The Companies Act 2006

The Companies Act is now an integral part of UK corporate Law, and has also played an important role in consolidating the importance of corporate responsibility for all UK companies.

The act discusses all areas of corporate law, however there are a couple of areas that are particularly relevant from a corporate responsibility standpoint, and these are outlined below.

It is also worth pointing out an excellent, more in-depth guide to The Companies Act, put together by David Chivers QC and the Corporate Responsibility Coalition (CORE) that focuses on the responsibility of Directors.

There are two articles in particular it is crucial to point out: (quoted exactly and then explained from a CR perspective)

• Article 172 (Regarding the Responsibilities of Company Directors):
  
  'Director of a company must act in the way he considers in good faith, would be most likely to promote success of the company for the benefits of its members as a whole, and in doing so have regard (amongst other matters) to:
  
  a) The likely consequences of any decision in the long term
  b) The interests of the company's employees
  c) The need to foster the company's business relationships with suppliers, customers and others
  d) The impact of the company's operations on the community and the environment
  e) The desirability of the company maintaining a reputation for high standards of business conduct
  f) The need to act fairly as between members of the company'

Pre 2006 amendments, the director's responsibilities were simply to act in 'in the interest of the company', however article 172 now makes it clear that this specifically must include a consideration of points a-f. The legal term used to describe this 'regard' is to 'give proper consideration to'- effectively, this means that a director has a real legal responsibility to factor-in the wider impacts of the company (a-f) to decision-making procedures.

This article puts into UK law, possibly the most powerful argument for Corporate Responsibility: that these issues (a-f) do have a significant impact on a company's success. It is for this reason that they must be considered by a company director.

• Article 417 (Regarding the necessary content of a Director's report) Subsection 5:
  
  'In the case of a quoted company the business review must, to the extent necessary for an understanding of the development, performance or position of the company's business, include:
  
  a) Information about:
  
  I. Environmental matters (including the impact of the company's business on the environment)
  II. The company's employees
  III. Social and community issues Including information about any policies of the company in relation to those matters and the effectiveness of these policies.'

This article is referring to company reporting for publicly listed companies, stipulating the need for such a business to report on impacts and issues regarding communities, society, the environment and their employees. Again, this is putting Corporate Responsibility theory into UK law, recognising the important role that a business' wider impact can have, both for those impacted and also the business itself

What the law puts in place is the necessity for business reviews to include: the issues the company faces (with regard to employees, society, communities and the environment), the policies they have implemented to deal with these issues and impacts, and also the subsequent success or failure of these policies. This is not by any means forcing businesses to undertake a full CR report, nor is it even recommending this. What it is recognising is that, to get a full understanding of a business (the purpose of a 'business review' such as an annual report), one must understand its wider impacts, and how the business is dealing with them.