Business purpose and sustainability: A perilous proposition or one whose time has come?
It can be good in a time of crisis to look ahead hopefully to the longer term.
So it is that IBEX is intrigued by the growing movement concerning ‘business purpose’.
We read that it is 50 years since the economist Milton Friedman, beloved by the political right in the 1980s, who wrote that: “The Social Responsibility of Business is to Increase its Profits” (especially for shareholders). T
hose concerned with Social Justice and tackling economic inequality have long challenged this, such as in the infamous critique of the Church report Faith in the City.
What is interesting now, is that since 2018 there is a movement within the business world, around Purpose, which critiques all this, from the point of view of good business governance and economics.
The British Academy, led by Professor Colin Meyer, and others, has researched and published a report on The Future of the Corporation. This gained high profile media coverage, leading to a significant conference in 2020. The second conference to further the Purpose agenda is in early February 2021.
IBEX is interested, and wondered if, dear reader, you are as well?
Their first conference, back in the summer, was addressed by economic and business luminaries such as the former Governor of the Bank of England, Mark Carney, the CEOs of companies like Microsoft, and leading politicians from differing parties... so these are not fringe concerns.
IBEX plans, all things being equal, to invite a series of reflections on this movement and its themes, over the next year. This piece is simply to introduce it.
Professor Meyer, and the researchers, argue for a broadening of the Purpose of Business, making real what can be known as Ethical, Social and Governance (ESG) concerns, which have driven a lot of investment considerations; a supplement in the Times, on Sustainable Investment, cites pressure from Church and faith groups, who have significant investment portfolios from property and pension funds, driving ESG considerations (read more in our IBEX blog here).
The United Reformed Church’s Wessex Synod Trust meeting, recently heard how its investment returns, focussed on ESG driven funds are proving more resilient and profitable. Increasingly ethical portfolios are recommended for good sound economic reasons, as well as meeting the social justice demands of those whose funds they manage. It is not just good ethics, but also sound business.
Prof Meyer, suggesting principles for the sustainable future of the corporation, argues for purposeful engagement around good Corporate Law, Regulation, Ownership, Governance, Measurement, Performance, financing, and investment.
Ownership, for instance, should involve engagement with all stakeholders of a business, not just the shareholders as Friedman encouraged.
Stakeholders might be employees of a business, its customers and suppliers, and the communities where a business is physically located.
Is a new contract is needed between business and society, beyond narrow concerns of serving shareholder value?
A debate is to be had here, as another critical opinion article (Schumpeter in the Economist, Sept 19 2020) tackles ‘The perils of stakeholderism’.
Inevitably, in a project such as this, the language, and accompanying acronyms, can get very technical and complicated, and seem very theoretical. What is happening to embed this movement on the ground? Is this just business virtue signalling? Making grand-sounding policy pronouncements, but not doing much to implement it?
Which is why the principles around measurement and performance will be important!
Already some companies, especially energy companies, are showing awareness of the force of the argument around being perceived as ‘Greenwashing’.
Mark Carney is interesting on this.
He suggests that just as post the 2008 Banking crisis, where there was greater attention on regulators ‘stress testing’ banks for their liquidity and financial stability, companies might be similarly stress-tested by regulators on the strength of the environmental and social engagement.
This last year has seen much focus on the issue of Sustainability, especially considering the UN’s Sustainable Development Goals (SDG). An interesting graphic in the launch document for their 2020 conference from Prof Meyer, outlines which SDG’s have a prominence in the priority business puts to them, and which lag behind in serious consideration. Climate action (SDG 13) and Decent Work and economic growth (SDG 9) get a lot of attention. At the bottom of the list are SDG’s on eradicating Poverty (SDG 1), reducing inequalities (SDG 10), Zero Hunger (SDG 2), and Life below the water (SDG 14), for instance. These latter ones are the concerns of many a Church, and activists concerned for social justice in the exercise of their faith.
Dilemmas implementing these can be difficult to navigate. Take the Microsoft CEO at the 2020 Business Purpose conference commending the positives of using IT more, which enables more home working through conference platforms; but also leads to significant issues with energy consumption of the servers involved to operate them and keep them cool, compromising Carbon neutrality. We read some interesting investments are happening in placing servers under in containers underwater, to help with the cooling challenge.
Interestingly, also at the 2020 conference, delivered in the midst of Covid pandemic, a number of contributions noted the need to tackle sustainable environmental issues, and diversity and inequality driven by the Black Lives Matter movement seen last summer. These could not be left just to fine words and goodwill. Businesses needed to tackle it to remain respected and valued, and sustainable economically.
We plan to write more on this in the succeeding months and welcome your responses.
Which areas might we seek more information and insight?
And we can point you to the web page to register for the next online Business Purpose conference on 1, 2 and 4 February 2021, where you can hear about these matters directly. They hope to address the role of stakeholders in a purposeful business, for instance; and explore the challenge of technological changes; and what can be learnt from crises, past and present’ to name the topics of three sessions.
To conclude, we ponder if we were asked, what would be our purposes in life, and does the life we have as individuals, or as an organisation have a purpose we serve, how would we describe it, and measure it even?
Rev Tim Clarke
Church in Community Officer; IBEX South Coast