Local Value for Local People

In this article, Tom Levitt, author of The Company Citizen explores the use of social value and the frustration of measuring it. It appears on the City View web site. Tom will be discussing these issues at Commissioning and Procurement for Growth National Conference on the 27th March in London.

 

As a CEO in the social finance sector said recently: ‘More people are measuring social value than creating it.’ I understand that frustration – though there are certainly more of both doers and measurers than there used to be and that’s welcome.

Social value and impact have become part of the vocabulary not just of service delivery but of all activity in the three sectors, public, voluntary and private.

One very good reason for this is that having one eye on social value enables budget holders to deliver more from what, in the public sector, at least, are ever-dwindling budgets.

However, six years after the Social Value Act came into being, and more than a dozen since ‘Impact Investing’ became a thing, we still lack a common, agreed statement of principles, let alone a practical method of measuring and comparing the different ways in which organisations create change in society.

Whether their activity is social or environmental, implemented efficiently or otherwise, delivering outcomes against targets or simply assumed to be ‘good’, the need to measure is getting more imperative.

Commissioners, procurers and procurees, investors, donors, boards and governments, all contributors to the common good, want meaningful, cost effective and measurable outcomes.

Essentially, the Social Value Act allows (but doesn’t require) local authorities to take into account the ‘social value’ a company delivers when considering whether to accept its tender for delivering a service.

This value can justify awarding a contract to a company if it exceeds the difference in value between that bid and the lowest bid by up to a specified proportion of the contract price, normally ten per cent.

There are thresholds and limits to the Act’s scope but those who make the most of it often set their own criteria.

The Act applies to all government agencies, with large councils the most likely to use it, some specifying which types of social value they want to see delivered by which contract.

Private companies such as Fujitsu voluntarily apply the Act’s criteria to their own procurement practices.

Defined by Social Value UK as ‘…the quantification of the relative importance that people place on the changes they experience in their lives’…social value is normally expressed in monetary terms, though the processes by which this is calculated are varied and somewhat arbitrary.

This makes it difficult to offset the value against the ‘bottom line’; hence the frustration. This is less of a problem for impact investors – normally high value, outcome-driven, corporate philanthropists – who tend to invest in large scale development schemes designed to deliver long term outcomes against specific goals with a readily measurable monetary value.

This wish to quantify non-fiscal outcomes is no longer confined to the charity and public sectors. As companies sign up to deliver the UN’s Sustainable Development Goals, or simply become more aware of the commercial imperative to be ‘responsible’ in everything they do, businesses need to take seriously measurement of the social and environmental changes that they cause.

From the global to the local: a number of councils around the country have taken social value to heart and its footprint can be seen in all of their activities.

Few have done this more intensely than Preston, a city both big enough for a policy of local spending for local people to have a real, observable and positive impact and small enough for that focus to generate a sense of local community and purpose.

There are inherent problems in achieving a common approach to recording social value, not least the intellectual challenge of comparing the value of different elements of change, which includes the emotional and intellectual reward gained by the people delivering it (social value is a strong motivator of employee engagement).

There’s a common failure to distinguish between outputs, outcomes and impacts, a shortcoming which too often results in the proxy measurement of inputs posing as outcomes: ‘my company delivered 10,000 hours of volunteering this year’.

Indeed, one recently launched ‘impact measurement tool’ is no such thing, pretending to measure change by combining a handful of quantifiable inputs.

This story illustrates what’s supposed to happen when employee volunteers turn up at a community centre with their paintbrushes: the input includes the hours of labour and the paint, easily quantified.

The output is a pristine wall of a calming colour. An outcome is that users show greater respect for and pride in their facility and the impact is that this contributes, along with many other factors, to reducing community tensions. As the chain grows in complexity the direct link between the hours spent painting (itself dependent upon volunteers’ efficiency) and any reduction in street crime becomes more tenuous.

Different funders and investors may seek different outcomes.

Consider an organisation which helps teenagers at risk of entering gang culture: it provides them with support at school and counselling for their families.

Some of its operations are funded by a council contract, the rest through charitable fundraising. The council wants to see repeat juvenile offending reduced thereby saving money for public services.

A foundation wants to know how many children engage with the organisation and how community perception of young people has changed. A potential donor wants an assurance that the organisation isn’t spending excessively on administration, fundraising and running costs. And a local business has offered to provide work experience for some – though not those at high risk of offending as they pose an unacceptable reputational risk to the company (even though a positive outcome for them would create more social value than for those posing a lower risk).

There are four ways to arrive at a common approach to measuring impact or social value:

  • make it simple, aiding comparability
  • make it complex, maximising transparency, accounting for all outputs
  • compromise, pleasing no one
  • measure impacts in different but appropriate ways for different purposes

All of these approaches present challenges.

As for companies and government agencies, so for countries. GDP is an inadequate but oft-used measure of a nation’s worth, measuring as it does the value of commercial transactions (including, controversially, drug trafficking and prostitution) but excluding investment in education or culture and certainly not including the negative value of environmental damage.

Campaigners within the business world calling for ‘internalisation of externalities’ are growing in their call for negative impacts to be measured as assiduously as the positive, such that the currency of impact measurement (and, indeed, social value) should become a net figure rather than a headline one.

Perhaps the Social Progress Index or a system based on the Sustainable Development Goals should be the norm between nations? Can these myriad measures, this vortex of values, be rationalised or is a common system of assessing social value and the like an impossible dream?

In 2016 the British Standards Institution called together a variety of people interested in social value and asked us what we thought. There were broadly two camps: one believing that monetisation of social value was a goal in itself and the other that the solution was more nuanced, tending towards the fourth of the bullet point alternatives above.

Today, in 2018, BSI has established a committee of the willing to explore the practicality of a common framework and measuring system for social value, or net social change, or impact, call it what you will. We will look at the issue over 18 months and hopefully reach a consensus; part of our work will surely be to assess the different frameworks that already exist.

For example, I know of two procurement guides which allot unskilled volunteering time (an input!) a monetised common value, of £13 or £14 per hour respectively, deemed to be the typical cost to an employer of having the equivalent work done by an employee. But they disagree significantly on the value of pro bono professional advice, with one citing £25 per hour and the other £84.

Unravelling these knots is a challenge to which we must rise.

We need to alert businesses to the benefits of delivering social value in their everyday operations as much as we need charities to better report on what exactly changed as a result of their deployment of donors’ funds.

Meanwhile the public sector, always assumed to be the epitome of social value delivery, will not be reversing its shrinkage of recent years nor meeting society’s future challenges alone. Knowing what we change, for good or ill, and taking responsibility for it is both a start and a challenge for all sectors and organisations.

Tom Levitt, author of The Company Citizen


Find out more on this topic:

Commissioning & Procurement for Growth
Quantifying Social Impact in Business and Public Services
Tuesday 27th March 2018
Mary Ward House Conference & Exhibition Centre, London , WC1H 9SN
Visit the conference website

Why Should Business Give to Charity?

In his book, The Company Citizen, Tom Levitt argues that businesses should work with charities for the good of society – but also in their own interests. This article was written for the website What Charity, ‘the Tripadvisor for charities’, launched in March 2018.

There’s no shame in advocating that business should have a reason for giving to charity that’s more than the moral, slightly guilt-tinted one of ‘giving back’. A business case for a company to work with charities makes it sustainable and repeatable, helping build positive community engagement into the company’s operations.

Superficially, companies find the charitable giving of cash tax-efficient but this is where business giving should start and not end.

There’s much evidence that companies known for their support of charities enjoy greater interest and loyalty from their customers. M&S maintains its successful partnership with Oxfam, notwithstanding recent events, and Boots’ liaison with Macmillan Cancer Care is now six years old. In both cases the relationship is not confined to cash but includes employee volunteering, training, skills exchange and strategic gifts in kind. Gifts in kind can reduce waste, surpluses and processing or disposal costs.

For companies seeking contracts with local authorities all of these activities can count towards the ‘social value’ that the law allows public bodies to seek from their procurement practices. Some businesses support ‘Buy Social’, a campaign in which they deliberately use their procurement powers to favour social enterprise suppliers, businesses which rank social or environmental goals as a greater priority than the maximisation of profit.

Perhaps the biggest prize businesses can win from working with charities is employee engagement.

Allowing employees to donate to good causes, perhaps through payroll giving, gives them a level of involvement and control; allowing them to use company time for fundraising, ditto. This is just a start! Where the company allies its own power to support charity with that of its employees an even  greater sense of purpose amongst staff is generated; it’s this purpose which generates employee loyalty and engagement. ‘Time volunteering’ creates a team spirit and can deliver greater impact than can fragmented individuals.

Where employees have the opportunity to use their professional skills in a good cause, a process which allies company purpose and mission with long term commitment, with the aim of bringing about a sustainable change for the better in the world, engagement is heightened yet again. Some companies allow every employee up to three days a year of paid leave to support such work.

An engaged employee is more committed for the long term, more productive and a better ambassador for their company than is a less engaged one. Bearing in mind that employee engagement in British business generally is at rock bottom whilst UK productivity has not improved in a decade, positive, active, sustained support of charities by businesses can only be a good thing – and not just for charities’ beneficiaries.

Is Corporate Giving really on the Wane?

Tom published this article on Linked In, in response to a recent CAF report:

The Charities Aid Foundation (CAF) has been performing a valuable service for 90 years by safeguarding philanthropic funds around the world to help charities build resilience, develop infrastructure and create opportunities for positive social change; in short, to act as a force for good. It’s also a valuable observer and commentator on the state of the charity world and civil society generally. Its latest report, ‘Corporate Giving by the FTSE100’, is very welcome. In a friendly and positive way, however, I’d like to suggest a few issues to bear in mind when reading the report.

My concern is that the headline news, that corporate donations to charity are down by 26 per cent in cash terms since 2013, comes with far too many caveats. Since 2013, reporting of corporate donations to charity hasn’t been obligatory so, the report concedes, some FTSE100 members have ceased doing it. The report seems to imply that those not reporting (whilst others continue) have something to hide, but this need not be the case. The report again concedes that the donation of corporate cash to charities, when expressed as a proportion of pre-tax profits, has actually been going up: indeed, the trend line for this figure suggests it has doubled (from 1 to 2 per cent) since 2009.

It could therefore be argued that – relative to what they can afford – businesses are being more generous, not less, than they used to be. And this is over a period when the proportion of pre-tax profits being paid out to shareholders has gone through the roof – one explanation as to why wage growth has stagnated for a decade. Although charities have not fared as well as shareholders from corporate bonhomie over this period, relatively speaking they’ve done a lot better than employees.

CAF correctly argues a business case for companies to engage with charities:

‘Companies are increasingly recognising that they need to better demonstrate their value, both social and economic, to maintain public trust.’

Indeed, more than half of British consumers are attracted to companies known to support a charity. But there’s a danger of the pot calling the kettle black! According to the perennial barometer of trust, Edelman (whose report is cited by CAF), confidence that business can be trusted to ‘do the right thing’ is indeed falling, to 52 per cent at the last count. CAF doesn’t mention that Edelman’s figure for charities – at 53 – is hardly any better. Recent stories featuring Carillion and Oxfam will have done little to boost either of these figures.

Most worrying about the CAF report is that it assumes that engagement with charities is the only measure of a company’s ‘good’. It repeats the idea of support for and duty towards charities several times without mentioning the ultimate beneficiaries of such philanthropic activity. Perhaps, just perhaps, some businesses have found a better way of engaging sustainably with communities and the environment than through charities?

The report is based on a common means of assessing corporate engagement, the well established and respected London Benchmarking Group (LBG) Index, a measure of cash and in-kind donations and the value of work hours donated through employee volunteering plus associated management costs. LBG metrics are applied to FTSE100 reports even where the company has not itself adopted the LBG method. And that’s a problem: conscientious companies are increasingly concerned not about the inputs that they make to society but about their outputs, outcomes and impacts – the changes that their activity brings about. Although the LBG Index can be used to measure outcomes it’s essentially a measure of inputs – a situation reflected in too many corporate reports. Applying an outcome-based analysis – ‘What’s actually changing as a result of our actions?’ – is not only responsible in itself but may prompt the company to then ask ‘Is investment via a charity the best way to achieve this?’

The American Dell Foundation works with 700 charities worldwide. Each year it asks its partners ‘How can we best support you?’ Five years ago an overall majority said ‘cash’; today the biggest single reply was not cash, nor even volunteer hours and skills, but measures to develop leadership and impact. Even more pertinent, when asked where the source of ideas for impact and social change would be in the future 62 per cent said social entrepreneurs, 40 per cent said people living on the front line and only 32 per cent identified local voluntary organisations. Dell isn’t in the FTSE100 but if this change in emphasis, reflected elsewhere also, is happening in Britain then ‘Companies listening to beneficiaries’ may have contributed to CAF’s results.

If a company is looking to work with a government agency or a local authority it may be required to report on the ‘social value’ it generates. The Social Value Act is agnostic on whether such value should be delivered through a charity partner. But businesses that increase their investment in apprenticeships, reduce their carbon footprint, build a comprehensive relationship with schools can all claim to be delivering social value – without using charities as an intermediary. Such beneficial and positive engagement does not feature in CAF’s accounting.

Take Lifebuoy soap: in many parts of the world Unilever has reduced the size of the soap bar (along with the price) to deliberately make it more accessible to people on lower incomes. Alongside this, the company has been campaigning in high risk countries to raise awareness of water-borne diseases such as cholera. In those areas a lot of soap is given away but a lot’s sold, too – and lives are saved as a direct result. Although local charities do support the Unilever campaign they are not an integral part of it, so nowhere in the CAF methodology could this ‘good’ be recorded.

There’s no shame in companies admitting that boosting employee engagement (a route to enhancing productivity) can be a valuable outcome of engaging charities. But getting workers on board with the company mission and purpose isn’t just about words: it’s about workers realising that they and their work can ‘make a difference’, ‘change things’, even ‘deliver social value’. A bike ride or cake bake might create a team spirit and raise money for charity but it only ‘makes a difference’ at one stage removed, when the charity spends it. Employees who volunteer in company time (using company skills) can create more change in a child’s life, and feel a greater sense of involvement in that change, by working with them on reading skills than by any number of miles covered whilst wearing lycra.

So, panic not. The headline fall in corporate sponsorship of charities might actually be a good thing: it might reflect company ownership of their impact, evolution of their social purpose alongside their financial one, reflect a development of the values of the ‘company citizen’. We should not read this CAF report as saying that companies are moving away from facing up to their social and environmental responsibilities.

Companies must be responsible; can they be Company Citizens?

I’m pleased to feature a GUEST BLOG from John Tizard, a fellow consultant with vast experience of the public, private and voluntary sectors.

Tom Levitt is a zealous disciple for the cause of responsible business and for businesses creating public good. In his new book, ‘The Company Citizen – good for business, planet, nation and community’, (Routledge 2017) it is apparent that his zeal has not diminished.

John Tizard

Indeed, his passion for the subject (as well as his knowledge of it) leaps out from every page.

In my view, Levitt rightly argues that businesses (be they large, small, local or multinational) have an absolute responsibility to the societies within which they operate, and to the wider public interest. However, there is a long litany of companies that have failed communities, society, their staff and even themselves. Ones that have had poor governance; ones led by people more concerned with amassing personal wealth rather than the public good; ones that are more concerned with short term profit maximisation at the expense of long terms sustainability and social responsibility.

Can businesses self-regulate? Can they adopt a responsible approach? Can they be ‘Company Citizens’? Does contemporary capitalism and consequential business practice drive irresponsible short termism and selfishness? Tom Levitt is of the view that more and more are committed to being responsible and recognising their wider social, environmental and employer responsibilities; and the opportunities that such approaches can create.

As Levitt evidences, some recognise these opportunities and are already taking appropriate action. Many large corporates have invested in this agenda but let’s not forget the many thousands of small companies that simply play a vital and positive role in their local communities. They don’t need glossy brochures or corporate departments to do this. It is simply part of their DNA.

In ‘The Company Citizen’, Levitt describes the attributes of a good ‘company citizen’ and cites numerous examples of companies that have shown leadership in one or more of the behaviours listed above but also argues strongly that it is in the interests of businesses to go further – much further.

Levitt makes the case for moving on from the traditional concept of ‘corporate social responsibility’ (CSR), where companies write a cheque to charity and/or encourage their staff to donate money and/or time to charities and community activities. He also bursts the cynical myth that CSR can be used as an excuse or cover for poor and unethical business practices.

Whilst philanthropy has a role to play, Levitt says that it can often be too donor focused. He quotes Martin Luther King as saying, “Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice, which make the philanthropy necessary”.

Levitt argues that businesses should commit to finding practical solutions to societal, environmental and economic problems. I particularly liked the example of Manchester

United FC (maybe because I am a supporter!) taking responsibility for its supply chain. On discovering that some of its footballs were being produced in factories where workers had little choice other than to bring their children to work with them, this leading football club as a business supported the establishment of creches at these factories. The book has many other examples of responsible supply management and companies going out of their way to solve external (but still linked to their business) problems, including ensuring their own procurement and contracting practices support SMEs, charities and the social sector.

Levitt is very strong in arguing that voluntary action by companies of all sizes and types is more likely to secure sustainable behavioural change than regulation. Yet we know that there are too many rogue companies.

There is evidence in many policy and practice areas that changing laws alters behaviours and more dramatically than nudging or peer pressure albeit that it can also lead to minimalist compliance rather than enthusiastic action.

Of course, whilst there are many companies that will recognise the benefits of being good ‘company citizens’, inevitably there will always be some rogue businesses and business leaders who don’t even meet moderate standards of behaviour, and some who actually act criminally. For these companies, Government must regulate to set minimum standards and be prepared to enforce them rigorously. It should align its public procurement with this agenda and drive good practice through publicly owned companies.

Levitt highlights examples of where companies have challenged ‘bad government’. For example, many US companies are not simply rolling over and accepting President Trump’s immigration and climate change policies. They are taking practical actions, which they believe align with the public interest as well as with their business interests. Now we see companies distancing themselves from the NRA in the aftermath of the recent US school killings.

Social activists can play in putting pressure on companies to change and to refine their behaviours. Groups as diverse as Occupy, Greenpeace through to consumer groups and local community groups have demonstrated that such pressure can be effective. This is core to the democratic process; and progressive companies should support and welcome such action.

Of course, social activism of this kind can also be strengthened when it aligns with trade union activism. I wonder if Levitt does not stress the importance of trade unions because of the massive decline in union membership in the private sector. And I personally wonder if an additional element of being a good ‘company citizen’ should be to encourage and facilitate union membership, and to involve unions and staff in all core company decision making.

What is certain is that to secure the significant advance that that Levitt proposes, it will be essential for investors, shareholders and owners to embrace the concept of ‘company citizenship’. Levitt describes: where this has happened; why it has happened; and the resultant benefits. And he makes a strong case for demonstrating that shareholder activism together with social action, government encouragement and consumer pressure could lead to significant movement for ‘company citizenship’.

Anyone who reads this book will fail to be challenged and impressed by Levitt’s call for businesses to shift the paradigm and act as ‘company citizens’ because this is in their best interest. This is a powerful manifesto. And whilst it is pleasingly passionate, it usefully draws on numerous case studies and offers practical advice for companies, and for government.

Levitt has set out a manifesto for responsible business and because it is a manifesto we can understand why he has not highlighted bad behaviours and poor practice as a different style of book might have done.

Having read the book three critical questions spring to mind:

  • will companies rise to the challenge and the opportunity, and if they don’t, what (if any) will be the consequences?
  • what should Government do – to regulate, to encourage best practice and to address those companies that fail to live up to Levitt’s aspirations or do worse?
  • is Tom Levitt being over optimistic or even a touch naive?

The reader will shape their own answers as will the key stakeholders, but on reading the book no one will be in any doubt about what the author thinks and his commitment to his progressive cause.

‘The Company Citizen’ should be read and absorbed by business leaders, investors, politicians and policy makers, trade unionists and social activists.

John Tizard, February 2018

Should charities pay any tax?

How seriously should we take calls to scrap all taxes on charities? Should we do the same for businesses that do good? (Originally posted on Linked In)

When I see a senior person from charity finance arguing that charities should be exempt from all taxes I’m tempted to reach one of two conclusions: either the Chair of the Charity Tax Group, John Hemming, has forgotten what taxes (and charities) are for or he’s simply setting an Aunt Sally running to see how many salute it, if I may mix my metaphors.

Whilst mansplaining the first option I hope I can do justice to the intellectual challenge of the second.

People and companies pay tax in order to do good. Such ‘good’ comes from funding common action to address common social and other problems: a service to help us when we’re sick, to educate our children or to address poverty and social exclusion through the benefit system, for example. Whilst we can all agree that ‘the defence of the nation’ should be included we may disagree on how that’s best achieved. Meanwhile, no one can sensibly argue that we’re spending too much on social services or elderly care.

Taxation redistributes wealth and few would disagree that the richest should contribute more than those less able to (though to what extent is always good for a pub debate).

Charities enjoy several tax advantages in exchange for delivering ‘public benefit’. There’s controversy over what this means, especially where independent schools are involved. The comedian (and economist) Simon Evans recently drew attention to the absurdity of Gift Aid: the more you give to charity the more the state subsidises your giving – using money that might otherwise be used for ‘doing good’.

This slightly irrational position sees a shift of resources from organised, focused intervention at scale by the public sector and in the public interest towards chaotic, diversified investment in… lots of stuff, delivered by a host of myriad charities. Little wonder some senior people on the left are reported to be sceptical of charities as service providers – in any situation.

But not me. I think it’s right for charities to bring innovation, local expertise, caring values and alternative ways of delivering services into the public domain and right that Government partners with them in that delivery. Whilst charities should never be the vassals of government, should always have access to funding from independent sources too, professional partnerships between charities and the state frequently make great contributions to society.

I’m also in favour of businesses doing good, as I outline in my book ‘The Company Citizen’. Companies have a duty to behave responsibly in respect of community, stakeholders and the environment, and there’s a long term business case for them to be proactive in doing so. In fact, we need them to address climate change, food poverty, resource management on the international scale that only companies can.

Some argue that companies who do good should be rewarded with tax reductions; this idea should get very short shrift. After years of cuts in public spending we can see that we should not be spending taxpayers’ money in ways which aren’t focused on need. Companies that cut their carbon footprint will save money in the long term and gain a business advantage from doing so, they don’t need a tax cut to achieve that.

So we’re left with a rather uncomfortable feeling that maybe taxpayers shouldn’t be subsidising charities as much as they do, let alone singling them out for tax cuts. But charities aren’t companies and they can’t gain from ‘doing good’, which is a cost for them, not a net benefit.

Actually, other than Gift Aid and the VAT issue there’s no wholesale subsidy of charity operations, despite what recent commentators on various Oxfam issues have implied; most taxpayers’ money that goes to charities goes straight into services for those they help, often the poorest and most excluded members of society at home or abroad.

The best thing is to quietly park the ‘scrap the tax on charities’ agenda, Mr Hemming. I suggest you do so!

The ex-Minister and his Trumpian ‘Facts’

As a former MP, Tom responds to the former Charities’ minister’s attack on Oxfam – and on charities generally.

Did Rob Wilson learn nothing as the Charities’ Minister?

I never thought I’d do it. I registered as an online Daily Telegraph reader so that I could absorb the thoughts of Rob Wilson, the former charities minister who lost his Reading seat at the last election. Had the commentators quoted him correctly? Unfortunately, they had. To dismiss Oxfam as he does, as a ‘left wing pressure group’ who therefore cannot have their views taken seriously, not only lacks evidence but is wholly irrational. That he learned so little in his time in office is a poor reflection on my former profession as a Parliamentarian.

Let me first pay tribute to some very sensible Conservative supporters and members, who play key roles in many major charities. They will feel offended by the implications in Wilson’s words that passionate support for a campaign or cause is somehow unworthy. The charity world needs Conservative activists just as much as it needs passionate and conscientious people of other hues. As a serial charity chair myself, and a lifetime Labour Party member, let me assure him that I’m very aware of the need for charities to behave in ways that are not seen to be Party-political. That doesn’t mean we can’t make a case.

Not only are lefties in my position aware of our legal duties but we actually agree that charities should not behave in overtly party political ways. When I chaired the All Party Parliamentary Group on Charities I never expected them to roll over, I expected them to challenge government. In part, that’s what charities are for! We want people of all political views to share charities’ commitment to social and economic justice and join our campaigns and activities. Or perhaps Wilson believes that ‘social and economic justice’ can only be a leftwing idea? Nonsense.

Nor, Mr Wilson, do charities campaign for ‘state handouts’ as if they had a divine right to exist. State handouts, as you may have noticed, are emergency measures which are not sustainable in the long term; there’s nothing charities would like more than to not have to ask for money – not for themselves, but for their beneficiaries. The idea implicit in Wilson’s view, that having more money circulating in their economy cannot be any part of a solution to people’s poverty, is simply bizarre.

This leads to my most serious concern about the former minister’s position: his Trumpian engagement with facts. I used to chair an international development charity (not Oxfam) and I know that no charity is more committed to ‘the market’ in its operations than is Oxfam. A decade ago I watched the journey of the international organisation of which Oxfam UK is a part. They realised – and then committed to the idea – that developing effective and efficient markets is the most sustainable way of helping people with next to nothing become economically viable in places like Africa. They moved away from a focus on ‘aid’, short term alleviation of the symptoms of poverty, towards ‘development’, the honing of processes to help the poorest people help themselves. That is not communism, Rob, it is not a ‘failed left-wing economic model’ as you claim: it is the fair and inclusive operation of a market economy.

Thank goodness the rumours that predicted Rob Wilson’s next career move to be the Charity Commission were wrong. Charities, led by a politically and otherwise diverse group of people, need partnerships and friendships with Government (and political parties) but they must always be critical friends.

That’s a lesson this former minister clearly never learned.

Small (business) is Beautiful

Tom Levitt, author of ‘The Company Citizen’, outlines why responsibility and sustainability are important for businesses of all shapes and sizes. This piece was written for Heart of the City, the City of London Corporation’s excellent programme for SMEs in the City.

 

‘How do we do Corporate Social Responsibility when we’re not a big corporate?’ was a common response to some research I did a while ago which asked how smaller businesses engage with the community. ‘And what would this CSR look like, anyway?’

The vast majority of Britain’s businesses have fewer than 20 employees. Such companies may have no human resources specialist, no strategy for community engagement and certainly no ‘CSR department’. But they’re aware of the community around them and many simply take it for granted that some form of community engagement is both expected from them and the ‘right thing to do’. In that sense, they gain from some of the benefits of engagement – though not all.

Very few businesses would say ‘no’ to a group of employees who wanted to raise money for a charity in company time, a school requesting a raffle prize or a good cause in need of some product which the company had classified as waste or surplus, but these are all reactions to external prompts. It helps to get on the front foot, not just to anticipate future requests.

It helps to have a strategy. If environmental responsibility (which, by the way, can pay for itself sooner than you’d think) demands a plan then community engagement does too. No sensible company would want to reduce its carbon footprint by responding to every new idea that comes along, switching electricity providers every time the tariffs change.

The benefits of such a strategy to those on the receiving end are clear: they’re usually charities who get money, goods, even volunteer time and skills which they wouldn’t otherwise have, though there are tangible gains for the company, too.

Such as: where an employee believes that their employer cares about the same causes as they do then a bond of engagement is created or strengthened which will benefit the company. Where that cause is related to the mission of the company the bond’s even stronger; engaged employees remain with their company longer, are better ambassadors and more productive than those who are disengaged.

For example, I met an employment agency that asks all of its staff to spend up to three working days each year volunteering to work with unemployed people, including graduates, in a deprived community. They teach them to write a CV, help them practice job interviews and, through building relationships, witness first hand how their effort is creating opportunities for people worse off than themselves. In the four years since the company took this initiative staff turnover has fallen, job satisfaction scores have risen and people have come to the agency looking to work there because of the caring reputation it has created. Similarly, trained staff at local branches of Boots Opticians spend time volunteering to help pre-school children learn to read, whilst informally checking their eyesight and referring them for free treatment where necessary. This scheme has won awards and creates huge levels of job satisfaction. I know of a steel stockholder with four employees where the team spends time every month carrying out odd manual jobs, such as repairing fences, for local good causes; and a garage mechanic who openly adds £1 to every invoice, creating a pot which he donates to a local charity each month.

Then, of course, there’s the charity fundraiser – the cake bake day, the cycle ride, the sponsored walk. Whilst these can certainly raise money they don’t create that sense of engagement and purpose in quite the same way.

There’s evidence that skilled volunteering takes place even within the very smallest companies, which are often ‘time poor’. An accountant might audit a small charity’s books for free in a couple of hours, a better use of her busy time than half a day litter picking or digging an old person’s garden. Skilled volunteering itself – updating a charity’s web site, perhaps, servicing a youth club’s minibus – can help an inexperienced employee gain valuable skills. Even listening to children read in schools can teach an employee ‘soft’ skills like empathy, patience, clarity, essential for a career in customer service.

However, responding to such requests can cause chaos if the company gets a reputation as a ‘soft touch’! This is where a strategy helps: how much money will the company donate to good causes this year? How many days will it allow for team building exercises (as team volunteering can be, when handled properly) and how much company time will be spent on volunteering and honing skills in aid of good causes?

So that’s environmental and employee engagement sorted. But more can be done! By paying the Living Wage as a minimum (a calculated level of decency slightly above the legal minimum) employee engagement is boosted again, even amongst those above that pay grade. Adopting the Prompt Payment Code, pledging to pay all valid bills within 30 days, helps supply chains – as many SMEs know to their cost, complaining legitimately that too few big customers acknowledge this. And building a broad, ongoing relationship with a local school, contributing to their curriculum, sponsoring their sports team kits, offering them apprenticeship places, can be a cost effective way of adding a new dimension of responsibility to an SME’s work.

This is the tip of the iceberg. Reducing plastic usage, recycling better, using cleaning products that don’t damage the environment, sourcing materials using fair trade and ethical criteria, such as sustainable timber, and using the Social Value Act to your advantage represent the next layer. And you wouldn’t want to be sourcing from a supplier that kept staff under conditions of ‘modern slavery’…

Social and environmental responsibility are really just common sense, looked at through the lenses of strategic and long term thinking. ‘The Company Citizen’ celebrates companies that take their citizenship role seriously – companies of all sizes, shapes and natures.

Next time, your company’s good work could be featured!

 

The Future of Outsourcing

What does the Carillion affair tell us about the future of the private sector in service delivery? It’s nothing like as simple as saying ‘no more’! What’s the Company Citizen’s approach?

 

It’s inevitable that, in the future, private companies will provide more services to the public than they do today.

This might sound extraordinary, in the light of the Carillion affair, but what’s the alternative? Spending cuts and austerity, especially at local government level, mean that the state no longer has the capacity to deliver conventional services on the scale we need; whilst our traditional, Attlee-esque view of the public sector struggles with diversity and complexity. With the whole of the public sector in a mess, if we don’t regard the private sector as, at the very least, an asset or partner in its recovery, we won’t succeed in putting it right within a generation.

This is not to say that the ways in which outsourcing has been conducted hitherto were right. Whatever the undoubted strengths of our civil service, commissioning skills have not been allowed to develop in the way they needed to. In short, government has been dictated to by a handful of large companies who don’t necessarily share the values needed to deliver services which are essentially about caring.

The following criteria should ring alarm bells in the offices of Chief Commissioners of Services in government departments:

  • Companies which have grown huge through acquisition. Although size may sometimes bring reassurance, acquisition itself provides no evidence of success in delivering services.
  • Companies with highly volatile share prices, because they are probably being dictated to by small groups of profit-hungry shareholders. (Note that companies which have abandoned quarterly reporting, to think longer term, tend to have more stable share prices).
  • Companies which are so big that their internal structures of accountability don’t work (which explains how some recent scandals, such as payments for handling non-existent prisoners, arose).
  • Companies with excessive levels of inequality within their employees. These continue to pay bosses after they’ve left, protect executive bonuses at the expense of pension funds and have low levels of employee engagement.

Unfortunately, as regards the current crisis, Carillion meets all of these negative criteria. In fact, most of our biggest outsource companies have lost one or more CEOs in recent years, seen their share prices tumble and issued profit warnings. This is because – back to austerity, but add in the toxic fear of Brexit unknowability – the supply of new big public sector contracts has simply dried up. We’ve allowed some private partners to walk away from contracts they don’t like, such as on the railways, when involving them was supposed to be a way of managing risk! This should not be allowed without repercussions.

And yet… some outsourcing companies have developed excellent working methods which, where they work, receive no publicity and therefore little credit, including partnering with charities to allow them to deliver services at an unprecedented scale. HCT (formerly Hackney Community Transport), one of the country’s largest social enterprises, delivers transport services on a massive scale. Recently Cordant, previously regarded as just another outsource company, remodelled itself with a flatter pay structure, more employee involvement and more recycling of profits. Is this a flagship for service provision of the future?

The fact is that personalised health and care, investment in the prevention of poor health, better local housing and transport, all demand more (and more accountable) local autonomy in the way that they’re delivered. This needs huge investment, especially in the period of transition in which we find ourselves, in the eighth year of a government which doesn’t really believe in governing. We’d all love for the taxpayer to ride to the rescue but, in the short term, that ain’t going to happen. The private sector has access to the money – profits associated with share price changes may exist only on paper, but many have seen real profits blossom and dividends rocket as wages have been held back. We need such money invested in providing services, either on behalf of or complementary to those of the public sector, driven by a reasonable rate of return.

Above all, we need to see companies take on a long term approach to services that is not only financially healthy but delivers responsibility, sustainability and ethics, too.

 

This article first appeared on Linked In

Company Citizen is now available

In January 2018 this article by Tom appeared on Linked In:

Tom Levitt, author of ‘The Company Citizen’, explains how the book came to be written.

‘In 1948 the world’s great powers, 58 countries, came together at the UN to tackle the world’s problems. If today we brought together the 100 greatest economies to do the same, over 40 would be companies, not countries.

‘In 2000 the UN laid down the Millennium Development Goals, 6 challenges to world leaders. In 2015 these became 17 Sustainable Development Goals, many of which cannot be achieved without the active participation of business.

‘Yes, over decades business has helped to cause many of the world’s problems: climate change, human rights abuses, exploitation of the poor and the depletion of natural resources. That’s all the more reason to demonstrate that there’s an attractive business case for investing in renewable energy, adopting a ‘circular’ approach to resources and getting the best out of supply chain workers rather than bleeding them dry.

‘And what applies on a planetary scale is just as true at national and community levels. It’s in business’ interests to help reduce mental health problems, to increase employee engagement through meaningful work in the community, to invest in the skills they need for the future’.

After a career in education and government, including 13 years as a Member of Parliament, and a lifetime of supporting charities, Tom realised ten years ago that not only could business be a force for good but that it had to be so. Today’s problems can’t be solved by the public and voluntary sectors alone, business has to be part of the solution; a long term ‘business case’ is what makes such solutions sustainable. Business, he says, is more capable of thinking long term than is Government; the tragedy is that too many businesses too often focus on only short term gains.

He says: ‘I wrote ‘The Company Citizen’ to demonstrate that at every stage, in almost every challenge society faces, business doing good is actually doing good business’.

You can order the book here: https://www.routledge.com/9781138063037

Creating Company Citizens

This article first appeared on the Tomorrow’s Company web site

‘Responsible business’ makes sense: there’s always something to be said for balancing your company’s needs against those of the environment and society in general. Why go against the grain?

This is the theme of my new book, ‘The Company Citizen‘.

For the CFO, there’s the knowledge that businesses which adopt more environmentally sustainable strategies produce more long term profit than those that don’t. The HR director knows that where employees are treated with dignity, and identify themselves with the meaningful mission or purpose of the company, then levels of engagement will be higher – which in turn enhances productivity. The procurement officer knows that legal and other codes of compliance are more readily accorded with when supply chains are open and transparent and the COO knows that ethical sourcing is a major contributor to removing unnecessary risk from their company’s portfolio.

When these four are happy so are the CEO and the Chair, who both know that the more they need to hide the less certain they can be about their future. Customers frequently show their appreciation of the honest, ethical, corruption-free approach by enhancing sales and market share.

Discussing his company’s newly-stated commitment to becoming globally zero carbon within a decade, a CEO recently told me: ‘This isn’t about climate change. It’s about long term thinking.’ How right he was. Putting climate to one side, carbon fuels can only become more rare, more expensive, more politically sensitive and their supply less reliable in the future; the same can’t be said for wind or sunshine, where technology costs are plummeting. A generational view puts the path of your company into perspective, puts budgeting for major projects in context and restores that business goal of years gone by: to leave a better company for the next generation than that which ours inherited.

In 1948 the United Nations came of age. It met in New York to discuss human rights, migration and other themes still redolent 70 years later. Today, if we brought together the 100 biggest economies of the world and charged them with resolving hunger, poverty and global warming only 58 would be countries – the rest would be companies. That shift in global power, recognised by the UN in the way it constructed its 2015 Sustainable Development Goals, suggests that combining global purposes with traditional business concepts of success is essential for our species’ survival; success must be tempered by a new level of responsibility. No longer confined to the optional extra of CSR, that responsibility could almost be described as epitomising the values of ‘company citizenship’.

Profit’s not a dirty word but it shouldn’t be the exclusive purpose of business. A true company citizen not only serves the market and the owners in a traditional way but pays tax willingly, with pride. The company citizen recognises that a business is a community in which employees, customers, investors and others have stakes which need to be in balance with each other. A good citizen’s a good neighbour, a community player and a friend to the environment 365 days a year, aware of both the positive and negative impacts that they have on others, seeking to accentuate the former whilst eliminating the latter.

The good news is that more and more businesses are finding ways to sustain themselves whilst maintaining the highest standards of ethics and probity, not least through the ‘new economies’ known as social, inclusive and circular. Business is increasingly looking to the longer term to reduce those negative impacts, especially on the environment.

When the day comes that it’s normal for companies to pay bonuses on the basis of carbon footprint reduction; boast in the media that they’ve eliminated slavery from their supply chain; go out of their way to limit top pay; take employees readily onto their boards; and abandon quarterly reporting, then we’ll know that we’re on the way to creating a society which includes company citizens and creates value for all.

Tom Levitt’s new book ‘The Company Citizen: Good for Business, Planet, Nation and Community’ is available now from Routledge.