Businesses urged to follow ‘purpose-led’ agenda
Increasing numbers of businesses are making a shift from being driven solely by profit to pursuing a ‘purpose-led’ agenda that makes a positive contribution to society, according to new research.
Instead of prioritising shareholder value above all other outcomes, they are focusing on benefits for employees, the wider community and the environment.
However, many businesses are uncertain how to become more purposeful, and some commentators have questioned if it is a priority at this difficult time for businesses.
The Business Purpose Commission for Scotland, a group of 25 leaders from businesses, social enterprises the voluntary sector, trades unions and academia, reported its findings and announce recommend practical actions at a presentation in Edinburgh today. It is believed to be a global first – a business-led, government-commissioned action plan.
The commission shared new evidence and set out why becoming purpose-led can help Scottish businesses to be resilient through economic difficulties.
Businesses represented on the Commission include SMEs as well as bigger corporates such as abrdn, John Lewis Partnership, Wood, Edrington and Janssen (Johnson & Johnson)..
Speakers at the launch included Amanda Young, Chief Sustainability Officer, abrdn; Colin Mayer, Emeritus Professor of Management Studies, Blavatnik School of Government; and Richard Lochhead, Minister for Just Transition, Employment and Fair Work, Scottish Government
An opinion poll for the Commission found that half Scottish people think that the reputation of businesses in Scotland is excellent or good. However, 45% of people have only a neutral opinion or did not know, while 5% thought that it is bad or terrible, including a higher proportion of people in lower skilled jobs.
Critically, while nearly half of people (48%) think that the role of businesses currently have in society is to maximise the returns for shareholders/owners, just over a quarter (27%) think that it is to find profitable solutions to the problems of people and the planet.
However, when asked about the role that business should have nearly two-thirds of people (65%) think that businesses should play a role in finding profitable solutions to the problems of people and the planet.
And most businesses agree. A survey of Scottish businesses by the Fraser of Allander Institute found that more than half (53%) think that finding profitable solutions to the problems of people and the planet best reflects the role that businesses have in society, compared to a quarter of businesses who think that it is to maximise returns for shareholders/owners within the confines of the law.
Making the business case for purpose, the report highlights international evidence of benefits including:
- Customers want to buy from them – two thirds of people will pay more for socially driven products
- People want to work for businesses with a purpose – around two thirds of millennials take a company’s social and environmental commitments into account when deciding where to work
- Businesses are more resilient – 73% of them say a well-defined purpose helped navigate disruption
- Businesses are more innovative – 53% of businesses prioritising purpose said they were successful with innovation and transformation efforts, versus only 19% not prioritising it
Long-term evidence shows that a focus on purpose increases businesses’ bottom line and over the next 15 years purposeful businesses are forecast to achieve 10% higher growth than other businesses.
The Commission sets out a vision that by 2030 all businesses in Scotland will have become purposeful businesses which profit from finding solutions for people and planet. The report makes 12 recommendations for business, governments and other stakeholders, including:
- Encouraging businesses to define, communicate and measure their business purpose
- Establishing a world-leading hub for Environmental, Social and Governance (ESG) investment
- Amending company law to require businesses to state and report on their business purpose
- Mainstreaming and scaling-up public and private sector business support for purpose-led business
Ms Young, who is also co-chair of the Commission, said: “I believe passionately that consideration of wider issues affecting society and the world we live in should be at the heart of business strategy and indeed as engaged investors, we expect a full range of long-term risks to be considered as we all work towards a more sustainable future.
“The report is a call to action to businesses of all shapes and sizes to develop and nurture their own business purpose and I welcome the fact that practical recommendations are provided to help businesses along that journey.”
Prof Mayer added: “As the first business-led, government-initiated commission on purposeful business, this is a landmark report. It provides a clear and compelling case for purposeful business, and the substantial benefits that the Scottish economy, people, and environment will derive from it.”
Richard Lochhead said:“I thank the Commission for this very thoughtful and detailed report which places Scotland at the forefront of an exciting agenda to unlock the potential of purposeful business to meet the great economic, social and environmental challenges ahead.
“The Scottish Government will consider the recommendations carefully. The report presents clear evidence that now is the time for businesses to embrace a purpose to find profitable solutions to the problems of people and the planet. This focus will allow them to attract and retain customers and employees, and build trust, both in this country and across the world.”
Sara Thiam, CEO of the Scottish Council for Development and Industry, said: “SCDI’s mission is to support a more inclusive, sustainable, and prosperous Scotland for all. This is a chance for Scottish businesses to lead the world in investing in making Scotland a better place to live and work today and, critically, for future generations.”