Businesses are an integral part of any economy – so how do they need to transform in order to contribute to a fairer, more sustainable system?
Mel Young and Alexandra Matthews, the founders of The New Ism, are practising social distancing at home in Edinburgh and London respectively: we wanted to take the opportunity to discuss how this time of change and reflection could be harnessed to create a New Ism when all this is over. As members of different generations, we have different experiences and perspectives, but share a desire to create a new way forward.
Mel: The announcement that Rolls Royce was shedding 9,000 jobs in the UK this week shocked everyone but it wasn’t a surprise given the economic impact of Covid-19. The demand for their engines simply evaporated and with an empty order book they were left with little option.
But the impact for their workers and hence the wider communities in the East Midlands is devastating. Unfortunately, we will hear more bad news like this in the coming weeks as the economic impact from the pandemic hits home.
Alex: Sadly it’s just one of many terrible side effects of the pandemic – and a side effect that will be long-lasting and far-reaching. My immediate reaction (which may or may not have been accurate) when I saw the news was that they were prioritising wealthy shareholders over their employees and the community. I understand that currently companies have a legal obligation to shareholders, but it means that in circumstances like these, those who have enough money to invest in companies like Rolls Royce are prioritised over the livelihoods of ‘ordinary’ people – and the consequences for the latter will be much worse than for those who have money. I think this is one of the key things that will need to change in a New Ism – but how?
Mel: I am not sure if shareholders will have priority but I think what you are saying begs a more fundamental question: what exactly is the role of business in society? Do we establish business simply so that the founders can make lots of money? Businesses add value and they also create employment. One of the greatest impacts for business given the models we work in, is that they create employment opportunities. Without that, how would we live? When you ask some business owners what their contribution to society is they will say that their sole contribution is to create jobs and that they should be praised for that. Others, of course, will go much further and say that you can create a bad business where employees are exploited and the environment is destroyed and that businesses have an ethical and moral obligation to contribute to wider society. Perhaps we need to be much clearer about the role of business in society.
Alex: I think you’re right. The founders of successful businesses can earn millions, if not billions, but they are currently under no obligation to benefit society beyond paying taxes and employing people. Even those two obligations aren’t set in stone – an increasing number of jobs can now be carried out by robots/AI, and many companies do everything they can to avoid paying taxes. I think we need to address the latter point in particular. But getting back to your point, yes I think we do need to be clearer about the role that business plays – and I believe that businesses should be obligated to demonstrate how they positively contribute to their communities and to society beyond job creation. Encouragingly, more and more companies see CSR and good corporate behaviour as an integral part of their business models and not just a PR stunt or ‘white washing’ – even big corporations like Unilever are weaving social and environmental policies into their business plans. Many of my generation expect brands to behave ‘well’. The ice cream brand Ben and Jerry’s springs to mind. This should be the norm rather than the exception – indeed, I think it should be the law.
Mel: It is a fascinating area of discussion. A lot of business people I know will say that they have a hard enough job just running the business without thinking about the wider community. They feel challenged by this. I heard a business leader in India talking recently about how his business had been badly affected with the pandemic and he had an option to pay off over 100 people. He runs a good business which has a foundation which supports people particularly women living in poverty. If he doesn’t lay off his employees then he won’t be able to afford to give his usual amount to help people out of poverty. What should he do, he asks himself? It is impossible to answer but it begs a much bigger question about the role of business in society.
Alex: It sounds like this man is exactly the type of person we want running businesses across the world. Not only the fact that he has a foundation, but also that he considers the impact of important decisions on people, and not just his profit margin. If he lays off his employees, that will affect their mental health, their families and their communities, but if he doesn’t, the people who benefit from his foundation will be adversely impacted. I fear that many businesses would make the decision based on the financial health of their organisation.
I know that my generation is quite idealistic about how business should behave – that they should be more like the Indian business leader you mention above and less like Google and Amazon, for example. But perhaps that is unrealistic – if we expect business to have a more active role in the betterment of society, will they create fewer jobs? What are your thoughts?
Mel: Well, businesses do a lot more than just create jobs but to me, the area of job creation is one of the biggest inputs for society as a whole. But if it is that valuable then we need to think about how we create safety nets when businesses get into trouble. And what should those safety nets look like?
Alex: Well, for me that brings to mind the idea of universal basic income (UBI). If we gave everyone enough money to survive, regardless of whether they were working or not, then there would be less need for those safety nets – because the creation of jobs wouldn’t be so critical. I read something the other day about re-imagining a world where we don’t actually need to work – that we all spend our time on projects that fulfil us, rather than being driven by the need to earn money. That’s another matter for another day, but I think the question of UBI is an interesting one. People want to buy from businesses that have a positive impact – so that could be the focus, rather than the creation of jobs.
Mel: That’s an interesting place to end because it begs so many more questions. Perhaps we can look at it in more detail in our next blog.
The new role of business will be crucial for the New Ism and it will be fascinating defining what its real purpose actually is.