Principles for Purposeful Business
From a report by The British Academy
The British Academy, the national body for the humanities and social sciences, recently published Principles for Purposeful Business, outlining the changes needed to put people and planet at the heart of corporate capitalism.
The principles propose a new formula for corporate purpose: “The purpose of business is to profitably solve problems of people and planet, and not profit from causing problems.”
The report explains how this can be done, presenting eight principles for use in guiding lawmakers and business leaders and including reform of company law.
The principles aim to re-organise the corporate sector around purpose and around corporations’ contributions to solving social, political and environmental challenges:
Corporate law should place purpose at the heart of the corporation and require directors to state their purposes and demonstrate commitment to them.
Regulation should expect particularly high duties of engagement, loyalty and care on the part of directors of companies to public interests where they perform important public functions.
Ownership should recognise obligations of shareholders and engage them in supporting corporate purposes as well as in their rights to derive financial benefit.
Corporate governance should align managerial interests with companies’ purposes and establish accountability to a range of stakeholders through appropriate board structures. They should determine a set of values necessary to deliver purpose, embedded in their company culture.
Measurement should recognise impacts and investment by companies in their workers, societies and natural assets both within and outside the firm.
Performance should be measured against fulfilment of corporate purposes and profits measured net of the costs of achieving them.
Corporate financing should be of a form and duration that allows companies to fund more engaged and long-term investment in their purposes.
Corporate investment should be made in partnership with private, public and not-for-profit organisations that contribute towards the fulfilment of corporate purposes.
Professor Colin Mayer FBA, Academic Lead, Future of the Corporation Programme and Peter Moores Professor of Management Studies, Saïd Business School, University of Oxford, said, “There is evidence all around us – from the climate crisis to inequality – that the corporation, as it is, has failed to deliver benefit beyond shareholders, to its stakeholders and its wider community. While many businesses have woken up to this, others have not. Restoring trust between businesses, stakeholders and society demands us to act differently. The eight principles intend to enable corporations to act deliberately, boldly and profitably, to meet global goals and tackle problems of society, people and planet. Our message today is both practical and positive: a rethink of capitalism is possible, and here’s how it can be done.”
Principles for Purposeful Business draws from evidence and research papers, and insights of business leaders, experts, civil society and academics from across the humanities and social sciences globally, who have gathered frequently over the course of two years. As well as presenting the eight principles, the report contains case studies and highlights the need for leadership from business, investors and government to bring about the necessary changes via a number of pathways.
A big step on from Corporate Social Responsibility (CSR) - will your business become a purposeful business?
Download the report here.
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