Right Corporate Wrongs
The Companies Act (formerly the Companies Bill)
An update for supporters on the outcome
(November 2006)

Overview

The Trade Justice Movement and Corporate Responsibility (CORE) Coalition have been campaigning for stronger laws to make UK companies accountable for the impact of their activities in the UK and overseas. The Companies Bill has concluded its passage through Parliament and has now become law (as the Companies Act 2006).

Summary

Thanks to your campaigning to right corporate wrongs, we have achieved some important improvements to UK company law. The UK Government has recognised that UK companies need to be made more accountable and an important first step towards greater corporate accountability has been taken. This is a fantastic achievement and a testament to the power of campaigning by people like you. There is still a long way to go, but we have made a good start.

Below is more detail about the changes your campaigning has helped to make and what this will mean for the impact of British business on poor people and the environment around the world. These are only a first step: in 2007 and beyond CORE and the Trade Justice Movement will continue the campaign to right corporate wrongs.

What were we demanding?

The Companies Act was the biggest shake up of UK company law for 150 years and an unprecedented opportunity to make laws to help stop big British business profiting at the expense of people and the environment. CORE and the Trade Justice Movement demanded improvements to company law so that:

• Companies are legally required to report on their social and environmental impacts
• Directors are legally obliged to minimise any damage their company does to local communities and the environment
• People overseas who are harmed by the activities of a UK company are able to take action against them in a UK court

What have we achieved?

Real improvements to UK company law

The resulting Companies Act 2006 shows that campaigning really works! Thanks to your efforts, we achieved some significant improvements to the legislation during its passage through Parliament over the course of the past year:

1.      Stronger social and environmental reporting requirements

Thanks to over 100, 000 UK voters contacting their MP in 2006 through emails, postcards, letters and local lobbying, the Government strengthened the requirements in the legislation on social and environmental reporting so that the 1300 companies quoted on the UK stock market must report on environmental matters, employees, social and community issues and risks down company supply chains where they are necessary to understanding the company’s business.

2.      Directors’ Duties on Environmental and Social Matters

Directors of UK companies now have a duty not only to maximise profits but also to consider the impacts of their business operations on the community and the environment.  This is the first time that the such responsibilities have been written in UK company law, and we know of no other country in the world that demands in law this kind of responsibility from company directors. 

The Government also put in place a link between the reporting requirements and the directors’ duties in the Companies Bill, making it clearer that the reports must show how directors are performing on their duties to society and the environment, bringing responsibility for reporting to the Boardroom level. A new provision to the law now recognises that some companies can be run for purposes other than to make profits. Lastly, the Government have committed to publishing advice on how directors’ should interpret their duties, helping them understand exactly how they should take social and environmental matters into consideration.

Widespread support for our campaign

Your campaigning has brought about a major increase in awareness about the abuses committed by British companies overseas and the need for laws to prevent these, laying the groundwork for more progress in the future.

• Parliamentary Petition: Over one-third of all MPs (225) signed Early Day Motion 697 – the Parliamentary petition tabled by Sarah McCarthy-Fry MP supporting our proposed amendments to the legislation.

• Debates: Our concerns about the social and environmental provisions dominated all the debates in Parliament and have been represented by MPs across the political spectrum.

• Postcard campaign: MPs told us this is one of the biggest postcard campaigns they have ever come across.

“I had more letters from constituents about trade justice and the Companies Bill than any other issue since I became an MP.”
Ed Balls MP, Economic Secretary to the Treasury

“I believe that the rights of companies should be counterbalanced by meaningful and effective responsibilities including responsibility for the environmental, social and economic impacts of their business. I agree that the law should be changed to ensure that this is realised. I received a staggering number of letters from constituents sharing concerns and contacted the Minister to urge her to amend the Companies Bill.”
Diane Abbott MP, Hackney North and Stoke Newington

Coverage in the media

The story was widely covered by the media. There were regular stories in The Guardian and Financial Times, along with broadcast interviews with coalition members on TV and radio. The work done by CORE and the Trade Justice Movement positioned the coalitions as key voices in debates around corporate accountability, which is a great platform for future campaigning. Indeed, the FT reported that “business had been comprehensively outmanoeuvred by environmental and corporate responsibility campaigners, in a stunning lobbying victory.”

There was some impressive coverage including:

• Polly Toynbee’s article in The Guardian

• John Battle MP’s article on rights of redress for affected communities

• ActionAid’s full page celebrity advert in The Guardian asking MPs to back our amendments

Inspiring new campaigns around the world

This groundbreaking campaign has inspired coalitions in other countries to press for changes in their laws to make companies more accountable.

What next?

The Trade Justice Movement  is already gearing up for future campaigning in 2007 and beyond so the right measures are put in place that will ensure companies are made accountable for their impact on people and planet.

This will include how the Companies Act 2006 works in practice and pushing for rights of redress for communities negatively impacted by UK companies operating overseas, especially in poor countries.

We will also be working with allies across the world for international regulation of corporations at a European and global level.

Check back at this website early in January for information on how you can support the next stage of the campaign.