“Society’s expectations of business have changed more in the past two years than in the previous 20. A pandemic, increasing and costly natural disasters, George Floyd’s murder, attacks on democracy, and more: all moved us past a tipping point. Both practically and morally, corporate leaders can no longer sit on the sidelines of major societal shifts or treat human and planetary issues as ‘someone else’s problem’. For their own good, companies must play an active role in solving our biggest shared challenges. The economy won’t thrive unless people and the planet are thriving.”
This quote starts an article by Paul Polman, the ex-CEO of Unilever., in the Sept-Oct edition of the Harvard Business Review.
Great opportunities lie within this call to action. A two-year study by the Business and Sustainable Development Commission reported that working on the UN’s 17 Sustainable Development Goals – the SDGs – which address everything from hunger to poverty and climate change, could unlock trillions in value and create millions of jobs. In addition, companies embracing environmental, social and governance issues perform better than competitors.
Investors are pushing for action. Financial regulators demand more disclosure and transparency. Business customers seek climate and diversity targets from suppliers. And employees – especially Millennials and Gen Zers – want to work for companies aligned with their values.
To succeed in this new environment means a major rethink. Traditional philanthropy and corporate social responsibility are insufficient. We must rethink what a business is, how it behaves and operates, what its purpose is and how it can help drive change in the world.
Many are already on the journey. Business leaders are pressing governments on climate change policies, setting goals to become carbon-positive, making commitments to racial equity, and speaking out in favour of the rights of LGBTQ citizens. They’re forming cross-sector partnerships with suppliers, customers, peers, NGOs, charities and governments to address shared problems.
There are some leading examples in Northamptonshire, many in the Business Beacons Group that the Lord-Lieutenant has set up with the University. The concept of ‘stakeholder capitalism’ in which business has a responsibility to society is slowly becoming mainstream. Those who miss this paradigm shift will suffer. Business as usual will not favour them, the younger generations won’t work for them, and society won’t accept them.
Paul Polman, a leading evangelist for stakeholder capitalism, suggests four areas for business success in the future:
Serve stakeholders, not shareholders: operate in service of multiple stakeholders, which will then benefit investors
Take ownership of all impacts: address the internal and external impacts on social and environmental issues
Embrace partnerships: work with charities, communities, local authorities and academia
Tackle social challenges: bring advocacy and business skills to address social issues in a strategic, focused and localised way
Paul Polman led Unilever for a decade, during which time Unilever’s total shareholder return was close to 300% – well above that of its peers.Unilever did this whilst making a commitment to serve multiple stakeholders at the brand level.
The largest of its ‘purpose-led’ brand initiatives is the Lifebuoy handwashing campaign. At the turn of the millennium, Lifebuoy was not a vibrant business, but working with UNICEF in the 2010s Lifebuoy taught millions of children and mothers about the benefits of washing hands, helping to avert millions of deaths from easily preventable diseases. As the handwashing programme expanded, its revenue grew at a double-digit percentage rate.
Putting purpose at the core of strategy drives growth. You reap profits through purpose. Employees in the Lifebuoy business are not just selling soap; they’re helping save lives.
Purpose is the subject of an influential new report by the British Academy entitled ‘Policy and Practice for Purposeful Business’. It is a call to action for regulators, investors and companies, suggesting that directors be legally held to account on their company purpose. Watch out – reform is in the air!
The world’s challenges are great. They cannot be solved without drawing on the financial, operational, human and creative resources of business. We need collective action to improve the wellbeing of all in our community and thus ensure a healthy business environment.
Is the world better off with your business in it? Does it have a clearly defined purpose? Can we help?
The Lieutenancy and the University are ready, willing and able to play their part, working with local organisations to instil and share best practice as today’s business leaders face some key questions in attempting to ‘build back better’.