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Read the latest blog from our Chair, Prof. David Grayson CBE.
A group of business-led organisations, predominantly based in the USA but with international reach, came together last year to consider how to “reset capitalism.” The B-Team, B-Lab, Conscious Capitalism, Chief Executives for Corporate Purpose (CECP), JUSTCapital, The Global Impact Investing Network (GIIN) and others launched Imperative21 (www.Imperative21.co) to “reset capitalism.”
This follows a similar call to “reset capitalism” from the Financial Times: “Why capitalism needs to be reset in 2020.” (FT: 29 Dec 2019) and the World Economic Forum’s Davos Manifesto published in January 2020.
The Imperative21 team have proposed three core “Imperatives” to help reset capitalism that must underpin the RESET of our economic system:
- DESIGN FOR INTERDEPENDENCE
- INVEST FOR JUSTICE
- ACCOUNT FOR STAKEHOLDERS
As chairman of the Institute of Business Ethics, I would certainly like to add the words “and business ethics” at the very end of the third imperative so that it would read: “enhance standards of fiduciary duty and business ethics.”
We all know, however, about camels, committees and horses – and to major in on the precise language of Imperative21 is, in my view, to miss the bigger picture.
Imperative 21 is bringing together more interested individuals and organisations around the world, who want to help #BuildBackBetter and accelerate progress on sustainable development and tackling hyper global inequalities and the Climate Emergency.
The truth is that none of us have the full picture or all of the answers. More and more, I have come to believe that those of us who have the privilege of being involved in one or more of the Responsible and Ethical Business / Corporate Sustainability initiatives and organisations, have an urgent responsibility to do a far better job of explaining how our organisations and their insights join-up. We cannot and should not expect busy business leaders to wade through all the TLAs (Three Letter Abbreviations) and models and organisations for themselves. We have to join the dots!
Imperative21 formally launched on September 13th 2020 – the 50th anniversary of the famous (some would say infamous) essay by Milton Friedman arguing that the only social responsibility of business is to make profits within the law and the rules of the game. This led to the notion that the purpose of business is about maximising shareholder-value – often in a very short-term horizon. Imperative21 explicitly rejects the Friedman theory in favour of a Stakeholder model.
The need for businesses to define their purpose is becoming increasingly mainstream: from Larry Fink, the founder and CEO of BlackRock, to the World Economic Forum in their 2020 Davos Manifesto and the Business Round-Table in the US.
Prof Colin Mayer and colleagues in the British Academy’s Future of the Corporation project suggest that “the purpose of business is to profitably solve problems of people and planet, and not profit from causing problems.”
Personally, I think this definition is far more aspirational for employees, suppliers, customers than Milton Friedman’s definition, without throwing out or denying the critical importance of profits. Personally, I want more profitable businesses, more high-impact entrepreneurs – I just want them to be truly profitable – not based on fake surpluses because they have managed to externalise their internalities like pollution or via aggressive tax avoidance. I fully recognise, however, that many business leaders – including many IBE supporters – don’t see the purpose of business as being to change society per se but rather to contribute to that change in ways which are meaningful.
At the IBE, we very much agree that having an authentic, inspiring and practical purpose is important – and crucially, that it is for each business to determine its own purpose. Such a Purpose can motivate and help people to make tough decisions. It helps to build and sustain an ethical business as Mark Chambers, Associate Director of the IBE discussed in a webinar last year.
Whilst the IBE strongly supports the critical importance of Company Purpose there are other very good organisations like Blueprint for Better Business that provide specialist advice in this area and which we support.
Similarly, having a comprehensive Plan or Strategy for Sustainability, managing a business’s ESG or Social, Environmental and Economic Impacts (minimising negative impacts and maximising their positive impacts) is now surely integral to being an ethical business.
Organisations like the Future-Fit Foundation and the Sustainability Accounting Standards Board help businesses to identify their most material impacts. B-Corp certification through the B-Labs helps businesses to track their progress and whether they are achieving at least the standard required to be recognised as a B-Corp (with a requirement to re-certify every three years on progressively higher standards). Growing numbers of mainstream institutional investors are using ESG criteria. The Big Four global Accounting firms have published a set of ESG standards – and there are urgent calls from BlackRock and others for a rationalisation of the different frameworks. Five sustainability organisations — the Sustainability Accounting Standards Board, the Global Reporting Initiative, the International Integrated Reporting Council, the CDP (formerly the Carbon Disclosure Project) and the Carbon Disclosure Standards Board have announced that they planned to work together to develop a global reporting system.
Again, IBE does not get involved in helping businesses to identify and manage and report their material impacts. Well-established business-led Corporate Responsibility coalitions like Business in the Community in the UK, CSR Europe, Business for Social Responsibility (BSR – headquartered in the US) and the World Business Council for Sustainable Development (WBCSD – headquartered in Geneva) and many different sectoral and issue-specific coalitions such as the Sustainable Apparel Coalition or Responsible Care for the chemical industry, provide plenty of “how-to” good practice and safe-spaces for non-competitive collaboration. Most of these coalitions also provide a platform for collaborative advocacy for responsible business, corporate sustainability and sustainable development.
IBE recognises the importance of purpose, strategy, collaboration, advocacy for doing business ethically – and the importance of organisations which help businesses with these. Our focus in the IBE, however, is on organisational culture and how organisations create and maintain strong ethical, responsible cultures.
It is increasingly recognised that boards, as well as SMTs (Senior Management Teams), need to be much more proactive in defining the desired culture and checking regularly on actual culture: how close to or distant from the desired culture is the actual? Hence, our increased IBE focus on supporting boards on ethics and culture. Our updated and refreshed IBE Strategy that the board signed off last September, rightly gives greater emphasis to our work on organisational culture and I am pleased that feedback from a webinar we did with IBE supporters last October, endorsed this approach. So, you can expect a lot more from the IBE on creating and sustaining ethical cultures.
Author
Professor David Grayson CBE
Chair
David is Emeritus Professor of Corporate Responsibility at Cranfield School of Management. From 2007-2017, he was director of the Doughty Centre for Corporate Responsibility and Professor of Corporate Responsibility.
David became Chair of the Trustees Board on 01 April 2019.
He joined Cranfield in April 2007, after a thirty year career as a social entrepreneur and campaigner for responsible business, diversity, and small business development. This included founding Project North East which has now worked in nearly 60 countries around the world; being the founding CEO of the Prince's Youth Business Trust and serving as a managing-director of Business in the Community.
David has an Honorary Doctorate of Law from London South Bank University and was a visiting Senior Fellow at the CSR Initiative of the Kennedy School of Government, Harvard (2005-10).
He has served on various charity and public sector boards over the past 35 years. These have included the boards of the National Co-operative Development Agency, The Prince of Wales' Innovation Trust and the Strategic Rail Authority. He chaired the National Disability Council and the Business Link Accreditation Board; in each case appointed by the Major Government and re-appointed by the Blair administration. David now serves on the board of a financial services company in Asia where he leads on embedding ESG/sustainability and chairs the board’s Group Risk Management Committee.
He has previously chaired the national charity Carers UK and one of the UK's larger social enterprises and largest eldercare providers, Housing 21 during which the organisation made corporate history by becoming the first-ever not-for-profit successfully to acquire a publicly quoted group of companies. David received an OBE for services to industry in 1994 and a CBE for services to disability in 1999. He is a Companion of the Chartered Institute of Management.
David has written a number of books on responsible business and corporate sustainability including most recently: ‘All in - The Future of Business Leadership’ and The Sustainable Business Handbook – both with Chris Coulter and Mark Lee. He is part of the faculty of the Forward Institute and of the Circle of Advisers for Business Fights Poverty.
The Guardian has named David as one of ten top global tweeters on sustainable leadership alongside Al Gore, Tim Cook - CEO of Apple, and Facebook's COO Sheryl Sandberg.