Out-Law Guide 1 min. read
26 Jan 2010, 9:30 am
This guide is based on UK law. It was written and last reviewed in January 2010.
The Companies Act 2006 introduced a new duty on directors to "have regard to [among other things] the impact of the company’s operations on the community and the environment". The duty is found at section 172(1)(d) of the Act.
In Ministerial Statements (16-page / 69KB PDF), the Department of Trade and Industry (the predecessor of the Department for Business) said in 2007 that "have regard to" means "think about":
The words “have regard to” mean “think about”; they are absolutely not about just ticking boxes. If “thinking about” leads to the conclusion, as we believe it will in many cases, that the proper course is to act positively to achieve the objectives in the clause, that will be what the director’s duty is. In other words “have regard to” means “give proper consideration to”…
Explanatory notes to the Act added: "In having regard to the factors listed, the duty to exercise reasonable care, skill and diligence … will apply. It will not be sufficient to pay lip service to the factors, and, in many cases the directors will need to take action to comply with this aspect of the duty."
This does not mean that a director needs to compromise the commercial interests of the company to achieve environmental aims. For example, a director might be deciding whether to choose service provider A or service provider B for a new ICT services contract. Making the decision purely on the financial business case would not be enough to discharge the director's duty under the Companies Act. Directors should consider also the environmental impact of their decision (along with the other matters set out in the Companies Act).