Businesses in Scotland can best weather current economic storms and seize future market opportunities by becoming purpose-driven, according to a group of business and economic leaders.
The Business Purpose Commission for Scotland has launched a report presenting the business case for purpose and setting out practical actions that businesses, supported by the Scottish and UK Governments, can take.
It stated that while business purpose has come to be associated with bottom-line financial returns to shareholders - above all other stakeholders - this focus on maximising profits has been shown to harm businesses, social prosperity and environmental sustainability.
The report present evidence that now is the time, despite the challenges around the costs of doing business, for companies to embrace a purpose to “find profitable solutions to the problems of people and the planet”.
The report argued that this focus will allow firms to attract and retain customers and employees, and build trust, in Scotland and globally.
A new opinion poll for the commission found that half of Scottish people think that the reputation of businesses in Scotland is excellent or good. However, 45% of people have only a neutral opinion or did not know, while 5% thought that it is bad or terrible, including a higher proportion of people in lower skilled jobs.
While nearly half of people (48%) think that the role of businesses currently have in society is to maximise the returns for shareholders/owners, just over a quarter (27%) think that it is to find profitable solutions to the problems of people and the planet.
When asked about the role that business should have, 65% said they should play a role in finding profitable solutions to the problems of people and the planet.
A separate survey of Scottish businesses by the Fraser of Allander Institute found that more than half (53%) think that finding profitable solutions to the problems of people and the planet best reflects the role that businesses have in society, compared to a quarter of businesses which think that it is to maximise returns for shareholders or owners within the confines of the law.
Making the business case for purpose, the report highlights international evidence of benefits including:
- Customers want to buy from them – two thirds of people will pay more for socially driven products.
- People want to work for businesses with a purpose – around two thirds of Millennials take a company’s social and environmental commitments into account when deciding where to work.
- Businesses are more resilient - 73% of them say a well-defined purpose helped navigate disruption.
- Businesses are more innovative - 53% of businesses prioritising purpose said they were successful with innovation and transformation efforts, versus only 19% not prioritising it.
The commission acknowledged the current difficulties for many businesses and called for support to make it as easy as possible for more businesses to become purposeful.
The report describes examples of purpose-driven Scottish businesses of all sizes and sectors already leading the way, including Advanced Clothing Solutions, Amiqus, Edrington, Macphie, Jerba Campervans and SSE.
The commission has set out a vision that by 2030 all businesses in Scotland will have become purposeful businesses which profit from finding solutions for people and planet.
The report made 12 recommendations for business, governments and other stakeholders, including:
- Encouraging businesses to define, communicate and measure their business purpose.
- Establishing a world-leading hub for Environmental, Social and Governance (ESG) investment.
- Amending company law to require businesses to state and report on their business purpose.
- Mainstreaming and scaling-up public and private sector business support for purpose-led business.
Amanda Young, chief sustainability officer at abrdn, co-chair of the commission, said: “I believe passionately that consideration of wider issues affecting society and the world we live in should be at the heart of business strategy and indeed as engaged investors, we expect a full range of long-term risks to be considered as we all work towards a more sustainable future.
“The report is a call to action to businesses of all shapes and sizes to develop and nurture their own business purpose and I welcome the fact that practical recommendations are provided to help businesses along that journey.”
Colin Mayer, emeritus professor of management studies at the Blavatnik School of Government and Saïd Business School, University of Oxford, co-chair of the commission, said: “This landmark report provides a clear and compelling case for purposeful business, and the substantial benefits that the Scottish economy, people, and environment will derive from it.”
The Scottish Government supported the creation of the commission and Employment Minister Richard Lochhead said that the government will now consider the recommendations.
“The report presents clear evidence that now is the time for businesses to embrace a purpose to find profitable solutions to the problems of people and the planet.
“This focus will allow them to attract and retain customers and employees, and build trust, both in this country and across the world.”
The Business Purpose Commission for Scotland is a group of 25 leaders from businesses of all sizes, social enterprises, the voluntary sector, trade unions and academia.
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