Inspired by our late founder and lead sponsor, Nigel Doughty, the Doughty Centre for Corporate Responsibility has been mapping and tracking the myriad of organisations, initiatives and time-limited projects focused in some way on the renewal of capitalism. We identified more than 130, and have found many more since our mapping. Many of these highlight the need for businesses to have a societal purpose.
‘On a Mission in the UK Economy’ which has just been published, analyses the current state of play of, and offers a future vision for, mission-led or purpose-driven businesses in the UK. It is produced by the ten-member advisory panel, chaired by Dr Nigel Wilson CEO of insurer Legal & General, to the UK Government’s Mission-led Business Review 2016. The report defines mission-led businesses as:
“profit-driven businesses that make a powerful commitment to social impact. The ethos of mission-led business is to contribute positively to society through their operations, goods and services.”
The panel correctly identifies that these mission-driven or purpose-led businesses operate across diverse markets and sectors. They tend, however, to have the following characteristics:
- A clear commitment to transparently delivering a positive social and environmental impact.
- An understanding that parties beyond shareholders have a legitimate interest in outcomes of the business.
- A recognition that value can be delivered sustainably by moving from contractual stakeholder management to broader engagement.
The Advisory Panel has done a good job in synthesizing recent evidence for the growing interest in and attractiveness of, mission-led or purpose-driven business – not least to millennials. They also identify some of the challenges facing such businesses. Alleviating these challenges is the focus of their ten recommendations to government, business and other actors. All ten recommendations are sensible and deserve endorsement and promotion by supporters of responsible business.
The panel are too polite to say explicitly, but their repeated linkage of their work to the new government’s commitment to “an economy that works for all,” is surely a pitch for an overall and coherent government programme to encourage mission-led or purpose-driven business. This should encompass the anticipated review of Corporate Governance; the work of the Department of Business, Energy & Industrial Strategy (BEIS) work on Industrial Strategy and on encouraging more responsible, sustainable business practices; and the Cabinet Office-led work on promoting more government-business-civil society collaborations.
Amongst the key recommendations are that Government should encourage and incentivise the positive social impact of mission-led business by enabling blended finance investment models and social pension funds; and that UK corporates should create social and environmental impact investment funds targeting £1 billion by 2021. Given that the panel report suggests the FTSE 350 had net balance sheet assets of £1.3 trillion in 2015, this seems like a modest and doable target which it would be good to see organisations like the CBI, Business in the Community and Tomorrow’s Company actively promoting.
Business schools and higher education generally are not forgotten when the panel divvies up work. The panel recommends that “starting with business schools, educators should lead the way in analysing the impact on business of having a purpose that serves society, and embedding this into curricula.” Perhaps one of the commercial organisations associated with the panel might sponsor for the next two to three years a category for teaching such cases/curriculum material within the existing business school case-writing competition run annually by the European Foundation for Management Development (EFMD) and The Case Centre (which acts as a clearing-house for academics producing teaching cases and those seeking suitable curriculum material for their business school classes).
Other recommendations include a call for “Mainstream businesses and start-up mission-led businesses to set up talent exchange programmes”; and that advisory firms should commit to better serving mission-led businesses through increased training and extending their pro-bono remit.
Government is encouraged to “lead a conversation on responsible business and identify how the public, private and social sectors can work together to address societal issues.” One practical way of doing this would be to host a website where visitors can respond to each of the recommendations of the panel report and add further examples to those provided by the panel of where each recommendation is already being implemented. This inter-active approach would be analogous to the comments section underneath each article on the digital version of quality newspapers. It would be in the spirit of a “conversation” rather than the more traditional one-way communication of governments publicizing their reports.
Government is also asked to promote the flexibility offered under English law for companies to act with a social purpose and align shareholder and stakeholder interests; and explicitly “to explore the introduction of a “benefit company” status in English law, based on the B-Corp model now permitted in 32 US states and Italy. As the panel notes, “similar legislation is being explored in Argentina, Australia, Canada and Chile.” Even without B-Corp status, the Government is advised “to encourage businesses to incorporate around a social purpose and commit to social impact by establishing clear entry points for entrepreneurs.” The “Blueprint for Better Business” organisation provides a good model for this.
There is a recommendation that “Every business is to actively communicate its social mission and progress in the form of a “transparency report”. I am surprised that there is no read across here to the EU non-financial reporting directive which comes in next year for the largest companies in the EU – personally I hope that law will survive any eventual Brexit. Overall, however, the panel has produced an excellent report which I hope gets wide attention – and implementation!1