Time for new thinking on corporate purpose

Mike Tuffrey

 

Posted in: Briefing Comment, Corporate Reputation, Speaking Out, Strategy

Time for new thinking on corporate purpose

September 01, 2016

An opportunity to kick-start a move towards more mission-led companies is getting caught up in Brexit fall-out, warns Mike Tuffrey.

 

A little reported but potentially momentous bit of thinking is going on in the depths of the UK government. Earlier this summer the Cabinet Office started a consultation on ways to strengthen so-called mission led business. One question arising is whether we need a new form of corporate structure to encourage them.

The consultation set the scene like this:

The traditional roles of civil society and business are changing for the better. The social sector is becoming more business-like and businesses are keen to demonstrate their social impact. This shift in responsibilities could revolutionise the way we solve some of our biggest social challenges, like aged care, dementia and unemployment.

Mission-led businesses are part of this shift. They are profit-driven businesses that make a powerful commitment to social impact. This model attracts entrepreneurs and investors who want to harness the power of business to make a difference and tackle longstanding social and environmental challenges.

Examples of businesses with formal mission-led objectives abound, from homemade freezer food company, Cook, and to Al Gore’s long term investment fund, Generation, to cite just two that have gone down the certification route. Plenty of others say they have a wider social purpose, though few have embedded it in their governing articles.

Led by the then minister for Civil Society, Rob Wilson, the review has got caught up in the post Brexit fall-out, with responsibility for civil society bizarrely shifting to the Department for Culture, Media and Sport, to the dismay of many leaders in social enterprise and the wider voluntary sector.

On the other hand, incoming prime minister, Theresa May, has made positive sounding noises on the need to reform the way the economy works for all.

To my mind, the jury is very much out on whether the UK government is both serious and able (given everything else going on) to make the sort of fundamental changes this rhetoric implies. If it is, then encouraging more businesses to go down the mission-led route is a powerful avenue that could and should be explored.

The case for doing so is well set out in a submission to the consultation from B Lab UK, the charity supporting businesses in the UK who are certified under the B Corps approach as meeting “rigorous standards of social and environmental performance, accountability, and transparency” – a sort-of Fair Trade mark for business.

That submission sets out the wider case for a mission-led approach. It also specifically argues for an amendment to the Companies Act so that a for-profit company limited by shares can lock into its governing documents a clearly stated purpose to have a material positive impact on society and the environment.

It’s just about possible to do that at present, even without using specialist asset-locked models. However the concept of an overriding duty to benefit shareholders (‘members’) is deeply ingrained in conventional company thinking. Indeed so powerful is the short-term shareholder value approach one should properly call it as psychosis.

It’s clear to me we need another step forward in our thinking about business, as powerful as the tomorrow’s company debate was in the 1990s.

There’s lots going on in this space, not least by Tomorrow’s Company itself (UK Business: What’s wrong? What’s next?) and by the RSA’s Inclusive Growth Commission.

Adding to all that, a move to create a ‘benefit corporation’ status in the UK, as more than half the states in America have done, would give practical help and unlock new thinking in boardrooms and beyond.

 

Mike Tuffrey is Co-founding Director of Corporate Citizenship.

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