What is holding purpose-driven business back?
We’ve got to stop holding business back from doing good
Public finances are stretched, many charities are at breaking point and the Covid-19 crisis is far from over. There has rarely been a time when we have so needed all sectors of society to up their game and help tackle the urgent environmental challenges and myriad of social ills, from unemployment to mental health, that face us.
When it comes to the role of business, there is cause for optimism. Business leaders are increasingly chomping at the bit to play a big part in tackling the world’s social and environmental challenges.
In polling released today by the British Academy, it is now neck and neck between those senior decision makers in business who think that the purpose of business is to maximise returns to shareholders, and those who think it is to find profitable solutions to the problems of society.
Moreover, this passion for building businesses that do good is strengthening as the new generation of leaders come through, with over half of those under 35 believing this, versus just a third of those aged over 55 years.
This begs a question: if leaders want their companies to have a positive impact, why are we not seeing this impact at the scale we might expect? The uncomfortable truth is that the businesses who are pursuing a positive impact are doing so despite the surrounding system, rather than because of it.
It is time for the system to catch up with the desire of business leaders to play a more proactively positive role in society, and do more to help support our recovery from Covid-19. But what exactly needs to change and where do we start?
New research by ReGenerate has sought to answer this, by reviewing the major studies of the last decade and interviewing experts from all corners of the system. We found that there are four “I”s holding businesses back from doing good: identification, incorporation, investment and impact measurement.
IDENTIFICATION: Firstly, people cannot identify purpose-driven businesses. Polling by B Lab UK and ReGenerate showed that only 10% of the public find it easy to identify purpose-driven businesses. This matters, because people want to work for them, buy from them and invest in them. Yet, if they do not know who they are, this is obviously going to be hard to do.
INCORPORATION: Second, it can be difficult to find an incorporation type that works for purpose-driven businesses. it is vital to ensure that a company’s purpose is protected amongst the many interests that speak to how it should be run, yet the legal framework surrounding business is, at best, unclear in its protection of purpose, leaving purpose-driven businesses exposed.
INVESTMENT: Thirdly, purpose-driven companies can find it difficult to get purpose-aligned investment. New data has shown that only one percent of private investment into UK companies came from impact funds last year.
IMPACT MANAGEMENT: Finally, purpose-driven businesses often find it hard to demonstrate their impact. The measurement landscape is vastly complicated and the sheer volume of metrics and frameworks leave many businesses, investors and consumers scratching their heads with where to start or how to interpret or compare companies’ impact.
In this moment of crisis we should feel buoyed by the knowledge that business leaders are increasingly eager to run their businesses for more than just the bottom line. Yet this intent is met with a system that holds it back. Is it time to make sure that any business seeking to improve society and protect the environment is fully supported in doing so?
A first step for businesses interested in measuring their social and environmental impact is by using the free B Impact Assessment tool. Any company wishing to certify as a B Corp has its performance assessed by B Lab across all dimensions of its business. These companies are on a journey of continuous improvement to ensure business leverages its power to be a positive force in the world.
