The Company Directors (Duties) Bill, published in the House of Commons this morning, would amend section 172 of the Companies Act 2006 to require company directors to “balance their duty to promote the success of the company with duties in respect of the environment and the company’s employees.”
Currently, Section 172 requires directors to act in the way they consider “most likely to promote the success of the company for the benefit of its members as a whole” – effectively prioritising shareholders above all other stakeholders.
Recent corporate scandals, including water companies’ environmental failings, demonstrate where short-term financial performance trumps long-term sustainability.
The legislation, scheduled to be debated by MPs on Friday 4 July, is being spearheaded by Liberal Democrat MP Martin Wrigley and has already secured support from dozens of MPs across four political parties.
The law change would introduce new criteria to ensure adequate safeguards in company law for both the natural environment and social environment, alongside requirements for annual reporting on these commitments.
In practice, the Bill would require directors to consider shareholders alongside those of employees, customers, local communities, and the environment in their decision-making.
The proposals are backed by compelling economic evidence. Research from B Lab UK shows that UK B Corps – companies that already balance profit with purpose and make a legal change to their Articles of Association to embed this – outperformed ordinary businesses from 2023 to 2024, increasing turnover by 23.2% compared to the national average of 16.8%.
During this time, UK B Corps also saw a 9.6% increase in employee headcount, compared to a national decrease of 0.5%.
In addition, the Purpose Dividend report, conducted by Demos on behalf of the Better Business Act, found that a purpose-led economy would boost UK GDP by £149 billion a year, showing that a stakeholder-led approach enhances our economy rather than sacrificing it.
The Bill has been inspired by the Better Business Act campaign, led by B Lab UK, the non-profit behind the UK B Corp movement. The business-led campaign now includes over 3,000 businesses in more than 15 sectors, including technology, finance, insurance, and science.
Notable businesses include Iceland, Tony’s Chocolonely, Olio, Bloom & Wild, Charlie Bigham’s, HumanForest, Danone, Virgin Group, Little Moons, Gü, ELEMIS, as well as non-profits and membership organisations such as ShareAction, Institute of Directors and RSPB.
The publication follows Better Business Day last month, when business leaders and policymakers gathered in Westminster to celebrate the UK’s growing movement of future-fit businesses.
At the event, Department for Business and Trade Spokesperson Lord Leong told attendees the Government supported the ambitions to make the UK “the most trusted, forward-looking business community in the world.”
The Labour peer praised purpose-driven businesses, adding: “For those stepping up with purpose, with integrity, we know this, we see you and we support you, and we value your leadership.”
Martin Wrigley, Liberal Democrat MP for Newton Abbott, said: “This Bill would drastically shake up how companies operate, ensuring all company directors are required to consider the planet, their employees and the communities they serve, alongside profit.
Parliament must act to create a legal framework that empowers companies to prioritise long-term sustainability alongside financial success, ensuring the two go hand-in-hand. The UK has a unique opportunity to become a global leader in transforming corporate governance so that every business is a force for good.”
Chris Turner, CEO of B Lab UK and Campaign Director of the Better Business Act, said: ”The publication of the Company Directors (Duties) Bill demonstrates the growing support from within Parliament and from businesses across the UK to redefine the role of business in society.
With cross-party support from dozens of MPs and backing from over 3,000 businesses, the momentum behind embracing a better way of business to turbocharge our economy is evident. B Corps are already demonstrating the benefits of empowering directors to make decisions that consider their wider stakeholders — now is the time to ensure this approach becomes the norm, not the exception, across the UK.”
