Welcome to your roundup – a monthly selection of news hand-picked to keep you up to date with what’s going on for businesses wanting to create positive impact.
In this roundup you can find out what’s new in the B Corp, social enterprise, and impact investing spaces, amongst others, collated under helpful headings. We’ll also share links to resources and information that our expert lawyers have selected as being useful to you and your networks.
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Corporate purpose
Purposeful business charity ReGenerate has published The Good Business Manifesto, which sets out the critical role of business in addressing the significant social and environmental challenges currently facing the UK. The report highlights the need for a collaborative approach between government and business to tackle issues such as poverty, climate change, regional disparities, energy insecurity, and strained public services. Drawing on research and polling data, the report outlines public and business sentiment on the role of business in tackling such issues and sets out the economic advantages of purposeful business.
The Institute of Directors has launched a consultation on its proposed Code of Conduct for Directors. The Code is designed to help directors “fulfil their responsibilities by providing a clearly articulated statement of what good conduct looks like” and to set “a bar for director conduct beyond the legal baseline as a means of enhancing the legitimacy and reputation of directorship in the eyes of society and stakeholders”. Based on the Nolan Principles for standards in public life, the Code’s 6 Principles are: Leading By Example, Integrity, Transparency, Accountability, Fairness, and Responsible Business. Under each Principle are undertakings, including an undertaking under ‘Integrity’ to: “Place the interests of the organisation and its societal impact above my personal interests” and, under ‘Responsible Business’, to: “Avoid prioritising the short-term financial interests of shareholders above the longer-term interests of the organisation as a whole” and “Promote high business standards across the supply chain, particularly with regard to employment conditions and environmental impact”. The consultation closes on 16 August 2024, and you can read the full consultation paper.
Prototyping the future: how next-generation enterprises are unlocking solutions to the polycrisis. In Pioneers Post, author Marjorie Kelly (senior fellow at the Democracy Collaborative) and economist Kate Raworth and Erinch Sahan (Doughnut Economics Action Lab) explore ‘deep enterprise redesign’ – transforming the underlying structures of who holds power in business and to what end. The authors describe this approach as the new frontier of sustainable business, and possibly the beginning of the end for shareholder primacy. The article highlights organisations that are already taking this approach, such as Faith in Nature that has given ‘Nature’ a seat on its board, and Tony’s Chocolonely, which created shares with special rights to protect the company’s mission of making the chocolate industry slavery-free. The article describes challenges to deep enterprise redesign including “capital bias”, which confines enterprises to using a lens of value extraction for shareholders.
Advertising industry campaign group Purpose Disruptors’ latest report, Towards Reimagining Advertising, challenges the industry to use its creative force for good, building on the concept of “Advertised Emissions”. Based on a six-month programme created with the RSA and supported by King’s College London, the report calls for advertisers to end the culture of unbridled consumption and to visualise a better future with which to guide their service provision in the present. The report describes the advertising industry as sitting at the root of the business ecosystem (alongside other professional services), and that the industry must first shift its output in order to, in turn, shift client behaviour and business models.
B Corps
B Lab has announced a new digital series about the B Corp community to be produced by BBC StoryWorks. The series will be split across the impact areas ‘Workers’, ‘Consumers’, ‘Planet’, and ‘Community’, and aims to showcase the B Corp community and educate global audiences.
Investors widen focus to business models in assessing ESG impact. The FT considers the public benefit corporation structure and outlines that impact investors are increasingly seeking investment targets that have embedded ethical and sustainability commitments into their governing documents. This is explained as being due to the risk that a company’s purpose can be diluted though scaling up, acquisition or listing. Impact investors are therefore beginning to factor the enterprise’s business model or leadership into investment decision-making, rather than focusing on the social or environmental impact of their products.
Speaking up, speaking out! – Developing corporate advocacy strategy for purpose-driven business. Bates Wells’ Suhan Rajkumar and Louise Harman consider guiding principles for developing a corporate advocacy strategy, as well as some key regulatory considerations around campaigning and lobbying activities.
Climate & biodiversity
The Supreme Court has published its judgment on a case with potentially significant implications for new fossil fuel projects (press release). The case concerned an application by Horse Hill Developments Ltd to Surrey County Council to expand an existing onshore oil well site. The environmental impact assessment for the project considered the site itself, but did not assess the impacts of the downstream greenhouse gas emissions (GHGs) that would result when the oil is extracted and used, for example, as fuel. An individual, Sarah Finch, acting on behalf of the Weald Action Group, sought judicial review of the council’s decision to grant the application. The court held that the council’s decision was unlawful because the emissions that will occur when the oil produced is burnt as fuel are within the scope of the environmental impact assessment required by law. This decision may impact upon the assessment of future fossil fuel developments and brings to light the importance of Scope 3 emissions. For more, Friends of the Earth, an intervener in the case, comments on the judgment.
Bates Wells was delighted to join the recent #RestoreNatureNow march in London as one of many businesses participating, coordinated by campaign group Business Declares. For more, Business Declares’ Ben Tolhurst writes for Edie about why businesses have been getting involved in the campaign.
The Green Mirage: Climate Lobbying and Corporate Greenwashing. In its recent blog, the Commonwealth Climate and Law Initiative considers the risks arising from corporate lobbying that is inconsistent with a company’s stated climate and nature goals. Citing reports and statistics illustrating the issue, the blog highlights key points such as a trend of increasing shareholder activism and the connection to directors’ duties, and provides a list of practical considerations for boards.
The EU Council has approved the EU’s Nature Restoration Law, a regulation that will require Member States to put in place measures aimed at restoring at least 20% of the EU’s land and sea by 2030 and all ecosystems in need of restoration by 2050. The new law includes specific, binding targets and obligations for nature restoration in specified ecosystems, and Member States will be required to submit national restoration plans to the Commission and monitor and report on their progress. The regulation will shortly be published in the EU Official Journal and come into force.
Impact investing
Impact Europe has published a new report, How to do Corporate Impact Investing, which outlines the key characteristics of impact investing – intentionality, measurability and additionality – and identifies the main drivers for engagement in impact investing in the corporate investor context. The report also outlines how corporate foundations can approach impact investing through deploying impact investments directly from the foundation’s programmatic budget and through endowment capital.
The Impact Investing Institute has released its latest report on the expansion of the place-based impact investing (PBII) landscape (press release). The report outlines that pension funds and other asset owners are helping to drive the growth of PBII by prompting asset managers to seek out opportunities for investments that produce positive local outcomes alongside returns, fuelling an increase in funds and products pursuing PBII. At the same time, the report describes cash-strapped local and combined authorities partnering with private investors that foster local economic regeneration, emphasising the importance of public-private collaboration. The report highlights increasing awareness and adoption of PBII as a goal of capital allocation, considers how government is using public funding to leverage private finance for local impact, and notes work by the Institute and others to foster connections to facilitate this growth, as well as barriers to scaling PBII.
Mark Porter, Chair of Big Issue Invest (BII), outlines an urgent need for social investment to end poverty in the UK and potential benefits of breaking from traditional allocation frameworks in respect of impact and fiduciary duty. Porter draws on a discussion among asset owners from pension and insurance providers at a recent event hosted by BII at the House of Lords. Porter notes that although “investment allocation frameworks in place today have largely been derived from empirically testing legacy approaches, empirical testing has not involved analysing the positive or negative social outcomes generated from the last four decades of investment allocation policies”.
Better Society Capital (BSC) has published a new report, Outcomes For All – Redefining Public Service Delivery, which finds that social outcomes contracts (SOCs) – public service delivery that channels investment to empower organisations working to tackle social issues – have generated nearly £9 of public value for every £1 spent, saving the taxpayer £507m. The report identifies challenges to deploying SOCs, including the structuring and short-term nature of government budgets, which makes it harder to coordinate multiple service needs for the individuals intended to benefit. BSC notes that this barrier has been overcome through multi-year outcomes funds that government agencies, in partnership with others, have implemented in the last 10 years, such as the Social Outcomes Fund. These have brought together commissioners at central and local levels to enable the outcomes approach to be implemented over longer-term periods. BSC is calling upon government to re-allocate some budgets to more of these multi-year outcomes funds. For more, see BSC’s commentary on the report.
Social Enterprise UK and the London School of Economics have published a new report, Socio-economic diversity in social investment. The report investigates aspects of diversity that it states have not been substantially reviewed in the sector: socio-economic inclusion and the role of power and privilege among those who work for social investors. Insights include that elite-educated employees represent a higher proportion of employees in social investment organisations compared to the population in general. The report argues that as long as “shifts in socio-economic inclusion…do not represent a wider transfer of power and resource to people and communities historically disenfranchised, there remains work to be done”.
Social enterprise
The Buy Social Corporate Challenge has announced reaching a new milestone, with participating businesses having spent £477m with social enterprises since the initiative began (press release). Launched in 2016 by Social Enterprise UK in conjunction with the Department for Culture, Media and Sport, the initiative has also created over 4,500 jobs and has been part of the global movement towards social procurement.
Coffee that fights homelessness: Nespresso’s new £1m partnership with social enterprise Change Please. The Big Issue reports on a new partnership whereby Nespresso customers can support Change Please’s mission by choosing the new ‘Nespresso for Change Please’ coffee blend. The article discusses support for Change Please from the Big Issue and Nespresso, and alignment of the initiative with the aims of Nespresso’s AAA Sustainable Quality Program.
Co-op News reports on a joint letter from the CEOs of major UK co-operative and mutual trade bodies to the leaders of the UK’s main political parties, arguing for co-operatives and mutuals to be brought into the centre of growth plans. The letter outlines recommendations to support the sector and states that, for co-operatives and mutuals, complexity in their legal and regulatory frameworks can be a barrier to growth.
The Fairtrade Foundation is celebrating 30 years of campaigning in the UK, and has published an impact report outlining the organisation’s work towards achieving a fair price for farmers and the sharing of power across supply chains. The report also outlines four urgent priorities for furthering its mission: tackling the climate crisis, creating a trade policy for people and planet, more effective regulation, and pre-competitive collaboration.
ESG
Realise your purpose: Increasing gender diversity in the workforce. Bates Well’s Partner Rachel Mathieson and HR Director Scott Sullivan consider the indicators of ongoing disadvantage for women in the workplace and outline measures that businesses can take to support better gender diversity.
The ISSB has announced plans for further harmonisation of the sustainability disclosure landscape, including supporting work to streamline and consolidate frameworks and standards regarding transition plan disclosures, through the implementation of sustainability standards IFRS S1 and S2 (S2 requires that information be disclosed if an entity has a transition plan). The IFRS Foundation will assume responsibility for the materials developed by the Transition Plan Taskforce. Also, the IFRS Foundation and GHG Protocol have agreed governance arrangements to enable the ISSB to be engaged in decisions relating to the GHG Protocol standards and guidance (IFRS S2 requires GHG emissions to be measured in accordance with the GHG Protocol Corporate Standard). And the ISSB will consider how to build upon the recommendations of the Taskforce on Nature-related Financial Disclosures. The ISSB has also published a Feedback Statement from its recent consultation on the IFRS S1 and S2 standards, which includes detail on the organisation’s work plan for 2024-2026.
The PRI has published a new report, A Legal Framework For Impact, Summary Report: Long Term Value Creation in a Changing World, as the final instalment of the PRI’s ongoing project with UNEP FI and the Generation Foundation. The report aims to summarise why sustainability outcomes are relevant for investors and assesses progress made since 2019 to address sustainability outcomes in investment policy and practice, with examples from the five jurisdictions (including the EU and UK). The report also outlines key learnings and recommendations on empowering investors to contribute to overcoming urgent sustainability challenges alongside pursuing financial returns.
Assessing the Impact: The EU’s Corporate Sustainability Due Diligence Directive (CSDDD). Bates Wells’ Tim Constable and Matilda Graham discuss the new CSDDD, which outlines a comprehensive framework for companies to follow when conducting due diligence regarding their ‘chains of activities’. This process must be formalised in company policy and reviewed every 12 months, along with requirements for effective complaints procedures for stakeholders, climate mitigation transition planning, and reporting and disclosure. According to certain thresholds, EU companies and some non-EU companies are within scope. Non-compliance can attract fines of up to 5% of a companies’ net global turnover in the financial year preceding the penalty. Member states must form supervisory authorities to investigate and penalise non-compliance.
The EU Council has announced its position (‘general approach’) on the EU’s proposed Green Claims Directive, which targets explicit environmental claims and labels used voluntarily by businesses to market their ‘green credentials’ as part of their products/services in EU markets. The directive aims to tackle greenwashing and enable consumers make more environmentally positive purchasing decisions. Among other points under the proposal, ‘green claims’ would require substantiation and verification and there would be measures around transparency on the use of carbon credits and support for SMEs. Council ministers also considered the interaction between mandatory, national and non-EU labelling schemes, and where some exemptions might be allowed. The Council’s general approach forms the basis for negotiations with the EU Parliament on the final shape of the directive.
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