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We need an improved policy framework that can support purposeful businesses and enable them to collaborate with government and civil society
Hetan Shah is Chief Executive of the British Academy.
The World Economic Forum (WEF) wants its annual gathering of corporate leaders to return to Davos in January 2022 with “the first truly global leadership event to set the agenda for a sustainable recovery”.
Previous gatherings of the global elite at a small Swiss ski resort have not necessarily helped shift the dial, but the WEF is right – it is time to ask how we will address the longer term economic and social crises in the wake of COVID-19. The scarring of young people’s education and employment prospects, the backlogs in public services from hospitals to the justice system, vast increases in public debt and the impacts of lockdown on people’s relationships and mental health have been huge.
The impacts run so deep that a British Academy review earlier this year – requested by UK Government Chief Scientific Advisor Sir Patrick Vallance – found that we are in a ‘Covid Decade’. Much of the narrative on how we might recover focuses upon what the government can do, but this can put undue expectation on what the state can achieve. Local communities and civil society’s part alongside government is increasingly recognised with calls for more investment in ‘social infrastructure’.
Given the last in-person meeting at Davos took place barely a month before the World Health Organisation declared COVID-19 a global pandemic, it is reasonable to ask what good corporate leaders can be expected to do to avert disaster. But we have a curious collective blind spot where business is concerned, despite the positive role that businesses have played during the last year.
Recall how AstraZeneca developed a vaccine with Oxford University at speed and is now selling it to poor countries at cost price. Gin distilleries shifted to producing hand sanitiser. Supermarkets worked hard to ensure we had the goods we needed in the pandemic. Hotels opened their doors to the homeless and, during holidays, cafes fed hungry children when they were not entitled to school dinners. A wartime mentality meant that government, civil society and business were working together for society’s benefit. How can we hold onto the best of this?
Scepticism over business’ long-term role in building a better society is relatively recent. American economist Milton Friedman's doctrine that the role of business is to maximise profits for its shareholders is 50 years old. But if we look back over the last two millennia that corporations have existed, purpose has been present alongside profit – from Roman corporations, medieval guilds through to public chartered corporations.
The role and regulation of companies has shifted over time and can do so again if we want it to. The British Academy has brought academic and corporate experts together over the last four years to think about the role of business. Our conclusion? That we should reconfigure the purpose of business to finding profitable solutions to the problems of the people and planet. Businesses agree; 43% of business leaders responding to a YouGov survey for the British Academy agree with this definition.
The UK has an opportunity to lead the way in reform of business policy around this notion of corporate purpose. The directors of boards of companies should be held accountable for determining, implementing, and delivering the purposes of their companies, and regulators, standard setters, and auditors should ensure that companies do not profit from creating detriments.
Business is a third pillar of society, alongside government and civil society. It has already played its part in getting us through the initial crisis. The dynamism and innovation of the private sector should be channelled through a regulatory framework that promotes purposeful business rather than one that incentivises short term profit maximisation at the cost of all else.
Seen from the long view, purpose and profit have traditionally gone together. The Friedman doctrine of profit maximisation for shareholders is the aberration. We need an improved policy framework that can support purposeful businesses and enable them to collaborate with government and civil society. That could mark the beginning of the sustainable recovery that global leaders are ambitious for.
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