Glossary entry

Social Purpose

Definitions

Option 1 (as defined in Frank’s Clause)

Social Purpose means [insert relevant purpose for investee company which is likely to be linked to a UN Sustainable Development Goal].

Option 2

Social Purpose means [insert relevant purpose for investee company as expressed in the company’s articles][and that contribute to and are not [materially] inconsistent with UN Sustainable Development Goals [insert number of relevant goals].

Drafting notes

Option 1

The operative provision in Frank’s clause gives the Social Purpose primacy over the Capital Purpose and Commercial Purpose as defined. These contractual commitments will only be possible if this is consistent with the constitution of the company (and the statutory duties that flow from this). 

Option 2

Different approaches may be adopted to defining the social purpose of a company, including:

  • Reviewing and adapting suitable wording utilising the online Purposely tool at getpurpose.ly.
  • Identifying purposes that the company exists to achieve (akin to the objects clause of a charity) without having to be consistent with charitable purposes (or the community benefit test of a community interest company (CIC) without having to be by reference to community benefit). This is different to marketing objectives of the company. For example, contrast a purpose of “building safe, environmentally efficient homes exceeding all decent homes standards” with “making people’s dream homes”.
  • Defining purpose by reference to specific UN Sustainable Development Goals (SDGs). An option is given in Option 2, to link the company’s social purpose with the SDGs and include a commitment that the company will not act in any way materially inconsistent with all, or specified, SDGs.
  • Referencing a commitment to (a) benefit the company’s members as a whole, (b) benefit wider society and the environment, in a manner commensurate with the size of the company and the nature of its operations, and (c) reduce harms the company creates or costs it imposes on wider society or the environment, with the goal of eliminating any such harm or costs. This might be instead of, or alongside, statement of a specific purpose.

Application

Commercial or investment contracts, constitutions of companies.