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
Ahead of the anticipated UK general election, the Future Economy Alliance has launched a new campaign to encourage the next UK Government to recognise the value of mission-led organisations working towards a purpose beyond profit. Centred on education, transparency, sustainability and community, the Alliance’s new report, Let’s Fix Our Future: Building a New Business Plan for Britain, sets out policy recommendations to empower mission-led business and create a stronger, fairer, and greener economy.
The Institute of Directors’ (IoD) new paper, Manifesto for Business: A policy roadmap for the next UK Government, sets out recommendations for creating policy frameworks to support sustainable business growth. These include recommendations in support of the low-carbon transition and for corporate governance reform, such as amending s.172 Companies Act 2006 along the lines advocated by the Better Business Act campaign. The paper proposes that directors’ duties should include a balanced assessment of stakeholder interests, such as those of employees, the environment, suppliers and communities, and rejects the precedence of shareholders over stakeholders. Among other points, the paper proposes a greater emphasis on director education in the pursuit of higher governance standards, and a review of the corporate reporting framework to improve useability. For more, the IoD’s podcast discusses the paper.
The OECD’s Global Corporate Sustainability Report 2024 provides an overview of the key sustainability trends and policy issues around the world, including in relation to reporting and disclosure, the sustainable investment landscape, boards of directors, stakeholder engagement, and recent regulatory developments (landing page). The report provides statistics that illustrate the trends discussed, including that the number of Delaware Public Benefit Corporations grew by more than half in 2021-2023, with a doubling of the number of these entities listed, and similar substantial growth in French sociétés à mission. The report also makes several recommendations, including greater flexibility in disclosure requirements to reflect the capacity of businesses, greater interoperability of regulatory standards around the world to reduce compliance costs, and that companies’ lobbying activities should reflect their sustainability goals.
B Corps
Tony’s Chocolonely went to Brussels to campaign for EU legislation on ending exploitation in supply chains: the Corporate Sustainability Due Diligence Directive (CSDDD) and the Forced Labour Regulation (see below for more, in the ESG section). Tony’s states that it already complies with the rules contained within both pieces of legislation through implementing its ‘5 Sourcing Principles’, and seeks to demonstrate that a business can be successful without exploiting farmers in their supply chains. The company expressed dismay at the attempts of some Member States to frustrate the passage of the new laws, including by diluting the strength of the CSDDD requirements.
Edie reports that B Corp Innocent Drinks has pledged £1m for the Farmer Innovation Fund to help support its ingredient suppliers to transition to low-carbon farming, boost biodiversity, and help decarbonise the business’ supply chains. Devised in response to a lack of alternative funding options, the fund will make grants of between £20,000 and £500,000 (and possibly more) to help de-risk innovation in farming practices, as well as supporting advocacy, education, and collaboration.
It’s a critical year for progressive business. B Corp Month reminds us the only way is forward. B Lab UK’s executive director, Chris Turner, reflects on the progress of the B Corp movement, the continuing need for an alternative to ‘business as usual’, and the importance of keeping the ultimate goal in sight: a more inclusive, equitable and regenerative economy.
The results of a survey from B Lab US & Canada highlight the strength of B Corp brand recognition, with over one-third of adults in that region recognising the B Corp brand name or logo – for Gen Z and Millennials, that jumps to approximately half. Among other points, the findings indicate that, of those aware of B Corp certification, around two-thirds of respondents felt that it makes a positive impact, with over 80% having a ‘very high’ level of trust in the B Corp standards. B Lab US & Canada describes the data as indicating that, as well as demonstrating commitment to better business, B Corp certification can help a brand tell its story to increase brand awareness and drive sales.
Climate & biodiversity
Pollination Law and the Commonwealth Climate and Law Initiative commissioned a legal opinion which found that the consideration of nature-related risks falls within directors’ duties under company law in England and Wales, as financial risks arising from the business’ nature-related dependencies and impacts (landing page and executive summary). Among other points, the authors note that s.172 Companies Act 2006 expressly provides that a director should consider the impact of the company’s operations on the environment. Further, s.174 Companies Act 2006 requires directors to maintain sufficient knowledge of the business to enable them to discharge their duties, which includes the physical, transitional and systemic risks of climate change and biodiversity loss relevant to the business. The opinion also considers the importance of disclosure requirements in relation to nature-related risks and the development of investor information needs in this regard, referring to (among other points) the Companies Act reporting regime and the TCFD Recommendations, and noting a trend towards greater disclosure of nature-related risks.
The government announced that Lloyds Banking Group is the first funder into three initiatives in the UK’s new Projects for Nature: a funding platform designed to promote collaboration between business and the non-profit sector and boost private sector funding of nature restoration. The platform pairs corporate donors to nature recovery projects that are compliant with the government’s Environmental Improvement Plan. Part of the government’s wider Nature Markets Framework, the new platform coincides with a consultation on the British Standards Institution’s new Nature Investment Standard, which aims to establish principles for UK nature markets to help prevent greenwashing and provide greater investment clarity.
The University of Oxford has published a revised version of the Oxford Principles for Net Zero Aligned Carbon Offsetting, which is the product of a collaboration of experts from across the university (press release). The principles have been revised in response to evidence casting doubt on the integrity of some carbon credits used for offsetting, including that most carbon credits are for avoided emissions rather than removals, thereby limiting the pace at which we can achieve net zero. The principles focus on cutting emissions, transitioning to carbon removal, removals with durable storage and a low risk of reversal, and supporting the development of innovative and integrated approaches to achieving net zero.
British Institutional Investment has published its third annual Emerging Economies Climate Report based on survey data regarding its investee businesses in Africa, Asia and the Caribbean, which sets out the impact already being felt in countries most vulnerable to the climate emergency (summary and press release). Among the findings, 79% of respondents said climate change is already impacting their organisation, an increase from 68% in 2022, and respondents called for a wide range of capacity-building support to enable action on climate change.
Labour/Co-op MP Alex Sobel has reintroduced Zero Hour’s Climate and Nature Bill (the CAN Bill) with cross-party backing, calling for politicians from all parties to unite around urgent, co-ordinated action to mitigate climate change and protect nature and to hold the Government to account on its targets. The content of the CAN Bill is the same as the Climate & Ecology Bill previously introduced into Parliament.
Impact investing
Following a year-long consultation and collaborative research process, the Equality Impact Investing Project (EIIP) and Bates Wells have launched the Equalising Deal Terms – Investor Key Principles (EDT Principles), designed to address inequality and power imbalances in impact investing arrangements (press release). Supported by the Connect Fund, the project has been co-led by Rana Zincir Celal, Director of EIIP, and Bates Wells partner, Sung-Hyui Park. The five EDT Principles acknowledge how power imbalances can undermine the positive impact that impact investing aims to further, and explore the ways that businesses, their partners, and stakeholders can work together to improve legal processes, documents, and investment deal terms. An accompanying report, Investee Perceptions of Power Dynamics in Legal Processes, presents key findings from interviews with investee organisations about how they experience and view the way investment terms, legal documents and processes are reproducing inequality. For more, you can sign up to an EIIP webinar on the EDT Principles on 17 April, 11:00am–12:30pm.
Big Society Capital (BSC) has announced new research on ‘homelessness property funds’, which channel capital from institutional investors into providing affordable housing. The analysis of five funds managed by Resonance Ltd, which between 2013-2023 acquired over 1,000 properties, shows a saving to local and central government of £140m on temporary accommodation and other homelessness costs. It is estimated that a £100m grant from government would encourage an additional £650m from investors, which could house 23,750 people and generate £1.1bn in public savings on homelessness. For more, BSC has published its Impact Report 2023, setting out (among many other points) that it estimates it has helped grow the social impact investment market by 11 times in size to date. And, alongside BSC, Lloyds Bank is the first mainstream investor in the new £62m Community Investment Enterprise Fund, launched to invest in Community Development Finance Institutions (CDFI), to help small businesses access finance to support local jobs and economic activity.
The Growth Impact Fund, developed by Big Issue Invest and UnLtd to support underrepresented UK social entrepreneurs, has announced its first debt investment of £500,000 into Genius Within, a specialist employment and training provider. The funding will support the development of Genius Finder, an online assessment tool designed to support neurodivergent individuals in exploring the most common work-related strengths and struggles.
The European network of impact capital providers, Impact Europe has published its annual report, The Age of Impact, exploring the activities of the network and its members over 2023, including in corporate impact investing and its work with EU policymakers. The report describes the existing impact investing landscape and its possible future, estimating that the impact investing market in Europe reached €80bn in 2022 and has the potential to reach €1trn by 2034, and to grow its mainstream market share from 1% to 10%.
Pioneers Post reports on the impact investing sector’s view of the UK government’s reversal of its decision to raise the income threshold for high net-worth individuals, from £100k to £170k, which is thought will help maintain diversity in impact investing. Open letters from investHER and the Startup Coalition to Chancellor Jeremy Hunt had warned that the policy change would reduce funding for startups and disproportionately exclude female and underrepresented founders from getting investment.
Social enterprise
Social Enterprise UK has published the latest State of Social Value in Public Sector Spending report, looking at the progress of the Social Value 2032 programme (press release). Using Freedom of Information requests sent to 396 local authorities across England and Wales, with a 71% response rate, the report provides a snapshot of the extent to which the recommendations of the Social Value 2032 roadmap have been implemented. The report indicates that, while there has been some progress, there is more work needed to embed social value.
It’s the final call for entries to the Stephen Lloyd Awards 2024; charities and social enterprises addressing societal or environmental challenges in innovative ways are urged to apply. The Awards provide uncommon projects at an early stage of development with the funding and support needed to drive their ideas into reality. If you are an organisation that is transforming traditional approaches, and are passionate about creating change in a meaningful way, we want to hear from you. Apply by 5 April 2024 for a chance to win up to £25,000 and receive valuable support. Visit the website or contact Mona Rahman ([email protected]). The Stephen Lloyd Awards are an initiative of the Bates Wells Foundation, Char Reg No 1150321.
The winners of the 2024 WISE100 Women in Social Enterprise awards have been revealed, and we’re delighted to share that Bates Wells’ Sophie Pender won Social Business Star of the Future for her work on The 93% Club.
Big Society Capital (BSC) has published its thoughts on the Spring Budget, including recognition of the value of the extension to the Recovery Loan Scheme, which provides loan guarantees for funding into SMEs and social enterprises. BSC also notes that there was no amendment announced to the cap in the Community Investment Tax Relief regime that limits how much wholesale CDFIs can lend to each retail CDFI (thereby limiting the support ultimately reaching small business and social enterprise), which is described as a missed opportunity, particularly in light of the scrapping of the Social Investment Tax Relief last year.
Access has published data from its Cost of Living programme, which supports charities and social enterprises that are using trading models to reach people that are significantly affected by cost-of-living pressures. Access’ analysis of the data indicates that enterprise models and blended finance can play an important role in the delivery of interventions in the cost-of-living crisis.
ESG
ESG Today reported that Member States in the EU Council have reached agreement on a reduced version of the Corporate Sustainability Due Diligence Directive, which would require large businesses (including non-EU firms meeting certain thresholds) to identify and address environmental and human rights harms within their supply chains. The progress of the Directive was thrown into doubt after Germany and Italy raised concerns about the potential burden to business, and the revised draft legislation is reported to include several rollbacks, such as increasing the thresholds at which businesses come within scope and delayed implementation. For more from the EU, the Parliament and Council have reached a provisional agreement on new rules that would ban from the EU market products made with forced labour, as well as creating a framework for investigation and enforcement.
Weaving the threads together: key insights from our panel discussion on sustainable fashion. During B Corp month, Bates Wells hosted a panel of industry experts to discuss sustainability in the fashion industry. The discussion emphasised the need for consumers to contribute to change, for example, buying second-hand, while acknowledging that action is needed from government and regulators, such as by introducing extended producer responsibility requirements to hold producers accountable for the full life-cycle of their products, or requiring companies to use Key Performance Indicators and Science Based Targets effectively. Given the inextricable link between environmental and social justice, the panel noted that business should be pro-active in addressing these issues in supply chains, manufacturing processes, and end goods.
The food waste-fighting business Too Good To Go and the British Retail Consortium have published an open letter to government demonstrating industry support for mandatory food waste reporting, signed by household names including Tesco, Yo! Sushi and Danone. For more on the sustainable food agenda, Responsible investment charity ShareAction has led a coalition of investors, representing around $1.68trn in assets under management, in filing a resolution for Nestle’s upcoming AGM. The resolution calls on the business to improve its impact on public health amid concerns over the regulatory, reputational and legal risks to the company of its current product strategy.
The Schwab Foundation for Social Entrepreneurship and the World Economic Forum have published a new report, Innovating for Equity: Unlocking Value for Communities and Businesses. The report considers the value of maintaining a strategic focus on racial and ethnic equity as a means to promote innovation and unlock economic opportunities within underserved communities, and encourages partnerships between corporate leaders, governments and social innovators. The report presents three pathways to leveraging racial equity opportunities across different business practices: ‘Expanding Markets’ (social innovators providing products and services that better meet the needs of communities and geographic contexts), ‘Unlocking Talent’ (social innovators creating more equitable hiring practices), and ‘Broadening Networks’ (social innovators building more inclusive and diverse supplier ecosystems). The report sets out detailed case studies of ventures implementing such approaches, as well as guidance on how to create the necessary partnerships and scale and mainstream the ventures developed.
The FRC has launched a study into the sustainability assurance market, inviting comment from stakeholders. Acknowledging increasing reliance by investors and other stakeholders on companies’ sustainability reporting, the regulator intends to explore the choice, quality and competition in the sustainability assurance market, the potential impacts from changing international regulations, the interplay between the sustainability assurance and statutory audit markets, and more.
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