Why business should support the Better Business Act (BBA) and the Climate & Ecological Emergency (CEE) Bill
The BBA needs clarity and ambition. The CEE Bill (largely) delivers.
Business engagement in the political process is powerful.
MPs and government ministers are constrained by public appetite, and businesses represent a crucial pillar of the constituents they represent.
The need for business engagement in the political process has never been more urgent.
The recent IPCC AR6 report articulated the challenge and importance of limiting warming to 1.5℃. As well as reducing operational negative impacts, most businesses must push for broader system changes to contribute meaningfully to global emissions and ecological impact reduction: it’s these global impacts which ultimately matter.
By supporting the BBA’s proposed legal change, a business demonstrates that it seeks the obligation and accountability to protect communities and the environment. The ambiguity caused by the lack of clear and credible definitions, however, is problematic. By supporting the CEE Bill, a business shows its commitment to credible national objectives, and clarifies that its approach to stakeholder value is one aligned with climate science and grounded in fairness.
The Better Business Act
The Better Business Act focuses on business-specific governance.
It proposes a legal change to UK company law so that all directors must regard the impact of the company’s operations on the community and the environment. The new wording would require companies to change their purpose to:
- ‘[benefit] wider society and the environment in a manner commensurate with the size of the company and the nature of its operations; and
- [reduce] harm the company creates or costs it imposes on wider society or the environment, with the goal of eliminating any such harm or costs.’
This proposed legal change addresses a key cause behind the climate crisis — an economy focused on short-term profits for shareholders at the expense of social and environmental costs. It replaces the director’s duty to ‘promote the success of the company for the benefit of the members’ (read ‘shareholders’), with a new duty to ‘advance the purpose of the company’ (as above). This eliminates a director’s doubt about whether decisions to benefit the environment/society may undermine their statutory duty to consider financial returns above all else.
However, the term ‘harm’ is not defined, and this reduces the act’s potential to hold companies to account. With clear definitions, companies could use the law to justify choices to protect communities and the environment, and companies could be held to account for failing to do so.[1] Without a clear definition, the latter is much harder. Furthermore, impact on the environment and wider society are connected. Given the disproportionate impacts of climate change on the world’s poorest, clear but insufficiently ambitious targets on climate action equate to a failure to ‘wider society’, meaning that ambitious climate targets are needed to protect both the environment, and wider society.
Without a definition of environmental harm which embeds the needs of the world’s most vulnerable communities, the bill is inauthentic, and at worst, contradictory. This crucial early-stage experiment in formalising stakeholder value therefore runs the risk of becoming a trojan horse rather than the embodiment of climate justice it should be.
The Climate & Ecological Emergency Bill
The CEE Bill pushes for credible and ambitious national objectives. Under the CEE Bill, the UK would take full responsibility for its entire greenhouse gas and ecological footprint, with a strong lens on national and international justice.
It would ensure that the UK:
- reduces emissions at a rate consistent with at least a 66% probability of limiting peak warming to 1.5℃ compared to pre-industrial levels through a new legally binding climate target.
- takes full responsibility for its entire GHG footprint (called ‘consumption emissions’), thereby embedding equity into its goal.
- ties a national nature target to international pledges, ensuring the UK comprehensively fulfil its obligations under the UN Convention on Biological Diversity.
This differs from the current UK’s 2050 net zero GHG target. The current target does not align with a 1.5℃ scenario, and does not simultaneously embedding the UK’s obligation to decarbonise faster than other countries given our historical emissions (2–3% of human-induced global warming), and capability (based on its level of development).[2] Accounting for our historical emissions and level of development is crucial for fairness internationally. In sum, the CEE Bill will embed credible climate science and equity into the UK’s collective targets on climate change.
The CEE Bill therefore provides a first step in defining environmental harm for the BBA: any business undermining the government’s ability to deliver on the targets outlined by the CEE Bill could be considered in breach of it. Neither campaign will solve the challenge of coherent, impact management objectives and metrics for businesses, therefore leaving plenty of work to be done to clarify what this means for each individual business. However, the CEE Bill does commit the country to a 1.5℃ scenario and ensures that the UK as a whole makes a fair contribution to that scenario. By defining this suitably ambitious destination, it puts in place the conditions for the BBA to define commitment to stakeholder value as a commitment to international climate justice (what is stakeholder value if not climate justice? ).
Supporting both the BBA and the CEE Bill while pursuing operational sustainability is a coherent, credible way to drive change.
Read and support the Climate & Ecology Bill (also see the Business Brief).
Read the Principles and Support the Better Business Act here.
Convinced, but looking for help with the first step (your sustainability strategy)? Feel free to connect through my LinkedIn.
Footnotes
[1] See FAQ ‘What are the potential implications for Directors?’ It highlights that ‘Under company law, the directors owe their duties only to the company, and only the company, or a shareholder(s) acting on behalf of the company, can take action against a director for a breach of their duty under Section 172; the BBA would not change this position in law. The BBA amendments to the law would not create new rights for other stakeholders.’ It seems that only a shareholder would be able to sue a company for failure to protect other stakeholders: possible, though unlikely.
[2] Understanding the targets is quite tricky, so below is an attemot to summarise the Climate Change Committee’s most relevant publication. It claims that the UK’s 2050 net-zero GHG target:
- Aligns (if replicated across the world) with a ‘greater than 50% chance’ of limiting the temperature increase to 1.5 degrees.
- Is an appropriate contribution to the Paris Agreement (which commits to ‘well below 2℃’) as it goes beyond what is required for the world overall.
- Constitutes the UK’s highest possible ambition.
What this means is that the 2050 target does embed equity considerations of the UK’s historical emissions (2–3% of human-induced global warming), if the global community is collectively pursuing a 2℃ warmer world, because (because on this pathway, global net zero could be reached around the 2070s). However, the UK’s target therefore no longer embeds such equity considerations if the world seeks a 66% chance of remaining within 1.5℃, as all countries need to reach net-zero by 2050. In this scenario, the UK would no longer be going further and faster than others.
