Keep it legal: Environmental duties

The new environmental duty for directors in the Companies Act 2006, which came into force on 1 October this year, is good news for the voluntary sector and for anyone who cares about the environment.

Section 172(1)(d) of the act states that directors of charitable companies must take into account "the impact of the company's operations on the community and the environment". This, of course, applies to charitable companies as well.

The new clause does not go as far as many in the sector had wanted because it was hotly opposed by the Confederation of British Industry. It is nevertheless a useful statement. Most charities will want to work within this framework. In fact, many already do so, and campaigned actively for the new law through the Corporate Responsibility Coalition. Having it written in law, however, adds some teeth.

Trustees are not required to record extensive minutes about the environmental impact of all their charities' activities, but they need to understand the responsibility and to consider it whenever relevant decisions are made. An awareness of the new rules should therefore be part of trustee inductions and should feature in senior management thinking.

A relevant decision, for example, would be the construction of a major new building. Trustees should consider the environmental impact of a new building and record the reasons for their decision. Charities reviewing their IT needs might replace heat-intensive servers, which require air conditioning, with fewer and more efficient servers.

Many charities will also calculate their carbon footprints. Oxfam, for example, has done this for its UK operations and also plans do so for its international activities. Such an assessment is not required by the Companies Act, but it helps demonstrate that trustees are taking their new duty seriously.

The new clause does not give public interest groups or governments the right to sue company directors for failing to act in an environmentally friendly way. But if a company wholly fails to take into account its environmental responsibilities, members can hold the directors accountable. Charities should therefore look upon their duty both as a campaigning opportunity and as a regulatory requirement.

- Joss Saunders is company secretary for Oxfam GB and a legal adviser.

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