B Lab believes that a different kind of economy is not only possible, but necessary — and that business can lead the way. We welcome the evolving discussion and focus on directors’ duties and the need for businesses to be accountable to the interests of all stakeholders — people, planet, and communities — alongside shareholders.
Image: Chia Sisters
The New Zealand Parliament is currently reviewing a proposed amendment to the Companies Act 1993, affirming that directors may consider wider factors beyond the financial bottom line when acting in the best interests of a company. In response to the public consultation process, B Lab AANZ has now made a submission to the Economic Development, Science and Innovation Committee regarding the Companies (Directors Duties) Amendment Bill 2021. Our submission can be downloaded here.
Where do we stand?
The Bill is a good start, but it won’t change the world. It might help some directors who are just beginning to consider broader stakeholder interests in their decision making and are looking for clarity. However, it’s not enough on its own to enable widespread adoption of purpose and stakeholder governance. More work needs to be done — and in our submission, we’re calling for a wider inquiry to understand the barriers and solutions to drive necessary change.
The global movement to a new economy is gaining momentum
The B Corp community has the evidence and the stories to illustrate how business can be a force for good. We are encouraged that the global movement towards an inclusive, equitable and regenerative economy that benefits all is gaining momentum, and B Corps continue to lead the way. As we reflected in a previous article on this proposed bill — the conversation about the framework for corporate governance is not new, but it is an important and evolving one that we intend to actively contribute to.
Over 90 B Corps in Aotearoa New Zealand demonstrate that the current law already allows for directors to exercise purpose and stakeholder governance. B Corps such as Kiwibank, Kathmandu, ecostore, and Sharesies show there is no doubt that directors can consider all stakeholders whilst running successful, profitable businesses.
We see significant scope to increase adoption of stakeholder governance beyond our B Corp community, and more companies and directors are beginning to grapple with exactly how to do this. In an inquiry like this, we can explore the answers they’re looking for. To what extent should each interest be considered and acted upon? Under what circumstances do directors still consider it necessary (or justifiable) to act in the short-term financial interests of a company, in particular where doing so is to the detriment of wider stakeholders? What are the real barriers to adoption of better practices, and how do we overcome these? There are many questions to ask, and further understanding and guidance is needed to enable meaningful change.
We need to go further to create benefit for all
To achieve Aotearoa New Zealand’s climate and social justice ambitions, all businesses must be supported to embed purpose and stakeholder governance models and practices. Our proposed inquiry is essential to understand current barriers and solutions to the adoption of stakeholder governance throughout the country. Ultimately, it’s about taking a progressive step towards realising our collective vision of an inclusive, equitable, and regenerative economy that works for everyone.
Learn more about B Lab AANZ’s purpose and stakeholder governance requirement here.