Philip Kirkpatrick, Partner in our Charity & Social Enterprise team, has spoken with Pioneers Post about the positive impact that embedding social purpose into a company can have but the need for better accountability mechanisms to ensure the value of doing so in the long term.
Anglian Water, a UK water utility company, amended its articles of association in July 2019 to embed public interest and social purpose into its constitution, however it has since come under scrutiny for its failure to uphold its social and environmental impact commitments following a report from the Environment Agency that the company had discharged sewage 31,632 times in 2023.
Philip comments: “The purpose provisions in their articles are not entrenched and can be changed at any time by a 75% majority. Furthermore, the directors’ duties to run a socially responsible business are only enforceable by the shareholders removing them from office.”
When company culture and shareholder opinion have a big impact in this process, Philip remarks on other ways that social purpose can be embedded into a water utility company, from introducing tougher constitutional mechanisms to establishing the company as a charity or a community interest company (CIC). Philip also highlights the role that legislation can play: “I expect that greater impact could be achieved if legislation required the delivery of social outcomes and set reasonable restrictions on payment of dividends (such as requiring adequate investment to overcome sewage spillage before dividends are paid), and the remit of Ofwat [the water services regulator in England and Wales] was changed to include enforcement of those requirements. Of course, the impact of such changes on the willingness of private equity to invest would need to be considered.”
Pioneers Post explores the state of water companies in the UK and the potential for purpose-led ownership models to improve the water sewage crisis in this article. Click here to read in full.