The better business act is a movement instigated by the BCorporation to bring business practices up to date and consider the environment and stakeholders, balancing this with the need to meet shareholder requirements. It’s quite a task.

The Companies Act in its current form has been in place since 2006 with little or no change as businesses practices have moved forward. The key area for change is Section 172 which specifically looks at the directors’ responsibilities towards the success of the company with particular emphasis on the benefit to Shareholders.

 Whilst the act has changed to say company directors should also consider stakeholders such as employees, communities and the environment, there is no current need for them to do this.

The Better Business Act movement is asking for a change, making directors take account not only of shareholder returns, but People and Planet as well as profit. It’s a difficult balancing act. Whilst we don’t pretend to understand all the nuances of the act, here are some of our thoughts on what it means.

Let’s start with the Shareholder side of things. By investing in a company, a Shareholder is providing funding to an organisation. As such, they expect to be rewarded for their support. So, it’s only right and fair they should expect a financial return on their investment.

Stakeholders take a similar view but in a different way. Their investment in a company or organisation is not necessarily monetary, but there are still expectations in terms of how they expect to see their support for a business or company to be returned.

Customers consider their patronage keeps a company afloat. Communities may say their support for a business helps it to maintain its reputation as a good business, for example, by bringing opportunity to a location compared to practices deemed unacceptable by its neighbours.

Employees are invested in the company they work for and expect to have their loyalty returned through decent remuneration, support, and communication. There are many other, wider groups such as environmental groups, whose concerns are equally as valid.

This is the age-old Shareholder/Stakeholder argument coming to the fore. So how can director’s make sure they balance all these conflicting requirements? We’re all aware of how much climate change is affecting the planet, so perhaps a good place to start is to take a look at the company carbon footprint. Activities like changing packaging materials, reducing polluting outputs, storing materials responsibly, making sure vehicles are properly maintained for example, are all good, sensible places to look for activities that can support both sets of requirements.

A company may decide to engage with a focus group to address a specific of Stakeholder concern. Of course, they will have to consider that any changes arising from these groups may bring a cost, but is that really so much of a problem? There are benefits to be had on both sides from even small investments in change for the good.

For example, a company may decide to install living walls, or living roofs, giving much needed habitat back to birds, insects etc. that has been lost due to urban change and building. By adding these habitats back to the environment, a company is moving towards a win/win/win situation. Wildlife could potentially thrive and Stakeholders will feel see tangible change taking place. Shareholders will benefit from the support these activities will earn for an organisation, thus enhancing its reputation as a responsible company.

There are, of course, many other ways to address the numerous Stakeholder concerns and help the balance between Shareholder/Stakeholder requirements if looked at sensibly and empathetically. The above is purely an example for illustration.

In these modern times of global, environmental awareness, companies are starting to realise the pursuit of profit alone should no longer be the only driver for their activities and that they should also be considering Stakeholder concerns. Government has started to support this view with the introduction of Section 172, but could go further, making it more than just advisory.

So how does a company do that? ^*Change, as they say, comes from the top, and directors can play an important role in helping to ensure both sides of the balancing act are happy with how a company addresses their specific concerns. By listening to all the various points of view, carefully considering what can be done to meet the requirements of both Shareholders and Stakeholders and taking suitable action, directors can make decisions that will help everyone to see signs of change for the better.

Perhaps the time has come for directors to embrace Section 172 of the act rather than seeing it as advisory, taking it as an opportunity to change their company behaviours even before Government makes any changes to make it mandatory. Organisations moving from being perceived as profit machines, to one that values the opinions of all parties its activities impact, can only reap the benefits of being seen as a proactive, responsible company.

Whilst money is the lifeblood of an individual organisation, there is only one planet Earth. And after all, everyone is a stakeholder in that.

Want to know more? Follow the link here: Better Business Act

*Dr W. Edwards. Deming 1900 - 1993