Brunswick partner Lucy Parker interviewed senior UK business people about the challenges they face in delivering long-term value as part of the British Academy's Future of the Corporation project. Martin Wright reports
As a curtain raiser to the British Academy's Future of the Corporation project, it commissioned Lucy Parker, partner at Brunswick, to canvas opinion from a wide range of business leaders. The 16 chosen for The Voice of Business went well beyond “the usual suspects”, as Parker calls them, of those already engaged with the whole sustainability/purpose agenda.
The list encompassed everyone from traditional corporate giants such as BP’s Carl-Henric Svanberg, Centrica’s Rick Haythornthwaite and Rolls-Royce’s Ian Davis, through to the worlds of finance (David Fein of Standard Chartered; Helen Alexander of UBM), tech (Mustafa Suleyman of Google’s DeepMind) and challenger brands (Debbie Wosskow, founder of Love Home Swap). They spoke on the record, but anonymously, which encouraged some frank expression of opinions.
If a company turns a profit, there is a considerable amount of public good already being done just through that
Parker kicked off by asking about the role of business in wider society. For those used to hearing earnest assurances around purpose and sustainability, some of the responses might be a little sobering.
Said one: “The role of business is to make the world go round, and make the economic world go round – because we all want goods and services, and it’s business that provides them.”
Another said: “I don’t dispute the fact that companies need to be responsible profit makers – but when you boil right down to it, if a company turns a profit it is therefore paying dividends to investors, salaries to employees, who in addition pay taxes into the public purse. So there is a considerable amount of public good already being done just through that.”
It’s a fairly narrow view of business’s role, perhaps, but one that doesn’t surprise Parker. “People sometimes forget that business is not a university, it’s not a policy think tank: it’s the engine of innovation, that gives us our lights or our phones or whatever.” And those in charge of the engine need to keep their eye on the road or they’ll be out on their ear.
“[The discipline] of quarterly results can be brutal,” observed one. “It’s like being a gladiator in the forum: he can go, he can stay; thumbs up, thumbs down. The truth is that, like a football manager, a CEO who has two or three quarters of bad results will go. The pursuit of that is unremitting, it trumps everything.”
Consumers want a fantastic value proposition. Only after that do they sometimes screen for values
So while consumer power can help shift a CEO’s attention to the wider horizon – as is happening right now with plastics, for example – it can’t be relied upon as a progressive driver.
“My experience is people are conflicted about these things. Mothers start out wanting cloth nappies and then buy disposables; people want local hardware stores but buy from big chains,” was the view of another leader. “Typically, consumers want a fantastic value proposition: they want it cheaper and easier. Only after that do they sometimes screen for values they have a connection with. In any business, you make your money by meeting the needs of consumers, but [based on] what they do – rather than what they say.”
So far, so sobering. But that doesn’t mean purpose has no role to play. Those who’ve embraced a commitment to it see their stock soar in the eyes of employees – actual and potential.
“There’s no question it makes a difference to recruiting. It’s hugely powerful and incredibly motivating for people,” one interviewee said. “We used to get 40,000-50,000 CVs a year, now we get over 200,000 – including CVs [from] most of our competitors. You’ve got to have something that positions your company as a magnet for the talent you’re going to need to run it.”
And it can help when times are tough, too, suggested another. “When the competition is very brutal and things are moving very fast, you almost cannot live without a clear sense of purpose because that is what you hold on to.”
Purpose is just a code word for ‘something other than money', and that’s not helpful
The challenge, though, is to make sure “purpose” actually means something, says Parker. “I fear its wishy-washiness ... There’s no set terms for the conversation … everyone talked about what they wanted to talk about and then said ‘this is purpose’. I understand the impetus towards it, and I understand why it’s catching, and I wouldn’t want to take away any of the positivity towards it – but [at the moment] it’s just a code word for ‘something other than money’, and that’s not helpful. How do you apply it in action? And especially, how do you apply it in action when things get difficult?”
Some of the more grounded “purposeful” comments came in relation to the environment.
“Companies are a means by which we organise capital and labour to serve people and the planet, and in doing so make a profit. We need to add ‘planet’ more clearly. We can’t deliver growth that destroys the environment. That is morally unacceptable,” was the view of one leader.
So much for purpose – what about the role of regulation? While there was some enthusiasm for it among those sectors that stand to benefit from ruling out the cowboys, like pharmaceuticals, many saw regulation as a blunt instrument, at best.
As one leader commented: ”Every time there’s a crisis, there’s new legislation, often in haste, and then we live with the outcomes as companies for years and years. It [works] as a safety net, to stop egregious behaviour – but it’s not a sophisticated mechanism for shaping companies’ behaviour generally.”
Another observed: “Today in the UK a new regulation goes to the House of Commons, then the Lords, then when it comes onto the books it stays for decades – while the business world changes. But imagine a world where we could work collaboratively with government to put something in place for three or four years and then review it.”
If consumers trust a product, they are likely to keep buying it even if they profess to be scandalised at its ethical shortcomings
Many respondents saw such an approach as essential in an age of fast-moving technological change, with the disruption poised to rip up many existing business models and force a radical rethink of company strategy [See With AI polluters will have nowhere to hide].
Trust also surfaced as a significant issue, but as Parker observes, there is a difference between generalised notions of trust in a company, and trust in a product. This particularly applies to new, tech-based companies – the Amazons, Ubers, Facebooks, etc.
“They are engendering trust around the product. People hardly see it as a corporatete, which is why it blows up when one of the big tech companies doesn’t pay tax, or whatever, or treats its workers badly.”
When it comes to the crunch, though, if consumers trust a product, they are likely to keep buying it, so keeping the company in business, even if they profess to be scandalised at its ethical shortcomings.
“If there is an exposé of Amazon’s working conditions, for example – showing that’s why people can get things delivered so cheaply the very next day – I don’t think it dents their sales for a minute,” one leader observed.
A director is here to serve all stakeholders. It may be shareholders and stakeholders – but it’s definitely all stakeholders
Leaving aside growing awareness of the tech tsunami poised to disrupt business, one of the greatest shifts, in the eyes of some at least, might come through the changing legal duties of directors. Tellingly, one respondent remarked how many didn’t seem aware of the shift in the Companies Act requiring directors to widen their remit beyond maximising benefits to shareholders.
“You still hear the phrase a lot, ‘We’re here to serve our shareholders’. Actually, that’s not what a director is for any longer: a director is here to serve all stakeholders. It may be shareholders and stakeholders – but it’s definitely all stakeholders.”
And that undeniable fact, coupled with all the other pressures on business, may help provoke the sort of shifts in corporate identity and behaviour that The Future of the Corporation project is seeking to bring out.
Martin Wright (@martinfutures) is a writer, adviser and public speaker specialising in environmental solutions and sustainable futures. He is a former director of Forum for the Future.
This article is part of the in-depth briefing Future of Capitalism: See also:
purpose ethical consumers Business stakeholders British Academy