Business beyond profit

Some of the orthodoxies of trade and industry are being fractured, as CEOs embrace new ideas about the purpose of a company. But how do we tell the difference between real change and virtue signalling? Writing for The Tablet, Charles Wookey CEO of A Blueprint for Better Business, explores what is involved in a re-engineering of corporate purpose.

Amid the Trump v. Thunberg Twitter storm at the World Economic Forum at Davos last month, business and finance leaders found time to issue a remarkable statement addressing the role of business in tackling global social problems.

The “Davos Manifesto” was itself an endorsement of “The Purpose of a Corporation” – a statement issued by nearly 200 chief executive officers of large US corporations last autumn – that called for companies to serve all their stakeholders by delivering value to customers, investing in employees, dealing fairly with suppliers, paying their taxes, supporting the communities in which they operate and protecting the environment. And that statement, in turn, was influenced by an initiative Pope Francis took in December 2016, when he invited CEOs from large companies to Rome to explore how businesses could help create broader prosperity and a more just society.

That companies should “serve all their stakeholders” may sound blindingly obvious, and many European businesses already take this as read. But many US businesses and investors still follow the credo, propounded by the economist Milton Friedman in the 1970s, that the sole purpose of a business is to increase its profits within the law and ethical custom. The Davos Manifesto shows that more and more business leaders are beginning to challenge that corporate orthodoxy.

Given the growing pressure for corporate reform on both sides of the Atlantic, the Davos Manifesto and the US CEOs’ statement might look like cynical attempts to put on the garments of virtue while carrying on pretty much as before. But many have welcomed the apparent change of direction. But what, precisely, are they welcoming? What is involved in a re-engineering of corporate purpose? What difference does it really make – and how can these businesses be held accountable without some way of distinguishing real change from feel-good virtue signalling?