How can policymakers create an environment where purpose-led businesses can thrive?

By 29/03/2018Blog

Written by Michael Hilton and Charles Wookey

A Blueprint for Better Business was invited to share a paper ahead of the meeting of the OECD Global Parliamentary Network, hosted by the All-Party Parliamentary Group (APPG) on Inclusive Growth, in London, 4-5 April 2018. Below is a summary of the report and the full text can be downloaded here.

The world has made great progress in tackling some of its biggest challenges. Between 2000 and 2015, 2 billion more people gained access to clean water, 43 million more children went to school, and the number of people living in extreme poverty halved. These are huge achievements that should give us confidence that we can tackle the new challenges that now face us.

In 2015, the 193 Member States of the United Nations adopted the Sustainable Development Goals, a set of 17 Global Goals to end poverty, protect the planet and ensure prosperity for all by 2030. A key difference to previous global agreements is the emphasis on the role that businesses have to play in helping to achieve these goals.

The good news is that helping to fix societies’ problems is good for business – the fundamental shift is from seeing profit as the purpose of business to seeing profit as an outcome of a purpose that benefits society. Purpose-led businesses can help to build a more inclusive and sustainable world and enjoy long-term success while doing so.

In fact, a recent report has estimated that achieving the Global Goals would open up more than $12 trillion in business savings and revenue and create 380 million new jobs by 2030. However, this will not happen through technical changes alone. It needs inspiration, hope and the realisation that businesses can contribute a huge amount to society if they change the way they think and act. A better future remains firmly within our grasp if business leaders and policymakers can work together to seize the opportunities.

So what can parliamentarians, ministers, regulators and policy officials do to create an environment where purpose-led businesses can thrive? While the detail will vary between countries, policymakers across the OECD can all help by:

  1. Leading a cultural shift to a mindset where businesses are expected to play a positive role in society. Many – in business and society – are still unaware of the concept of purpose-led businesses. Policymakers have a platform to change the social context, including by increasing awareness of purpose-led businesses in their country.
  2. Ensuring national law and guidance permits and is clear about the importance of corporate purpose and long-term sustainable success. Rather that reinforce shareholder primacy and short-termism, law and regulation can (and in many cases already does) signal clearly that a director’s responsibility is to the success of the company and that they have the freedom to run a purpose-led business within the existing law.
  3. Helping to shift the mindset of investors, who have a huge role to play in either enabling or disabling purpose-led business leaders. Policymakers can help by ensuring that laws and guidance on investment promote long-term stewardship, not short-term reporting and rewards. This will help change investor practices, so their decisions are informed by the ultimate beneficiaries of the investment returns (e.g. people with pensions) rather than the intermediaries who handle the shares.
  4. Treating businesses as partners in achieving the Global Goals. The Goals are too big to be met by governments alone. A new level of collaboration is needed, with policymakers bringing businesses and non-governmental organisations into discussions that were previously reserved for governments. In addition, policymakers can work with businesses to raise and maintain environmental and social standards across whole sectors at the same time, keeping the playing field level for all.