True and Fair

Social Value International (SVI), the global network for social value and impact management, is leading a Campaign for True and Fair Accounts to encourage and empower company directors to include sustainability in their financial statements.

As the world faces existential challenges such as climate change and rising social inequalities, there is a shift in what is ‘good’ or ‘sustainable’ business performance and how business, investment and consumer decisions are made. 

The last few years have seen an explosion of sustainability reporting initiatives, yet this information is treated differently to financial information and does not influence these decisions as much as is needed or wanted. 

Our campaign aims to change this.

The True and Fair requirement for company accounts

SVI commissioned George Bompas KC, a leading company law barrister, to give a new legal opinion on the requirements for annual company accounts [also known as financial statements] to present a ‘true and fair’ view of a company’s assets, liabilities, financial position and profit and loss in the context of sustainability issues.

The opinion reminds directors of UK companies that they have a positive duty to consider whether to reflect relevant sustainability issues, such as their contribution to climate change, in their financial statements, to provide a true and fair view of their company’s position. (Read the opinion in full below)

The opinion also includes examples relating to current accounting standards.  For example, it states that directors might want to deliberately structure commitments in such a way as to create future or even present year obligations which impact upon the accounts. An example might be where a company commits to buy carbon credits to offset its emissions on an ongoing basis.

One forward-thinking business in the UK has already taken a lead in disclosing its impacts on climate change in its financial statements. Its directors included a note in their recently audited financial statements that estimates the social cost of its use of carbon. In addition, the Directors’ Report states that future financial statements will address their contribution to other sustainability issues in line with the UN Sustainable Development Goals.

The opinion has been welcomed by UK business groups, legal practices and professor Mervyn King. The opinion will empower company directors and influence policy makers and the regulatory framework for businesses and investors in the UK.

Next steps for the campaign

Together with our partners, we are now developing guidance and resources for directors in the UK who want their companies to account for their impact on people and planet.

We are also working with lawyers and affiliated networks in six other countries (Canada, France, Germany, Italy, The Netherlands, and Spain) to examine the UK opinion and explore the implications for their jurisdiction – namely whether and how directors can integrate sustainability information with financial statements.

But our ambitions are not limited to those countries. No matter where you’re based, if you’d like to work on this with us, we welcome you to join the campaign and get involved.

It is all part of our movement to change the way we account for value.