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Lancor is a cooperative with 89 employees and 76 years of history. The company started off as a family business and is now specialised in the production of elevation machinery and wind generators, with a large additional portfolio of innovation and development projects. 

In 2005, the business was in a moment of crisis when Koldo Saratxaga from NER Group met with them and offered a transition towards a model of self-organization. In a leap of faith the employees decided with near unanimity to embrace the NER group model. In 2013 the cooperative Lancor 2000 S.COOP was founded. 

This was a radical change for the organization. The team had experienced many tensions and mistrust in the past: managers had committed to a workload that workers in the workshop didn’t feel was realistic. The change was challenging for former leaders who had held their positions for many years. Also for the workers, who struggled as they suddenly had to coordinate work themselves in their teams. 

“Most of us who coordinate have started in the workshop, like me. We got the opportunity from our coworkers to be coordinators.”
recalls Javier Dosuna, General Coordinator at Lancor

Javier Dosuna, Lancor

Today, Lancor has worked for over 10 years with a ratio of 99.5% in-time delivery, something that few manufacturing companies ever achieve. When the cooperative started the transformation, the business was depending on 4 clients, a situation that created a great risk for the business. Today the team has managed to widen the client and product portfolio. 

“We have won the trust of people through absolute and total transparency. Every month we meet and all information is shared with relation to finance, client situation etc. and we make decisions around investments where everyone can contribute and is represented.”
comments Javier Dosuna

 

From a situation of 450k Euros of loss in 2005 the company became profitable in 2006 and generated a €1M profit in 2018 (with a turnover of around €20M) with almost the same number of employees. 

The NER Group model is flexible but never the same, so we have adapted it to our needs. We are what we want to be and work as a combined entity that makes decisions about its development.”
adds Javier Dosuna, General Coordinator at Lancor

 

NER Group is an association in which diverse organizations, united by a shared organizational model, approach and culture that fosters self-organization, share experiences, synergies and knowledge. The group represents nearly 2,700 employees with an annual turnover of approximately €400 million. 

  • This is an extract from the forthcoming ‘The Business of Wellbeing – Alternatives to Business as Usual’ Guide, launching in January 2020. For more extracts, please click here
  • To stay informed of the release of each extract, please sign up to our newsletter here.

Nobody is born a perfect leader or entrepreneur. To be good at either means being able to take a risk. A leader might at first fear such actions, as they might think it appears as ‘weak leadership’, or not ‘leading from the front’. These fears are understandable, but as a business matures we naturally need to create space for participatory leadership…you can’t do everything yourself!

Lili David, Sociocracy 3.0

“Decentralize as much as possible, and retain as much influence as necessary.”
Lili David, Co-Developer at Sociocracy 3.0

 

Skilled leadership comes through an awareness of yourself as well as your changing external conditions. Understanding how the two combine is critical to knowing how your leadership can best serve the business. 

We have identified two key features of leadership and participation in a business that can flourish in a wellbeing economy: Trust and Control

 

Trust as a balancing act 

According to recent 4 year research study on team effectiveness carried out by Google, psychological safety was identified as the single most important dynamic of an effective team compared to a less effective one. Their research also revealed that sales teams with high ratings for psychological safety actually brought in more revenue.

A climate of openness with the possibility of admitting errors and speaking about them openly, is one of the key factors that also Harvard Business School Professor Amy Edmondson confirms to be crucial for psychological safety. 

Miki Kashtan, author

When we don’t experience trust, as when we don’t experience safety, we shut down, protect, and hide our vulnerability. We also, in both cases, tend to place responsibility for our experience on the outside.
Miki Kashtan, author and international CNVC trainer (from her blog post) 

 

As a leader you can support a sense of safety by framing challenges as open learning questions that require everybody’s input. 

 

Marcos Leite, OLX Brazil

“We need people who challenge the status quo, and openness in the management team to be challenged.
Marcos Leite, EVP & Chief Commercial Officer at OLX Brazil

 

Showing your own fallibility by openly requesting support and modelling curiosity by asking many questions can also help to stimulate a learning environment that creates space for innovation, exploration of new ideas and the possibility to make mistakes.  

 

Feeling good in and out of control 

We like to feel in control and often delegating responsibility is a big challenge for leaders. Sometimes, because of a lack of knowledge and maturity in the team. Sometimes because the leader struggles to let go of control. 

How can we provide the minimum amount of structure to allow the maximum amount of autonomy in our team; the best value to our customers; whilst making the leader feel good being ‘out of control’?

Erinch Sahan, WFTO

To move towards wellbeing economy you need to give up power, are the decision makers ready to do it?
Erinch Sahan, Chief Executive at World Fair Trade Organization

 

‘Giving up’…or as we would rather put it…’sharing’ power can be one of the best things a leader can do for the organisation. The Google study has identified dependability, clarity and structure as additional key elements for effective teams. 

 

Distribute the power to influence, to enable people to decide and act for themselves within defined constraints. Being clear about responsibilities and constraints when you delegate, as well as offering support if necessary, are key to the success of effective collaboration.Lili David, Co-Developer at Sociocracy 3.0

 

The benefits of effective delegation of responsibilities can be many: Firstly, delegating decision making creates a broader accountability base within the business. Secondly, decisions can be more effective as they no longer just rely on one person’s gut. Decisions can be made by those closer to the effects of those decisions.

Activating collective intelligence across the system

Ultimately, sharing control can liberate a leader as the business grows to provide guidance and strengthen the capabilities of their team. It can afford them to play the role of coach and mentor in areas they once dominated themselves.

We want to spend the time we have available where we can create most value, and often leaders create value by serving as motivational leaders, inviting in clarity and structure where it is needed and creating a culture of learning and innovation. 

James Vaccaro, Triodos Bank

We need to support founders with the elements they struggle with most so they can focus on what they are good at and where they can create impact.
James Vaccaro, Special Advisor at Triodos Bank

 

 

 

 

At the end of 2017, Auchrannie resort on the island of Arran in Scotland became the first Scottish resort to transition to a model of employee ownership. A trust now owns 100% of the company’s shares on behalf of its 160 employees.

The co-founder, and Managing Director since 2010, Linda Johnston said of the employees in relation to the transfer:

“They realise that what each of them does will affect the future success of the business and that this is directly linked to their own success, so they have already become more engaged in making the business better and understand the power and influence each and every one of them now has on their own future.”

 

New targets for the business

New efficiency targets for the business, agreed by the ‘new owners’, created the conditions to become a Real Living Wage Accredited Employer in April of 2018.

While the efficiency targets helped boost profitability, paving the way for the introduction of the Real Living Wage, there was also a recognition that the introduction of the wage would in and of itself support further financial benefits. These included lower staff recruitment costs (due to higher retention), greater productivity and increased occupancy from an improved reputation.

Linda Johnston, MD of Auchrannie resort

“Employee ownership will give the whole Auchrannie team a stake in the continued growth of the business. All of us will work together to build a more efficient, sustainable and profitable business.”
explains Linda Johnston

 

Since the acquisition of a 16-room guest house in 1988 by Linda and her late husband Iain, the resort has become home to two 4-star hotels, 30 5-star self-catering lodges, 14 luxury ‘Retreats’, two leisure clubs, 3 restaurants, children’s playbarn, a destination spa and outdoor adventure company.

 

Ownership transfer as an exit strategy

The ownership transfer was born of a desire for an exit strategy by the Johnston family (sole owners of the resort) that would allow the business to continue to flourish as well as upholding the ethos of the company, maintaining and motivating the team plus continuing the community’s access to the facilities of the resort.

“We are confident that the collective efforts of our fantastic team will continue to strengthen Auchrannie’s customer care and community focus as well as improving the sustainability of the business going forward.”
adds Linda Johnston, MD and former owner of the resort

Crucially, the transfer arrangements were designed for it to be affordable to the business to be able to reinvest in the future as well as financially reward the employees after the transfer. The previous shareholders will be paid out of the profits of the business over the next 25 years.

  • This is an extract from the forthcoming ‘The Business of Wellbeing – Alternatives to Business as Usual’ Guide, launching in January 2020. For more extracts, please click here
  • To stay informed of the release of each extract, please sign up to our newsletter here.

 

No founder will ever forget the day their business legally came to life. The birth of this new entity comes with a great sense of responsibility. Many business owners feel a great deal of emotional attachment to their creation as it unfolds, develops and grows. 

Ownership and governance play a crucial role in business as we attempt to transition towards a wellbeing economy. Holding on to what is most important can require reimagining what it means to own something. Here are 3 important elements to consider: 

  1. Decision making
  2. Growing pains
  3. The Social and the Environmental

How can ownership support effective decision making?

Recent research has shown that more than two thirds of employees are not fully engaged in their work, affecting motivation, commitment and ultimately also productivity.

James Priest, Co-developer of Sociocracy 3.0, LearnS3

“Collaborative endeavours will be more effective if people affected by decisions are involved in making them, or at least that they are able to influence decisions that affect them, on the basis of sound reasons for doing so.”
 James Priest, Co-developer of Sociocracy 3.0, LearnS3

 

According to a recent McKinsey survey, we spend about 37% of our work time on decision making.

Decision making, made in the absence of an understanding of the full picture, can affect the level of agility to respond to a changing environment (changing market demands, risk factors, regulations etc.). 

In commonly used ownership structures, influence and business information are mostly centralised to a few decision-makers. As a result, employees, customers, and affected communities and the planet are often left out of decision-making processes.

“Management hierarchies centralize decision making. While this is effective in some contexts, collaborative endeavours are more likely to succeed if you shift responsibility for significant elements of decision making close to where value is created.”
 James Priest, Co-developer of Sociocracy 3.0, LearnS3

 

Ultimately, ownership should not be a roadblock to productivity. It should enable it by delegating governance to those affected.

How can ownership affect our trajectory?

Many companies started out life in response to a social need – sometimes influenced by their founders’ religious beliefs. The UK confectionery Cadbury’s was begun by a Quaker. The Spanish cooperative Mondragon by a Catholic priest. The UK retailer Marks and Spencer by an impoverished Jewish boy from Belarussia. These organizations, like many others, have struggled through organisational growth and change of ownership to stay true to, and serve, their initial purpose. 

An ownership and governance structure that supports affected key stakeholders to have a voice in decision-making can help organisations to stay true to their mission. 

Katherine Trebeck, author of The Economics of Arrival

“Investor demands on business can take away from a business’s original mission. Without ownership and governance models designed to protect the interests of all stakeholders, there is a risk that actions focussing on the short-term will prevail.”
says Dr. Katherine Trebeck, author of ‘The Economics of Arrival’

 

As companies grow, they often start to be viewed as commodities, controllable by the highest bidder. Business-as-usual governance models are designed to maximise shareholder influence and often ignore stakeholder interests.

 

Martin Rich, FutureFit

“Listed companies are owned by nobody because they’re ostensibly owned by everybody, the result is a lack of responsibility.”
Martin Rich, FutureFit

 

This means economic interests and short-term profit gains can often overrule organisational values and principles, social and environmental concerns and even the long-term success of the business.

Even Patagonia, often held up as the poster child of sustainability, is wrestling with these questions as they head north of the $1bn mark in annual sales. They are beginning to question whether their scale is a hindrance to being truly regenerative.

Hunter Lovins, President of Natural Capitalism Solutions

“Scale is a real problem for change.”
Hunter Lovins, President, Natural Capital Solutions

 

As a business grows and occupies a new role in the market, there is a need to evolve to a model of stewardship. This means influence is delegated to a range of stakeholders to ensure informed decisions can be made by those affected.

 

Who’s responsible for the social and the environmental?

Traditionally, consideration of social and the environmental impacts was an afterthought for businesses, once the business of the economic i.e. financial had been taken care of. That has begun to change with statements from various business groupings that profit maximisation will no longer be the sole focus for their business.

Patrick Andrews, Co-Founder of Human Organising Co.

As a general rule, ownership brings responsibility. So it’s something of an anomaly that the owners of companies have no legal responsibility for their actions. If you own a share in a company that breaks the law, pollutes the environment or even kills someone, you can’t be touched. Is this not strange? 
Comments Patrick Andrews, Co-Founder of Human Organising Co.

 

However, saying it and actually doing it are two very different things. One way to help ensure we move from words to action is by bringing other voices into the governance model. Check out our first case study – Riversimple for such an example. Another is employee ownership, a model discussed in our second case study, that of Auchrannie Resort.

By Lisa Hough-Stewart

Last week WEAll was delighted to partner with Thomson Reuters Foundation to deliver a lunch event on wellbeing economics as part of their flagship Trust Conference in London.

Energy and ideas were flowing as a packed room full of leaders from the worlds of business, development and philanthropy (and beyond) discussed how we can better work together to transform the economic system.

WEAll Executive Chair Stewart Wallis inspired participants with a short introduction, explaining that “he’s been trying to change the world for a long time” and that what he had learned from over 50 years of work was that:

“Where a cause is both just & urgent, and we collaborate across barriers, it’s possible to achieve the seemingly impossible”

After Stewart outlined what the vision of a wellbeing economy looked like, participants round the table shared their dreams for what would change in the next ten years to help bring this about. Some named equality for all; others talked about decision making and monetary flows being based on solutions not problems; and we shared ideas about bringing all voices to the conversation and changing power structures.

It was clear that the vision for the world we want to live in is rich and shared by many – how we get there is less clear. This is where WEAll comes in – and Stewart invited everyone to participate as members or in some other capacity with our work.

The event was a great starting point for new ideas and relationships, and we are excited to build on this strong beginning.

It came as part of the two-day Trust Conference, which showcased innovative examples of pioneering business practices around the world and explored solutions to human rights challenges.

One highlight was a celebration of the Wellbeing Economy Governments partnership, with video clips of leaders Nicola Sturgeon of Scotland, Jacinda Ardern of New Zealand and Katrin Jakobsdottir of Iceland helping raise awareness of this important project.

I was personally incredibly impressed with two businesses in particular that we heard about: Nik’s Fudo in Geneva makes feminist economics a reality, providing business opportunities to migrant women enabling them to share their cooking skills and amazing food. Annie Cannons in the Bay Area trains and employs survivors of human trafficking in their cutting edge coding and tech company.

Both of these examples give me hope that innovation, entrepreneurial spirit, feminism and kindness can come together to support the type of future businesses that should one day be the norm. This is a wellbeing economy in action.

Wellbeing economics featured prominently in media coverage of the event, with Nicola Sturgeon’s TED talk being quoted:
“The goal of economic policy should be collective wellbeing: how happy and healthy a population is, not just how wealthy a population is.”

Together with a number of local and international stakeholders and investors, Futuro Forestal developed the ‘generation forest‘, a combination of the dynamics of a natural forest and reforestation.

This combined approach allows the organisation not only to tackle climate change by absorbing carbon dioxide and ensuring biodiversity, recover soils and water sources, it also helps to make a viable business case that reduces poverty locally by making sustainable forestry possible and economically viable. 

Andreas Eke, Futuro Forestal

“The natural forest in itself doesn’t have a viable business case, and political and financial entities lack the ability to create a system where environmental services are paid for.” Andreas Eke, Director of Futuro Forestal

Even though the company is largely driven by foreign impact investments, the business model ensures long-term profitability. Futuro Forestal attempts to be a game changer for the forestry sector:

“Generation forest is a concept, not a product. We need others to use it, so we can be on time with climate change. Our work is a small drop into the ocean and we have to be successful with what we are doing, so others copy what we do.” explains Andreas Eke.

With alarming climate change data, Futuro Forestal is in the process of expanding its approach through land ownership in addition to forest management and environmental services provision, creating an asset in which to invest.

What does success mean at Futuro Forestal?

 

“The biggest success moment for me was when the Jaguars came back to an area where we had reforested; an area that had been a cattle field 5 years ago. That was a moment of plain fulfilment, we celebrated this moment with champagne.” remembers Andreas Eke.

Futuro Forestal started off as a small family retail forestry company that has, over the last 25 years, transitioned to one of Latin America’s largest and premier providers of tropical hardwood, with reforestation of over 9000 hectares, the creation of 4,500 hectares of private reserves and FSC and bcorp certification. Find out more about generation forest and how to support the initiative here.

Images in this article: Copyright FF, 2 and credits to 3 Emir Lebedev.

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This is an extract from the forthcoming ‘The Business of Wellbeing – Alternatives to Business as Usual’ Guide, launching in January 2020. For more extracts, please click here

A clear future vision is key to redefining the way we do business today. If we want to become part of the solution, it is essential to create time and space to reflect on what kind of future we would like to contribute to; how can we make the wellbeing of people and the planet an integral part of our business goals? 

Marcos Leite, OLX Brazil

“We need to think beyond shareholder value and aim for improving people’s lives.”
Marcos Leite, COO, OLX Brasil

 

A business that will succeed is one that is able to make decisions that favour people and the planet where there might be a trade off with the goal of profit maximisation.

Why does common business logic no longer serve us?

The assumptions upon which the current economic system were built, simply no longer hold true: Jean-Baptiste Say articulated in 1803 that ‘natural resources cannot be exhausted’, therefore they are ‘out of the scope of economic sciences’.

Thomas Pikkety in his book ‘Capital’ showed to be false the assumption that free market capitalism will ensure the returns from capital and labour stay in balance. The returns from capital will always exceed those from labour under the current system, inevitably leading to ever growing inequality in economic life. 

Daniel Christian Wahl

“The economic and monetary system is still driving the process: Our current system has an inbuilt growth imperative and structure drives behaviour. In all of our good intentions to redesign things, we are not going deep enough. We need to be more radical if we want to make a difference.”
says Daniel Wahl, author of ‘Designing Regenerative Cultures’*.

 

To compound all of this, current company law (in many jurisdictions) is not explicit in its support for businesses to incorporate environmental and social impacts into their approach to business.

 

So, what can we do?

Most decision-makers gradually move into improving employee wellbeing ,supplier relationships and addressing community concerns to secure their market position and talent. While this has certain value, often the real deal lies in finding the hidden opportunity: 

How can we be the first to rethink our industry model, delivering products and services that add to human and ecological wellbeing? 

Given the increasing importance of environmental and societal challenges, redirecting the value creation of our businesses’ product or service offerings to serve society and the planet ensures business survival. In most cases this also means involving colleagues, and stakeholders in the process and adapting the vision of a wellbeing economy to each local context: 

Rehema Isa, Womanomics

Until we picture wellbeing in different cultural contexts we will not know what it actually means.”
Rehema Isa, Founder of Womanomics, South Africa

 

 

Ultimately, it also comes down to the question of how we want to leave this place behind for future generations and what a fulfilled life would truly look like for us as individuals, those we care about and for those we do business with.

*Find out more about Designing Regenerative Cultures by Daniel Christian Wahl here.

Business plays a vital role in the transition to a wellbeing economy. It is a vehicle for creativity and innovation with the potential to be one of the most effective advocates for change.

Working together with government and civil society, businesses have a major role to play in creating the means of meeting human and planetary needs. 

In our current system, finance and the economy tend to serve themselves rather than serving society and the planet. A wellbeing economy is an alternative approach, in which we intend to reverse these effects: Finance serves and incentivises the economy, the economy serves society and ultimately the planet as part of its intrinsic purpose:

Martin Rich

Martin Rich, Future Fit

“Today society and planet are serving business while business needs to be the servant of society.”
Martin Rich, Co-Founder and Executive Director at Future Fit

 

Given the complexity of the ecosystem we are part of, there is no one path that can help a business transition to a new economic system, and no one model for a business that flourishes in the economy of the future.

We will need multi-stakeholder collaborations to address today’s most pressing issues. We will need businesses playing a vital role in driving innovation and finding solutions that ultimately allow society and the planet to flourish.

Here are a few elements that such businesses are likely to have in common:

  • Connection – a corporate culture that aligns the organizational purpose with collective values 
  • Dignity – a business model that creates the means for employees, customers, suppliers and other stakeholders to live dignified lives
  • Fairness – a business model that distributes wealth in a way that supports equity  and equal opportunities
  • Nature – use of natural resources that flow back into ecosystems in ways that support regeneration rather than cause harm 
  • Participation – balanced and values-based relationships with all stakeholders 
Baby steps or taking the big leap?

Most businesses take small incremental steps to improving their impact on society and the planet, without compromising profit. 

In times where we are surpassing our planetary boundaries, many argue that it is simply not enough to be sustainable. We need to build regenerative systems that allow us to make up for the damage caused and add value back into the ecosystem in which we live. Kate Raworth has developed a corporate to-do list, in which she lists different levels, in which businesses respond to the environmental crisis. She maps stages from ‘doing nothing’ to ‘being regenerative’. 

But to get to where we need to, requires building a bridge and a bridge is built from both sides.

Kevin Bayuk

Kevin Bayuk, Lift Economy

“There is a paradigm shift between a new (transformative) economy and the old economy.” says Kevin Bayuk from Lift Economy
“Some people think if it is not going to change the world it is terrible, but we need incremental change too in order to build momentum for new economic models to emerge.”

 

No matter whether you decide to attempt a radical shift or to take an incremental approach: an essential first step towards alternative ways of doing business, is to build individual and organizational awareness of how our current business operations impact, and potentially damage, society and the planet.

Collective awareness is a first step to collective learning, and we will not be able to do this transition on our own. Once the value of taking an alternative path is recognised across the organisation, ideas and opportunities will emerge and more people will be willing to explore alternative ways of doing business.

This is an extract from the forthcoming ‘The Business of Wellbeing – Alternatives to Business as Usual’ Guide, launching in January 2020. For more information and further extracts, please click here. 

The circularity paradox in the European steel industry

What happens when solutions to economic system challenges start to create their own problems?

Researching the European steel industry, Dr Julian Torres discovered that the more integrated supply chains are, the easier it is to track the lifecycle of steel alloys and the elements that go into them. Higher levels of integration make it easier to bring steel back via reverse logistics without losing too much value. The more you do this, the less iron ore you need to mine and melt, and the longer the reserves of high-grade iron ore – which needs less energy to transform into steel – will last. And integrating supply chains does not necessarily mean having the different steps all within the same company.

Recycling, remanufacturing and refurbishing are indisputably important tools for reducing our consumption of natural resources. These activities contribute to what scientists call circularity: making sure we use materials for as long as possible, over and over, so that we exploit nature less and less.

Doing so requires creating what are called “secondary markets”, where used materials are gathered up, reworked and injected back into the economy. While this is an essential part of creating circularity, there can sometimes be unintended and negative consequences. A striking example is the secondary metals market: it has been a success), creating new jobs and business opportunities), but the environmentally friendly goal that it once had is no longer a priority.

In Europe, we recycle more than 70% of used steel on average, and just over 30% of all recycled or remanufactured steel is produced in furnaces that use electricity rather than burning coal. Not bad, but no longer enough when considering the increasing steel demand from developing nations, which are growing rapidly.

 

Read Julian’s recent piece for The Conversation here explaining his findings, and what the steel industry can do to improve.

He has also created this entertaining video to help explain the circularity paradox – a.k.a. the “little monster” Scrappy! Check it out, and be sure to share it.

Dr Julian Torres is a recent graduate of the AdaptEcon II PhD programme. During the Programme’s final retreat in Iceland in August he participated in workshops with the WEAll Amp team. Julian received funding from the European Commission’s Horizon 2020 Programme via a Marie Curie Fellowship on Excellent Research (grant agreement 

675153). Julian is a member of the International Society for Industrial Ecology and a Board Member of the Jean Monnet Excellence Center on Sustainable Development.

Photo by Scott Webb from Pexels

Dr  Yannick Beaudoin is a WEAll Global Council member. He’s also Director General of the David Suzuki Foundation in Canada (a WEAll member organisation).

He recently appeared on cosmetics industry podcast EcoWell to discuss the wellbeing economy and how sustainability and alternative economic thinking apply to the cosmetics industry.

So, check out the original podcast here, or listen below:

Reposted from Junxion 

Capitalism is suffering from a crisis of legitimacy and nowhere is that truer than in the banking sector. Following the 2007/8 crash, banks have focused on compliance and getting their house in order, but they have broadly failed to win back the trust they lost.

Working together in a process convened by the UN Environment Finance Initiative (UNEP FI), a group of 30 banks have developed the Principles for Responsible Banking—a framework for all banks to show that they understand their purpose is to serve and contribute to meeting society’s needs and individuals’ goals. Following a six-month global consultation, the final version of the Principles and supporting documents were released this week (July 25, 2019). The Principles will be opened for signature on 22 September 2019 at the UN General Assembly.

To cite r3.0—the multi-stakeholder platform that promotes Redesign for Resilience and Regeneration of which Junxion is an Advocation Partner—it’s the kind of ‘radical collaboration’ needed for system change. The Principles for Responsible Banking aim to create nothing less than the sustainable banking system of the future.

Who’s involved?

The 30 founding banks come from around the globe and include China’s ICBC—the world’s largest bank—BNP Paribas, Barclays, Citi, National Australia Bank, BBVA and South Africa’s Land Bank. A further 40-plus banks have committed to becoming signatories and these include Standard Chartered, ABN-AMRO and Amalgamated Bank from the US.

There are also a number of non-bank endorsers of the Principles—banking organizations such as the European Banking Association and the World Savings Bank Institute as well as specialist service providers such as Datamaran and responsible investment advocates such as ShareAction.

What are the Principles for Responsible Banking?

The Principles for Responsible Banking are a framework for all banks to show that they understand their purpose is to serve and contribute to meeting society’s needs and individuals’ goals.

The six principles signatory banks commit to are:

  1. Alignment We will align our business strategy to be consistent with and contribute to individuals’ needs and society’s goals, as expressed in the Sustainable Development Goals, the Paris Climate Agreement and relevant national and regional frameworks.
  2. Impact & Target Setting We will continuously increase our positive impacts while reducing the negative impacts on, and managing the risks to, people and environment resulting from our activities, products and services. To this end, we will set and publish targets where we can have the most significant impacts.
  3. Clients & Customers We will work responsibly with our clients and our customers to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.
  4. Stakeholders We will proactively and responsibly consult, engage and partner with relevant stakeholders to achieve society’s goals.
  5. Governance & Culture We will implement our commitment to these Principles through effective governance and a culture of responsible banking.
  6. Transparency & Accountability We will periodically review our individual and collective implementation of these Principles and be transparent about and accountable for our positive and negative impacts and our contribution to society’s goals
How will banks implement the Principles?

Within four years of signing the Principles banks must fully implement the three key steps of analyzing positive and negative impacts, target setting and implementation, and reporting on progress.

The impact analysis has to ‘identify the most significant (potential) positive and negative impacts on the societies, economies and environments where it operates’ and identify the business opportunities to increase the positive and decrease the negative ones.

Secondly, banks have to set two or more targets covering at least two of the priority impact areas. These targets have to be SMART (specific, measurable, achievable, relevant and time-bound). Banks have to begin taking steps to meet the targets, including establishing a governance and oversight structure to monitor progress.

Thirdly, banks have to publish their impact analysis and report their progress in implementing the Principles and meeting their targets, and this self-assessment has to be subject to limited assurance.

So what?

A responsible business professional might say this is sustainability 101 for banks: Set a vision, improve performance with the help of some targets, engage with all the people that matter in the shape of your customers and stakeholders, look at how you make decisions and your company culture and report on progress.

But it’s not just any old vision that the banks can set for themselves: it’s a vision of what the world needs. The draft Implementation guidance for Principle 1 talks about ‘creating consistency between the bank’s value creation model and the SDGs and the Paris Climate Agreement …’. This is big: the Principles are normative, explicitly calling on banks to work towards how the world should be.

It’s not just any old vision that the banks can set for themselves: it’s a vision of what the world needs.

And this theme is continued in Principle 2 about measuring impact and setting targets. On the face of it, that looks like any sound sustainability programme. But those targets have to meet or exceed the targets in the SDGs and the Paris Climate Agreement. Again, signatories have to contribute explicitly to what society needs.

And if those targets are judged to be failing to address that bank’s most significant targets or are not in line with the ambitions in the SDGs and Paris, then that bank can be removed from the signatory list. So, the Principles have teeth.

Will the Principles achieve any real change?

There are definitely reasons to be cheerful. The Principles elevate sustainability to the strategic level—this is more than some risk analysis on an individual transaction or an ESG (environmental, social and governance) screen on a particular portfolio. The Principles are saying society’s goals have to form an integral part of banks’ own strategic objectives.

And they are deliberately designed so banks can ‘start where they are’. No matter their starting point or context, developed or developing country, banks can get on board so the Principles create a framework for the global banking industry.

A key determinant of how much progress banks will make to delivering on the promise of the Principles lies  in the interpretation of ‘alignment’—a question that was raised In the public consultation that just closed. The official answer is that ‘Alignment requires that a bank’s business strategy is consistent with and geared towards making a positive contribution to the SDGs, the Paris Climate Agreement and relevant national or regional frameworks, where a bank is best positioned to do so through its business.’

This is clearly designed to leave space for individual banks to make their own judgement. But James Vaccaro, director of strategy at the ethical Triodos Bank, one of the founding banks that led the development of the Principles, is confident that the Principles are well designed to achieve change across the banking system:

“We have our ‘light on the hill’ in the shape of the SDGs and Paris and we have that ‘ramp effect’ where companies make progress as they individually go through their iterations of analysis, engagement and implementation. But crucially there is sharing between the individual signatory institutions as well. And that means you will have a race to the top, which creates the right conditions for non-linear change and the potential for the banking industry to take some really big steps towards the world we want.”

What’s the big opportunity here?

This is much more than a voluntary industry initiative that banks glibly sign up to, warns Madeleine Ronquest, Head of Environment, Social and Climate Risk at South Africa-based FirstRand Bank—also a founding bank of the Principles:

“We want to properly apply our minds so that the process and the information we publish will stand up to scrutiny. And there is a lot of groundwork that needs to be done in advance, engaging critical stakeholders, internally and publicly, spending as much time as may be required and being as inclusive as possible. The Principles are very aspirational and very ambitious and that was the intention in developing them. Signing them represents a serious commitment.”

The real opportunity of the Principles is to convince a sceptical world that businesses can and will collaborate for the common good.

So, they are not going to be easy to implement—but we all know they are necessary. The Principles represent an outstanding opportunity for the banking industry to do the right thing. To demonstrate that they are serious about backing up their social purpose statements with real impact that ‘achieves shared prosperity for both current and future generations’, as the Principles’ mission statement says.

And given the crucial role that finance plays in society’s collective efforts to create a better future, there is a lot riding on how banks step up here. It’s more than securing their own legitimacy and creating the sustainable banking system of the future, it’s about financing the change we need to see in the world.

Even more than that, we need these industry initiatives—these ‘meso-level’ activities in r3.0 parlance – to succeed and society has to see that they do. The real opportunity of the Principles is to convince a sceptical world that businesses can and will collaborate for the common good.

It’s what we at Junxion call being ‘audacious, together’. It is leadership.

 

Adam Garfunkel is an owner and Managing Director at Junxion. For more than 20 years, he’s been involved in corporate sustainability initiatives and led the team that created the communications strategy for the Principles for Responsible Banking.

This piece was originally posted on CDS Scotland

It is ten years since I took up my role as director at Co-operative Development Scotland. As someone who is passionate about creating a progressive economy – one that delivers for people and planet – it has been a real privilege to lead CDS over the past decade. As I prepare to move on, I’ve been reflecting on what we’ve achieved.

Initially on the edge of the economic development agenda, co-operative models have shifted firmly to the mainstream. Thousands of businesses and individuals have benefited from the 290 consortium co-operatives, community co-operatives and employee-owned businesses established in Scotland over the past ten years.  We have seen a fivefold increase in employee ownership since we started promoting the model and the pace of take-up is accelerating.

This growth has led to Scotland being viewed as a pioneer in co-operative development, with many aspiring to echo our approach. Over the years, I have been invited to speak at a range of international events and forums, including in the co-operative heartlands of Italy and Spain. A true recognition of our success.

In 2018, the Ownership Effect Inquiry, an independent review into employee ownership’s impact on the economy, recommended that the UK Government replicate “Scotland’s successful scheme that has delivered a tenfold return on investment for every £1 devoted to on-the-ground support.”

There are a number of reasons behind Scotland’s success in this area. We’ve had exemplary support from the Scottish Government, which recognises the key role that co-operative models can play in delivering its economic goal of Inclusive Growth – a fairer economy which distributes wealth more widely and addresses inequalities.

An encouraging amount of cross party support has also led to increased dialogue around the models, with parliamentary debates on the importance of co-operatives and employee ownership to the Scottish economy. I have frequently been invited to contribute to meetings of the Economy, Jobs and Fair Work Committee (and its predecessors), where I’ve shared some of Scotland’s many success stories as evidence of the wider economic and societal benefits of co-operative working, bringing these to the forefront of the economic agenda.

The Scottish Government’s commitment to promoting co-operative models was further demonstrated with last year’s launch of ‘Scotland for EO’, an industry leadership group co-chaired by Jamie Hepburn, Minister for Business, Fair Work and Skills. Led by industry working in partnership with the public sector, it has a championing, influencing and facilitating role which aims to build and strengthen Scotland’s EO community. ‘Scotland for EO’ is built on the immense pride and passion displayed by Scotland’s employee owned businesses in endorsing the model over the years – hugely valued support which has been vital in effecting wider change.

Also key to the surge in awareness of co-operatives is the work of a dedicated team here at CDS, whose commitment and approach to promoting the models has been instrumental to their growth. From raising awareness among professional advisors to providing businesses with advice and financial support, the team is passionate to drive momentum. With the ongoing support of our colleagues at Scottish Enterprise, Highlands and Islands Enterprise and Business Gateway, we have continued to attract increasing demand for our services, and as I move on, there is a strong pipeline of businesses looking to adopt co-operative models, particularly EO.

While progress has been significant, there remains work to be done to reinforce the benefits of co-operative models, and the route they offer to a more equal economy. As I hand over the reins to my successor Clare Alexander, I feel very positive that our activity over the past ten years has paved the way for continued change.

With a wealth of experience in driving better business through workplace innovation, Clare is ideally positioned to fully maximise the opportunities, and further drive the uptake of co-operative models in line with the Scottish Government’s Inclusive Growth Strategy. With her belief that “business leaders should be predisposed to see the power of their people”, her values are synonymous with those of ‘Scotland for EO’. Her position on the board will see her working towards the group’s ambitious goals of increasing the number of employee-owned businesses in Scotland to 500 by 2030, and by 2040 to have created the best environment for EO businesses to thrive with Scotland having the highest density of EO businesses in the economy as a consequence.

Meanwhile, I plan to continue to promote inclusive approaches through the Wellbeing Economy Alliance – a new global collaboration of organisations, movements and individuals working together to change the economic system to one that delivers human and ecological wellbeing. I look forward to building on what we’ve achieved over the past ten years and continuing to promote co-operative and employee ownership models as a way of achieving a fair and inclusive society.

There’s been a lot in the news in recent times about the sheer volume of money sloshing around the system and how it is being put to use. In our opinion at WEAll, nowhere near enough of it is finding its way to productive regenerative activities.

Money is finding its way into many areas of the economy that do not take a long-term nor a wellbeing view. Take for example how so much of bank lending since the 2008 Great Recession has in fact found its way back into the housing sector…the very sector at the heart of that crisis…or into sending personal debt to levels higher than they were in the run up to the crisis, or simply being used in share buy-back schemes.

This focus on rentier returns – compound interest derived from mortgages or interest rates on private debt (credit cards, loans for cars, education etc.) – or simply concentrating wealth through returning business ownership to private hands is stifling the transition to a truly sustainable and stable economy that truly has the wellbeing of all at its heart.

In this context,  it was incredibly heartening, although a relatively rare news item, to read the other day that the founder of a successful UK based audio and visual goods retailer – Richer Sounds – is not extracting the maximum personal wealth from selling his company but investing in its long-term future by handing over a controlling stake in it to an employee owned trust.

Democratic ownership

Employee owned trusts are not a new invention, but the rarity of this news in today’s economy is striking. The scarcity of the act should not diminish the significance, however.

It’s significant for a few reasons. Firstly it is a recognition by the founder – Julian Richer – that the business’s employees are a key part of the business’ previous and future success. Politicians love to talk about ‘wealth creators’ as though entrepreneurs operate in a vacuum receiving no support from outside. Undoubtedly entrepreneurs are a vital part of the success of any organisation and the business world, but not the only one.

Secondly, it is also a recognition that giving employees a stake in their own financial future makes long-term financial sense for an organisation. Making explicit the link between individual performance and organisational financial health can be motivational. Employees, now also owners of the business, also get to share more parts of the economic pie and one sees higher retention and lower attrition rates. Richer himself has previously recognised (through his management book) how providing secure, well-paid jobs with a happy workforce is key to business success over the long-term.

Thirdly, it provides a level of empowerment that is strongly connected to wellbeing. I recall a time when speaking with employees of a well-known UK employee owned business who said ownership was important for them because it gave them a chance to participate in the decision-making process, not simply for the additional financial rewards that the model provided to them.

Collaboration

Cooperation and Collaboration is a key building block of a wellbeing economy. Sharing the wealth among all stakeholders, not simply shareholders, is a key tenet of the wellbeing economy and employee ownership is one way to begin to achieve that. Going further however, we must ensure that business has a purpose that truly identifies environmental and social aims within its DNA and by the nature of its work is regenerative to society and the environment. It is this challenge that we all need to embrace and WEAll looks to amplify when great examples of such ways of work emerge.

Michael Weatherhead is the Development and Practice lead for WEAll, and coordinates the WEAll business cluster. Employee ownership, as discussed in this blog, will feature in the forthcoming WEAll publication ‘Alternatives to Business as Usual’ being developed by the cluster

On Tuesday 20th November, Steve Murrells, CEO of the Co-operative Group UK gave a bold speech to the National Social Value Conference in Manchester.

WEAll is sharing (with permission from the Co-operative Group) some highlights of the speech, as an example of a business that is showing leadership in changing its relationship to society.

“Why leadership matters – How business must change its relationship to society” – extracts from Steve Murrells’ speech      

The Co-op Group is a £10bn a year operation. We have three and half thousand Co-op food stores across the UK and we supply wholesale to more than 5,000 shops run by Nisa partners and Costcutter.

In addition, we’re the country’s biggest provider of funeral services with 1,000 funeral homes. We offer legal help too and we’re now the number one provider of probate in the UK and we have a successful insurance business.

The top mutual and social enterprise businesses pay more tax in the UK than Google, Amazon, Facebook and Apple combined. Although, that may say more about them than us!

Businesses driven by a social purpose are on the increase. There are good reasons for this, which I’m going to come on to.

I think we must remember that most of the social and economic challenges facing our country existed long before June 23rd 2016 [Brexit referendum in the UK].

In business itself I’m thinking of issues such as: trust, corporate transparency, accountability, executive pay, diversity, gender and inclusion.

As for the broader social issues: I had in mind

  • the growing economic divide between the most and least well-off, both in the UK and around the world.
  • the consequences of a global way of doing business that’s left too many people – and whole communities – as losers.
  • A Health Service under incredible strain
  • the lack of affordable homes for a younger generation, and the likelihood that today’s young people entering the workforce will be less well off than their parents or even grandparents’ generation.

And then there’s climate change.

From Ke-roola in India, to Cumbria in the UK, extreme flooding is already causing regular chaos and destruction.

Watching the terrible news of the dead and the missing after the wildfires in California, it’s clear that even the richest state in the richest country in the world cannot protect its citizens from climate change.

As an insurance provider, climate change already has to be factored in to our business planning.

But despite all of the evidence that global warming is no longer a potential risk but a current crisis, we’re still failing to face into it.

Not only are the challenges we face considerable, our ability to tackle them is hindered by our divisions. We have never lived in a more divided society:

  • The distrust towards government and traditional sources of authority
  • The Brexit arguments which divide households across Britain
  • The growth of strident nationalism across Europe
  • The tribal ‘culture wars’ that are scarring the United States

There is much that is broken in societies across the world.

And I believe business needs to acknowledge its part in creating this situation.

Trust in big business is at an all-time low.

It appears to be part of the problem, not part of the solution.

That’s due to a lack of transparency, a perception of tax avoidance, a feeling that there’s too much greed in the boardroom.

Of course most businesses don’t deserve this kind of harsh criticism. But there’s too many that do. And too many that think they’re doing a better job than they really are.

Business should care about their contribution to the communities they serve because all the research tells us that the upcoming generation of employees and customers care about it very much. Deloitte found that 92% of millennials believe that business should be measured by more than just profit and should focus on a social purpose too. In just seven years’ time, millennials will make up 75% of the global workforce. On what criteria do you think they’ll choose where to invest their time and talent.

At the Co-op…the question has never been: “Do we have a social responsibility in addition to generating profits?”

But rather: “How do we best express the social responsibility we were set up to address in the first place?”

One thing the Co-op has learnt over the years is that you cannot ‘do good’ in society unless you are also running a good business.

We have to be commercially successful. We do not operate in some kind of ‘Co-op bubble’ untouched by the rest of the world. Even our most passionate co-op members will not stick with us if our food shops are shoddy or our services are second rate.

But equally, we must not forget why we’re here.

There’s no point being exactly the same as everyone else. In our case, we could succeed as a business, but fail as a Co-op.

Mainstream business often makes the mistake of thinking that social enterprise is charity by another name.

At the Co-op we don’t see the good things we do for the community as some kind of corporate philanthropy. Nor is it merely a cost to our marketing budget.

And as a national business, operating in every postal area in the country, we choose to speak out and campaign on issues of local concern to our millions of members.

Social Isolation, Modern Slavery, and Safer Communities are three issues we’re campaigning on and talking about at a national and local level.

I don’t want you to think that we’ve totally cracked how to be a socially driven business operating at a national scale.

I talked earlier about climate change.

It’s an issue which has no respect for national borders.

We need international level playing-fields if business is to take the necessary actions to radically reduce our dependence on a carbon based economy.

Governments, acting internationally, have to lead on this. But politics and long-term thinking don’t always go together.

So business must help by giving our politicians the confidence and economic mandate to go further in their legislation and planning.