From Corporate Social Responsibility to Responsible, Purposeful Business

5 August 2016 | By Cause4 staff

Certified B Corporations must meet rigorous standards of social and environmental responsibility. Cause4 and the ninety-six other UK businesses that have achieved B Corporation status must consider the impact of their decisions. This requires looking beyond shareholders to their stakeholders, including workers, suppliers, consumers and also the community and the environment. B Lab, the non-profit organisation that grants and administers this certification, works from this premise, and aims to drive a global culture shift through redefining the terms of business success. Consequently with B Corporations, the impact of the environment, community and employees are considered crucial elements in determining business success. This model makes sense to me; a business should exist to function beyond profit, and success should encompass more than just results in the accounting sense.

Achieving B Corporation status requires meeting rigorous standards and although perhaps ideal, may not yet be practically possible for every organisation. Yet, within this landscape the language of corporate social responsibility is shifting. Notably, the recent Purposeful Company Interim Report indicates that purpose is a key element in increasing business performance. Purpose is the reason for a companies’ existence as determined by its aims, goals and strategy but importantly, it also incorporates the consequent contribution made to society through the companies’ external, internal, societal and moral impact. The Report predicts that the absence of clear purpose within British companies could be resulting in an economic cost of £130 billion a year to businesses.

The influence of shareholders

Unfortunately, at present the UK regulatory framework is uniquely fragmented and answers to a diverse shareholder base. In the UK there are less block shareholders or invested owners of companies than in any comparable advanced industrial economy. Due to this, companies align their strategy with the interests of short-term investment shareholders, a set-up that redirects the company interests away from the long-term investors and owners who are more concerned with the oversight and management, and consequently those more likely to promote corporate purpose. The potential visions of change and the desire to innovate and create this sense of purpose can become side lined, and stand secondary to the immediate interests of these short-term investment shareholders.

However, the direct business benefits of considering impact as part of core strategy are twofold. Firstly, it has become increasingly difficult to hide from an increasingly enlightened public and profit alone can prove to alienate businesses’ from customers and society. In light of this, a corporate purpose strategy that is engaging and authentic proves attractive to customers. This view is prominent within the largest sector of the global workforce; the Deloitte Millennial Survey indicated that 87% of ‘millennials’ believe that business success should be measured in more than just financial performance.1 These positives are emulated for employees too, where core strategic choices made in this purposeful way result in improved recruitment prospects, increased employee motivation and long-term staff retention.

Secondly, the positives manifest in financial terms too; the benefits of a clear purpose are reflected in share price performance, operation performance and the ability to foster a climate of innovation.2 A growing body of micro-economic evidence indicates this3, the UN Global Compact has supported it4 and research undertaken by Deutsche Bank highlights that companies that commit to doing good perform better than those that don’t.5 Payoffs for purpose are tangible for customers, employees, investors and ultimately (and perhaps regretfully importantly) shareholders.

Corporate social responsibility 2.0

Whilst a purposeful business does not adhere to the same rigorous standards as B Corporations, there is a key parallel in the ethos between the two; the impact and contributions of the business are placed at the core of business strategy, rather than designated to corporate social responsibility. I believe this is positive; where corporate social responsibility is more concerned with how businesses spend money, a purposeful and responsible business considers how it makes its money.

The growth of B Corporations in the UK and the increasing acknowledgement of the benefits and successes of purposeful businesses are impacting the footprint of UK businesses where transparency and accountability are becoming more important than ever before. Could this be the future of business and perhaps signal a close to traditional views of corporate social responsibility? I hope so. What do you think?

What are your views? Comment below or tweet us at @OfficialCause4 to join the discussion.

1 https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/gx-millenial-survey-2016-exec-summary.pdf

2 http://biginnovationcentre.com/media/uploads/pdf/The%20Purposeful%20Company%20Interim%20Report.pdf p. 6

3 http://biginnovationcentre.com/media/uploads/pdf/The%20Purposeful%20Company%20Interim%20Report.pdf

4 https://www.accenture.com/us-en/insight-un-global-compact-ceo-study#block-aboutthestudy

5 https://www.db.com/cr/en/docs/Sustainable_Investing_2012.pdf

 

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