty to make profits.
The campaign recognises that the Companies Act 2006 does contain reference to “the impact of the company’s operations on the community and environment”, but argues that this should be rewritten to “empower directors to exercise their judgment in weighing up and advancing the interests of all stakeholders”, rather than just shareholders. This would place environmental and social considerations into the heart of the business, they argue.
Campaign director Chris Turner said of the day at parliament: “We were so pleased that our coalition was able to be the first post-pandemic mass lobby of parliament. We met with MPs from across the House of Commons. We’ve engaged constructively with MPs from the Conservative Party, Labour, the Liberal Democrats, the SNP and the Greens.
“On the government’s own backbenches, we’ve had support for our proposals from Jonathan Djanogly MP, Stephen Hammond MP, Danny Kruger MP, Andy Carter MP, John Hayes MP, Edward Timpson MP, Simon Fell MP and many others. We remain focused squarely on the Queen’s Speech in May and hope the government will heed the calls on its own backbenches, parliament more broadly and our coalition of more than 1,000 business leaders. On the basis of encouraging conversations with the small business minister, Paul Scully MP, we think this is a very real possibility.”