We welcome the first report of the Scottish Business Purpose Commission – a joint initiative of SCDI and the Scottish Government – as an important step in the right direction. Businesses have a vital role to play in creating a Wellbeing Economy that is designed to deliver for everyone’s needs, and protect the health of our planet. But they can only do so if they put the purpose of serving their employees, communities, customers and natural environment at the heart of their business purpose, rather than focusing on short-term returns for shareholders. As the commission says, we need businesses in Scotland to be part of the solution, not part of the problem.
It is time for businesses in Scotland to show real leadership in moving away from outdated business models and support an economy that works for people and planet. No matter where they are on this journey, all businesses must consider this, whether it is defining and communicating their purpose for the first time, developing comprehensive measures of their impacts on society and planet, or reforming their governance and ownership structures to give a stronger voice to employees, communities and the natural environment.
The commission shows that Scotland is already full of inspiring examples of purposeful businesses and the key to success is to share the learning and experience from those examples.
But the commission is also clear that conscientious businesses cannot do this by themselves. Purposeful businesses are not mainstream yet and our economy is still set up to favour those businesses that profit from creating, rather than solving, problems for people and planet. That set up is reflected in the competitive disadvantages, lack of support and limited access to investment for businesses that want to do the right thing.
Governments at all levels need to step up to create the architecture that ensures that the right thing to do for people and planet becomes the right thing to do for business.
The recommendations by the commission represent an important step in that direction and we call on businesses, the UK Government, the Scottish Government and local governments to implement the recommendations of the commission in full. Governments need to support businesses on their journey by:
- Mainstreaming business purpose in business education
- Incorporating purpose into all forms of government support for the private sector
- Building a favourable tax system for purposeful businesses.
But that can only succeed if there is a clear and shared understanding of what “business purpose” means in practice, what counts as contributing to the solutions that we need and what counts as profiting from the problems. This cannot be left to businesses to decide all by themselves, and the commission’s report offers little clarity. We need the UK and Scottish Governments to set a strong direction for businesses and to develop a coherent framework for measuring whether Scotland’s businesses are moving in that direction. We need effective ways of holding businesses accountable and prevent purpose-washing. Not all businesses take their responsibility for people and planet seriously as shown by recent examples (e.g P&O ferry, energy company profiteering from the cost of living crises and lobbying against climate change rules).
To set that direction, we need a wider national discussion to create a shared understanding of the kind of businesses that can contribute to building a Wellbeing Economy and which ones cannot. This process needs to be led by governments but be inclusive and make sure that those with the least power in our current economy are heard.