The Progressive Company Citizen

This article first appeared on the web site of the Centre for Progressive Capitalism and then, in a revised version, for the NewCo Shift site in America.

The idea that business can be at the heart of an inclusive society, driven on the path towards social progress by a dynamic market, without undue exploitation, maximising shared economic and social benefits, must be central to any definition of progressive capitalism. It’s the theme of my new book, ‘The Company Citizen’.

Progressive thinkers in this field largely agree what is meant by a ‘responsible company’, ‘triple bottom line sustainability’ and ‘ethical behaviour’; debates on ‘purpose’ and ‘mission’ rage, largely positively. Thankfully, too, the circular and inclusive economies are becoming established in mainstream thinking; witness the non-exploitative fashion industry built on zero waste, low energy usage and maximum re-use of fabrics envisaged just last month by Ellen MacArthur and Stella McCartney.

Why is it so important that the gauntlet for good is picked up by mainstream business? There are three priorities:

  • Practice what you preach
  • Look to the long term
  • Make it mainstream.

You don’t have to look far to find a company committed to social and environmental responsibility: the automobile industry is actively moving away from petrol and diesel, even tobacco and energy companies are turning from their traditional wares – whilst the American business backlash to Trump, both in banning Muslim migrants and quitting the Paris agreement, was profound. Every company with any clout should ask itself, or be asked: do you practice what you preach? Trading ethically, without corruption, exploitation or falsification is a start, so too is paying fair taxes.

Having set environmental goals, do you reward senior management for achieving progress towards them or pay their bonuses in the traditional way, on merely financial criteria?

Do your internal pay policies help eradicate excessive inequalities? Do you pay the objectively calculated Living Wage? Or are you happy to have the taxpayer subsidise your lowest-paid workers?

Do people know what your company’s mission, its purpose, actually is? Is it more than just making money and maximising profit? Or is it something that your employees and stakeholders can all ‘get behind’?

Do you know what your impact on the community and environment really is? Do you measure only the positive social value that your company generates, in the same partial and misleading way that GDP assesses countries, or do you acknowledge that a balance sheet approach, in which you aim to contribute a net positive social value, is the way forward?

A company CEO said to me, on the day that his company pledged to reach global zero net carbon within seven years, ‘This isn’t about climate change; it’s about long term thinking’. Today company shares are traded in seconds by computers and companies generally report to shareholders quarterly. Whatever happened to the generational perspective at the heart of family-owned companies? Long term thinking helps with horizon-scanning, risk management, budget planning – and calms the blood pressure. Of course each day brings challenges, but if business generally adopted a longer term perspective than so many firms exhibit today then many of our current resource challenges would be less ominous and threatening.

The ‘mainstreaming’ argument is crucial. Traditionally, ‘Corporate Social Responsibility’ has been optional, an add-on, a superficial box-ticking exercise measuring inputs – the number of volunteering hours the company donates to charity. Progressive companies no longer use that worn out acronym of ‘CSR’ and have moved on from its associated image of lycra, litter-picks and cake stalls. The idea of business as a force for good only makes sense if it’s embedded, which means making it both sustainable and sensible – from a traditional business perspective.

Fortunately, it can be so. It’s now well established that the following company formats are more profitable in the long term than those of comparable companies which don’t exhibit each trait:

  • Companies committed to long term environmental sustainability and reporting
  • Companies which include a degree of employee ownership in their governance model
  • Companies whose mission and sense of purpose, beyond profit alone, motivate high levels of employee and stakeholder engagement.

This is just as well. Of the world’s 100 largest economies almost half are companies and not countries. Business influences every community and environment yet still today too much of this influence is negative. In the same way as it’s said ‘you’re never more than a few yards from a rat’, you’re always close to a product made from slave or child labour, or manufactured by workers living in poverty or in unsafe workplaces, adopters of wasteful energy and other practices or unsustainable resource acquisition.

It’s easy (and too often fair) to dismiss business as the root of all of such problems. The fact is, as the UN recognised in setting its 2015 Sustainable Development Goals, we literally will not survive unless business becomes even more of a force for good than it is today.

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