06 February 2020, The Tablet

Business beyond profit


Business beyond profit

To capture people’s commitment and energy means reimagining a company

 

Some of the orthodoxies of trade and industry are being fractured, as CEOs embrace new ideas about the purpose of a company. But how do we tell the difference between real change and virtue signalling? The head of a purpose-led business charity helps sift the wheat from the chaff

Amid the Trump v. Thunberg Twitter storm at the World Economic Forum at Davos last month, business and finance leaders found time to issue a remarkable statement addressing the role of business in tackling global social problems.

The “Davos Manifesto” was itself an endorsement of “The Purpose of a Corporation” – a statement issued by nearly 200 chief executive officers of large US corporations last autumn – that called for companies to serve all their stakeholders by delivering value to customers, investing in employees, dealing fairly with suppliers, paying their taxes, supporting the communities in which they operate and protecting the environment. And that statement, in turn, was influenced by an initiative Pope Francis took in December 2016, when he invited CEOs from large companies to Rome to explore how businesses could help create broader prosperity and a more just society.

That companies should “serve all their stakeholders” may sound blindingly obvious, and many European businesses already take this as read. But many US businesses and investors still follow the credo, propounded by the economist Milton Friedman in the 1970s, that the sole purpose of a business is to increase its profits within the law and ethical custom. The Davos Manifesto shows that more and more business leaders are beginning to challenge that corporate orthodoxy.

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