Book review: Nick Raynsford

Tom reviews ‘Substance not Spin’ for Order, Order, the magazine of former Members of Parliament:

img_0082If you’re looking for a ‘kiss and tell’ story of indiscretions from the heart of government, look elsewhere. In ‘Substance not Spin’ Nick Raynsford has produced a serious and essential guide to how to do government – and how not – a must read for every future minister. It’s the 21st century complement, perhaps, to Gerald Kaufman’s seminal tome.

The book is a good read too, with an easy style and an eye for detail which never palls; housing, planning and infrastructure are Nick’s passions (no surprise there) and through these issues he draws lessons for all involved in government. At times he rides the waves of success but too often, not least in his own estimation, the failures too. He dissects with scalpel-like precision the reasons why ambitions fail to materialise in Government.

Those ambitions were key to Labour’s progress over the last 20 years, not least our frustrated aims to build homes, either for rent or sale; to keep housing benefit under control; to deliver major infrastructure programmes on time and on budget (too many examples of this here) – and even to track smaller projects from conception to delivery. Having nine ministers responsible for housing policy over 13 years was a recipe for disaster; whilst no one ever decided that housing was a low priority for Labour our actions, unfortunately, speak louder.

Dare I mention HIPS or the reorganisation of fire and rescue? There’s a whole chapter named ‘Wasted opportunities’.

Yet there were successes too: we have a Mayor for London because of decisions taken on Nick’s watch, and the pleasure he gets from describing the rebirth of the once-failed Hackney council is tangible. He was engaged in the latter as a charity activist in the housing world, through various government roles to being a post-ministerial London backbencher.

Nick was never loud: I’ve known him 25 years and he is ever polite, engaged, intelligent and passionate – in a very English way. He worries about getting things done and if we can learn from his book about riding the competing currents of politics we will be better equipped to get things done in future – if Labour ever gets the chance.

My only niggle with an otherwise excellent piece of work is with the editor, not the author: Brentford, my present home, is not in Essex (p176) – that’s Brentwood!

Measuring Social Impact

Tom wrote the following for the CBI Good Business web site, published 1 November 2016. The article was inspired by a day conference organised by the British Standards Institute on whether there should be a British Standard on impact measurement:

A debate rages about the measurement of social impact. Charities need to demonstrate impact to funders, commissioners, donors, media and government, whilst businesses who value their social and environmental responsibility are being asked: ‘just how responsible are you?’

All organisations impact upon others. It’s rational to expect that social and environmental claims should reflect an organisation as a whole. Although big corporates will rush to demonstrate their positive impact through corporate social responsibility (CSR) activity, community engagement and philanthropy, just one oil spill, prosecution or product recall can change perceptions.

The heat of the current debate is not whether but how impact measurement is made. How do you compare reducing carbon footprints with creating apprenticeships? Or time spent listening to children read with pro bono legal advice? Can a common system of impact measurement cope with all of these activities?

People are striving to say ‘yes’. One way is to monetise impacts – what are they actually worth?  When a company donates an employee’s time to a charity should we count the hours at the actual salary rate, the cost to the company or a commercial rate? Or an independently calculated agreed sum? This is a common question within CSR circles, but is an hour really an impact measure? No, it’s an input.

What’s an apprenticeship worth? A company creates two identical apprenticeships with a net investment of £10,000 each; one goes to a long term unemployed ex-offender, one to a bright school leaver. The true social impacts, including lifetime savings to the state as a result of that individual gaining skills and employment, are vastly different.

Here’s a parallel: GDP is a recognised, long established and monetised assessment of a country’s worth that tells you nothing about the values, culture and degree of liberty that its people enjoy.

Clearly, simple impact measurements are less meaningful than complex ones; and calculations which become tiresome, long-winded and costly are both unattractive to organisations and open to challenge. Even more to the point: smaller organisations, charities or businesses, are less likely to have the skills necessary to make the objective and detailed comparisons that universally comparable impact measurement demands.

To achieve its goals an organisation must know what changes its activities make happen. Change and impact can be both quantitative and qualitative, sometimes impossible to monetise meaningfully. However, enhanced employee engagement, generated by a company with a purpose beyond the purely commercial, can be measured over time and is a prize worth having.

There’s a danger that standardised impact assessments will strike many as ‘not for us’; smaller players might use a low cost, ‘rough and ready’ assessment like Measuring the Good whilst others complain that a growing impact measurement industry offers unproven value for money.

So internal impact measurement is vital to achieving social and environmental goals. External impact assessment can be standardised but only to a degree, not least because different stakeholders make contrasting demands. Truly objective, universal standards that retain utility are problematic; and measures which accentuate the positive and eliminate the negative miss the point.

A Meaningful Profession: ICRS

On 15th September 2016 Tom was a platform participant at the first major debate sponsored by ICRS (Institute of Corporate Responsibility and Sustainability), hosted by the RSA and chaired by the RSA’s director Matthew Taylor, in the presence of over 100 CRS/CSR professionals.

160915-icrs-rsa-group-2-small

L-R: Claudine Blamey (ICRS), Lee Elliott Major (Sutton Trust), Beth Knight (EY), Matthew Taylor (RSA), Tom, Mariano Maratino (Indeed)

The debate was on the future of the CRS profession; at present the vast majority of people who work in CRS and CSR are graduates based in London and the South East. In Tom’s comments he pointed out that (at 62 years old) he was one of only 6 per cent of his generation to go to University whereas today the goal is for half of all 30-year olds to have a university standard (NVQ4) education. The panel agreed that there was a need for more apprenticeships and non-graduate opportunities, too.

Below are the thoughts that Tom put together when considering his remarks.

In an age of austerity, society and business have to engage better together. Why? As statutory government services are cut and charity incomes flatline a gap in community capacity has emerged, threatening the way we help the most vulnerable people, promote good health, celebrate cultures and support community cohesion. Businesses that take a broader view of how to protect the interests of their employees reap the benefits: greater employee engagement, more opportunities for innovation and partnership working and genuinely earned reputational gains are on offer.

At the same time a switch in business from shorter term to longer term thinking and planning can, for example, turn environmental challenges into opportunities. This then, is the business case: there is growing evidence that the Company Citizen is better placed to achieve sustainability in the triple bottom line – yes, including profit – than is the more predatory model so often but unhelpfully defined as the archetypal business.

160915-icrs-rsaIf an engagement programme can include using the surplus skills of business to, say, increase the capacity of the voluntary sector, better equipping them for survival and growth under their own terms, then a double whammy is achieved. No more will senior corporate executives have to admit that they have ‘no idea’ what life is like for people living within a mile of their plush HQ.

To deliver these goals and values, especially around employee engagement, a company needs a mission, a values-led philosophy, a sense of purpose broader than filling spreadsheets or making widgets. The spark to ignite this may come from Corporate Responsibility professionals, often found in the Human Resources department, a growing band of natural partnership workers, capacity builders and outward lookers. Promoting graduate qualifications is, of course, welcome; but it isn’t the only way forward.

Every manager should be a corporate responsibility worker, every company decision subjected to social impact assessment, every worker a champion for their community, fostered by the family of the Company Citizen. No more will ‘green teams’ of dedicated employee volunteers, encouraged by managers to use their voice for the environment, conclude ‘But we’re changing nothing’. We should boast not of hours volunteered but of change made.

Something is missing here. 99 per cent of businesses and half of private sector employees are excluded from this scenario: the SME sector. Whilst we define SMEs as having fewer than 250 employees in truth the median is in the 6-10 category. They have no HR departments and as for Corporate Responsibility their response is often ‘We’re not Corporates, this isn’t for us’. Yet they’re the closest to those voluntary services on the ground, the lifeblood of the community in which Company Citizens live.

By bringing SMEs together in local networks to share resources, perhaps alongside their larger cousins, capacity issues can be addressed and meaningful engagement generated to the advantage of all: society, employees and companies themselves. It can be done; the barrier to it happening is the wrong sort of thinking, hiding the path to win:win opportunities.

Brexit means MORE need for Responsible Business

(This article appears on the CBI Great Business Debate web site)

EU BrexitOver coming years, at least until Britain has established a new global role following the ‘Brexit’ referendum, the spotlight of public scrutiny will fall on business more than ever before. Its ‘licence to operate’ will have to be more obviously earned, whilst thoughts that business was somehow above the tawdry world of (small ‘p’) politics will have to be reassessed. Brexit is changing everything.

Big business was clear about where it stood on Europe: international trade requires maximum market access with minimum trade barriers so access to the single market was the obvious compromise. Smaller companies were more equivocal and less loud but not overwhelmingly pro-Brexit.

Yet business failed to convince enough people that their profits and voters’ jobs shared a common cause in ‘Remain’; polls show that business leaders’ opinions have no more credibility than those of politicians or red top journalists. Overseas investors in the North East wrote to employees, begging them to back ‘Remain’ in areas which subsequently returned large Brexit majorities.

And whilst the City, the FTSE community and big business generally were seen as pro-Europe the leafy home counties – where the captains of those very industries live – voted ‘out’. Did they not believe their own rhetoric?

There’s more.

Two groups emerged as pariahs during the referendum campaign: immigrants and, less predictably, ‘experts’. Anyone who knew what they were talking about was, bizarrely, not to be trusted. Leaders of multinational corporations suffered three-fold: they associated with Johnny Foreigner, they were experts and their interests were perceived as alien because of their size, distance and lack of a uniquely British focus.

Business was blamed for recruiting foreign labour at the expense of native British, with some employers cynically only advertising vacancies abroad or in another language, such as Polish. Since the referendum Muslims have borne the brunt of an unleashed tide of racism; Eastern Europeans, even families who arrived as refugees before the EU existed, have found themselves abused for the first time. Employers must work hard to prevent such neanderthal attitudes poisoning the workplace.

A sense of powerlessness, alienation from the establishment, contributed to the Brexit vote: inflated top salaries, growing levels of working poverty and multinationals’ optional approach to taxation all represent just that. Business must address these issues.

Our country must rebuild. Most intellectual leaders are still stunned by the unexpected and irrational nature of the June 23rd decision. Leading politicians have jumped ship rather than take responsibility for the decision they advocated: business must not do the same. Business has to find a new identity, less distant, a more human approach to the bottom line, one that promotes inclusivity not just in the workforce but alongside others in local communities.

This story is not over: social and economic conditions could get worse before they get better. Certainty and stability are gone, for how long?

The phrase ‘better together’ has never been more true; even if together we are to turn our backs on the biggest single market in the world and on 40 years of social and environmental progress. Business must be part of ‘together’ without being arrogant or lofty; our future depends on the Company Citizen stepping up to the mark.

(Picture from FreeDigitalPhotos.net Stuart Miles)

An Engagement Matrix: The CSR to Mission Continuum

On 1 July 2016 the Cabinet Office, in association with Legal & General, hosted an all-day open conversation on the future of ‘mission-led business’ in which Tom participated.  Tom facilitated a discussion on What can ‘Mission-Led Business’ learn from the world of CSR? and this is the second of two notes on the issue which he wrote as a result and submitted to the review.

 

As part of our discussion on Mission Led Businesses for the Cabinet Office, at Legal & General on 1 July, I spoke of a matrix of CSR activity. ‘Traditional CSR’ is towards the left and bottom of the matrix and ‘mission-led business’ towards the upper right.

1606 CSR matrixThis chart shows that CSR activity is divided into three qualitative categories and takes place at three different tiers of organisation; the chart is populated with examples of CSR activities though many others exist. (You could argue for more than three levels but three makes my point).

Traditional CSR activity tends to start on the shop floor (bottom left on the chart), with ad hoc fundraising such as Red Nose Day activity, recruiting sponsors for a charity walk or a cake bake. In its simplest form this activity may not involve management at all, unless permission is needed. Successful activity may lead to a broadening of engagement, perhaps into employees organising some voluntary activity between them in their own time, or a slight deepening. That would be perhaps when the employer matches the first number of pounds employees raise voluntarily or, as in the example given, makes payroll giving available. At this stage payroll giving would be independent of any other community engagement strategy.

The three boxes at top left, centre and bottom right all represent a further deepening of the company’s commitment to community engagement, so the CSR activity becomes more meaningful. For example, payroll giving might be actively promoted by management as part of a broader communications and engagement strategy, perhaps favouring a charity with which it shares a common mission or interest (such as construction with Shelter). In the category of Time & Talent employees are given paid time off to volunteer with ‘good causes’, typically up to three days per year, with various levels of organisation and promotion in operation. And Head & Heart comes into play with, at its most basic, a message of care and inclusion through the procurement of fair trade tea, coffee and sugar in the workplace.

At a yet more sophisticated level we see employers nominating key employees to carry out specific good work in the community using their professional skills. This has the effect of both creating capacity in the recipient charity and broadening the skills experience of the employee and the activity is clearly integrated into the mainstream of company operation. Cynics may argue that volunteering in paid time is not volunteering at all: but think of it as the company volunteering its time and skills to the good cause, not the individual.

Often such exercises can have the additional benefit of helping employees develop soft, interpersonal skills where that would be helpful in their work. ‘Sustainable purchases’ would mean that not only were tea and coffee bought with reducing negative impact in mind but cleaning materials and raw materials too, with a view to minimising pollution and environmental damage and maximising sustainability.

The top right hand corner is the pinnacle: all of this social and environmental activity is included in the company’s mainstream operations, and the values and mission of the company are reflected not only in its shop floor and boardroom but also in HR, procurement, transport and supply chain policies. For example, Boots has recently adopted the ‘Drop the Box’ approach to ensure that people with criminal records are not arbitrarily removed from consideration for recruitment – and they insist that companies in their supply chain do likewise. Adoption of Social Value Act criteria across a broad spectrum of activity would be in this box, too.

Finally, the activity that starts in the bottom left of the matrix cannot happen unless a ‘spark’ ignites the idea within the workforce. But the real value to the company comes in the move up the arrow, towards the top right – and this migration cannot happen in a sustainable way without the active and involved leadership of the company’s leaders, informed and guided in turn by their company mission.

This process only works when the company has both a workforce ready to engage and an leadership that is informed and enlightened.

There’s more about this in Chapter 6 of my book ‘Welcome to GoodCo’.

What can ‘Mission-Led Business’ learn from CSR?

On 1 July 2016 the Cabinet Office, in association with Legal & General, hosted an all-day open conversation on the future of ‘mission-led business’ in which Tom participated.  Tom facilitated a discussion on What can ‘Mission-Led Business’ learn from the world of CSR? and this is the first of two notes on the issue which he wrote as a result and submitted to the review.

 

In 1955 the phrase ‘Corporate Social Responsibility’ first appeared in academic literature and the mid 1970s saw the first despairing claim that the acronym ‘CSR’ had lost its meaning and authenticity.

It’s true, as the CEO of Dollar UK wrote for the CBI’s ‘Great Business Debate’ blog in June 2016  that ‘some cynics still insist that CSR is at best an act of empty corporate philanthropy, and at worst a smokescreen used to hide a multitude of corporate sins’. Mr Howard says that Dollar ‘see CSR as a central function that underpins the ethos of the whole company’ — but surely that should be much more than just encouraging employees to undertake ‘bake sales and sponsored runs’ and allowing them half a day per year of paid volunteering time, as he does? It’s also about being a responsible trader. Dollar is a finance company whose major subsidiary, Money Shop, was last year ordered to return to low income customers £15M which it had not been entitled to take from them. That’s not responsible lending or responsible business. But I know a ‘smokescreen’ when I see one.

Whilst the idea of mission-led business may be relatively new, the concept of designing a business around a social purpose in a way that complements, rather than undermines, conventional ideas of business success is not. The Quaker giants of the 19th century did it and Unilever is doing it now. Society needs the power of responsible business to complement the public and third sectors in their work. But whilst a host of social enterprises, B Corps and others are being created the real challenge is to learn from 60 years of CSR in mainstream business and distil what is good about it; in order to inform the process of retrofitting mainstream business with broad social and environmental missions.

A company’s mission can be wide ranging, encompassing both strict business terms such as ’to provide supportive, non-exploitative personal loans at affordable prices’ (Dollar UK please note); to the eradication of collateral damage, like ’to operate in a carbon-neutral way’. Such a company will come to have ‘responsibility’ running through it like Blackpool Rock in respect of engagement with its employees, customers, environment, neighbours, supply chain and the law. The benefit that accrues from this is ‘purpose’.

When a company has mission and purpose it can create value in qualitative as well as monetary terms. A sense of purpose from engagement with the company mission is known to be linked to greater employee productivity, loyalty and length of service; to reduced sickness time lost and greater informal ambassadorial activity; and to enhancing the company’s reputation.

The person with conscience should not ‘give up’ on business being a force for good, led by its mission. It has to become such, for we will struggle to survive if it isn’t. But the business person should not decline a broader degree of responsibility either: there is a very good, even conventional case which argues that being a business for good makes good business, whilst there is little long term reason to stick with the superficial and optional conventions of rudderless CSR activity alone.

10 Years of Buxton Dome

As the University of Derby celebrates ten years since it moved in to that wonderful building, the Buxton Dome, Tom reflects with the Buxton Advertiser on his contribution to securing it.

160705 ten years of DomeBuxton’s long term economic future was secured by the University’s rescue of the Devonshire Dome, said former MP Tom Levitt, who was instrumental in bringing the project to fruition.

But twice it hung in the balance and he was forced to tour cabinet ministers’ offices and Parliament in late-night lobbying to win support for the ground-breaking idea.

Speaking as the University plans to celebrate ten years since the Buxton campus opened in 2006 Mr Levitt recounted the behind-the-scenes drama which included fighting Whitehall’s ‘kiss of death’ – a referral to the Treasury just two weeks before the deadline.

‘Something had to be done for the local economy’, said Mr Levitt, who was awarded an honorary doctorate by the University in 2011 partly for his role in the project.

‘You can’t just rely on tourism and the Buxton Festival to power the local economy. The University, first of all, is a wonderful use of the building asset but it is also a year-round injection into the local economy. I do this it was absolutely crucial to the economic sustainability of the town.

‘As it is a University it brings prestige with it as well. The Dome was not just saved, it was saved for the people. Anyone can just walk in and there are things going on for the public. It’s not just the architecture and the money but the culture as well.’

But originally the idea was just about a merger between the University and the former High Peak College at Harpur Hill – which nearly didn’t happen.

‘It was one of the first mergers of its kind and was quite ground-breaking,’ said Mr Levitt, who now works as a consultant bringing charities and businesses together.

‘The main reason for the merger was that the Hospitality and Catering courses at High Peak College were world class but weren’t getting access to world markets because it was only a Further Education college.’

The Higher Education minister of the day, Baroness Blackstone, originally turned the merger down but Mr Levitt and the institutions’ two principals at the time spent two hours in her office arguing the case.

‘Tessa Blackstone eventually sighed and said: ‘All right – it’s up to you’.’

‘At that point it wasn’t about using the merger to save the Dome but that soon came up,’ said Mr Levitt.

At first the NHS agreed to sell the building for a peppercorn amount, but for moths there was silence – until the bombshell dropped that the building was going onto the open market.

Mr Levitt led another delegation to Whitehall, asking the the Health Minister Yvette Cooper to slap a public interest condition on the sale – ‘I didn’t even know if that was possible,’ said the ex-MP.

Another reprieve was granted but with a deadline to make the financial package work only weeks away the news came that it would go ahead – if the Treasury agreed.

‘The kiss of death is ending something to the Treasury,’ said Mr Levitt, who cornered the Chief Secretary to the Treasury during a late-night vote in Parliament, spending an hour and a half to convince him to give the green light.

‘Thirty-six hours later he rang to say we’d got it,’ he said.

 

The Only Way is Ethics

In this article, written as a former Member of Parliament, Tom examines the role of the Parliamentary Contributory Pension Fund, urging it to adopt a more proactive approach to ethical and responsible investing – without the need to sacrifice financial efficiency, and in line with the ongoing campaign of ShareAction and their ‘AGM Army’. The article, together with a reply from PCPF, was published in the summer 2016 issue of Order Order, the magazine of the Association of Former MPs.   

Here is the relevant page: 160610 Order Order PCPF and here is the article:

In the year to June 2015 the American stock market rose by over 7 per cent. That’s good – if you invested in the right stocks. An American teachers’ pension fund recently discovered that, over that year, it had lost $135 million on investments in a basket of oil and gas shares (1). The market has finally discovered climate change – and it’s punishing those who contribute most to it.

The Parliamentary Contributory Pension Fund (PCPF) invests the money that we put aside for our retirement when we were Members of Parliament. Its members know that it’s not an insignificant sum and we trust PCPF trustees, mostly former colleagues, to look after our investments.

One of those is in Shell, the oil giant, whose normally stable share price has fallen by over a third in two years and is now at its lowest since 2010. This raises the question ‘is this a good long term investment?’ But also, in light of the COP21 consensus on global warming, are we happy to invest in hydrocarbons?

‘Ethical’ and ‘responsible’ investing are growing and the UN’s ‘Principles of Responsible Investment’ agency operates out of London. Encouraging guidelines abound too, though implementation by pension funds generally has been slow – despite strong evidence that ethical investment funds can actually produce higher returns than the mainstream (2).

The bulk of institutional investment continues to focus on short term gains, suggesting that the interests of ‘independent’ fund managers are at least as important as the long term benefit of members (you and me).

The Church of England’s pension fund has an ethical perspective. It doesn’t invest its £8 billion assets in companies where more than 10 per cent of activity is military, or more than 25 per cent relates to tobacco, alcohol, high cost lending or human embryonic cloning; or more than 3 per cent is pornography. Other funds rule out companies with child labour in their supply chain and low carbon investment is increasingly favoured.

In 2015 I asked PCPF what ethical guidelines govern investments made on our behalf. Their reply was slightly reassuring: fund managers are instructed to act ‘consistent with [environment, social, governance] principles and in compliance with the [Financial Reporting Council] Stewardship Code’. Although the FRC code is notoriously weak it does require funds to report on the extent of compliance.

When I asked about PCPF policy on investment in carbon, arms and child labour I was told that ‘the Trustees do not currently exclude on ethical grounds any particular companies or sectors which their managers are permitted to invest in’. Why not? Because it would be ‘extremely difficult’ to achieve consensus on moral issues (3). Is this still their position?

Investors are increasingly demonstrating that they can be morally sound whilst maintaining, even enhancing, their fiduciary duty to those whose funds are being invested. Institutional investors are particularly powerful. I would hope that by choosing to demonstrate both social and fiscal responsibility PCPF can optimise both our funds and our futures.

  1. http://www.advisorpartners.com/uploads/4/8/5/3/48535043/350.org_statement.pdf?&utm_medium=email&utm_source=sactionlive&utm_content=3+-+httpwwwadvisorpartnerscomuploads48534853&utm_campaign=ClientEarthLowCarbon&source=ClientEarthLowCarbon

(2) Mercer (June 2015), Investing in a Time of Climate Change.

(3) Personal correspondence, Jan/June 2015

The Case for Mission-Led Business

Here is Tom’s response to the Cabinet Office’s call for evidence for their Mission-Led Business Review:

  1. What do you know about the number and profile of MLBs operating in the UK?

I have no evidence about the number of Mission Led Businesses (MLB); such evidence would be almost impossible to compile accurately as the phrase has no defined meaning and because the degree to which ‘mission’ complements ‘making a profit’ as a business purpose probably varies between 0 and 100% in different companies. What priority does a company have to give its non-pecuniary mission for it to be ‘mission-led’? A company’s non-financial mission may (and probably does) change both in quality and priority as the company matures; and there will always be a financial element to the mission – even if it is simply to remain in business.

A few years ago I conducted research (funded by Joseph Rowntree Foundation) on the way in which SMEs engaged with the local community; about 60 per cent thought that it was legitimate to expect businesses to engage with their communities (i.e. to undertake some degree of social obligation or mission) and only 20 per cent said that business had no obligation to engage with the community (http://sector4focus.co.uk/the-social-sme/). It is interesting to note that when BITC asked these same questions a decade earlier, in 2004, they reached exactly the same conclusion: that most SMEs believed that they could or should be more engaged than they actually were. When I asked why they did not engage more they said it was lack of leadership and advocacy, good practice examples and resources. I would add to this the lack of popular advocacy of a business case and low expectations of charities seeking community partners.

This does not mean that 60% of SMEs are ‘mission-led’ – they are not. But there is a grey area between being led by a mission and acknowledging social responsibilities towards the community and the environment. The profile of MLBs in terms of publicising their social mission is not high enough.

2. What do you know about the impact of being a MLB on business performance and social impact?

There is considerable evidence that socially responsible companies can command brand loyalty and boost sales through an ‘ethical’ or ‘fair trade’ label or a link with a charity (see my book, Welcome to GoodCo). However, the practice of double standards (a ‘green-washed’ appearance masking less than ethical behaviour) can be very damaging. But there are also various pieces of evidence to suggest that responsible businesses are more commercially successful than others:

  • ethical investment funds produce higher long term returns than others
  • the number of investors complying with the UN Principles of Responsible Investment has been growing steadily since its inception in the early years of the millennium – growth which was unaffected by the ‘crash’
  • FTSE companies with active CSR policies consistently show a greater TSR (Total Shareholder Return) than others; those companies showed more resilience to and faster recovery from the post-crash recession
  • companies with a significant element (more than 3%) of employee shareholding (sometimes regarded as an indication of being ‘in touch’ with communities) show a TSR considerably higher than the FTSE index as a whole
  • many newer companies with a specific non-financial mission – those that were created to further the green economy stand out – exhibit greater resilience; new social enterprises have a lower failure rate than new mainstream SMEs.

It is difficult to assess social impact as businesses do not routinely measure it and (under the 2006 Companies Act) only a few companies have an obligation to report on it. It has been observed that there is a link between the level of community engagement (mission) and employee engagement and many companies do measure employee engagement routinely. However, there are other factors affecting employee engagement, so measuring it can only be a proxy for measuring social impact. It has been reported that employees who acknowledge a ‘purpose’ to coming to work over and above earning a wage or creating a service or product are more loyal, productive and reliable than others and act as better informal ambassadors for their companies. That ‘purpose’ need not be associated with the product or service directly but can equate to the company fulfilling an active and positive role in the community.

3. What are the ways that quantitative data on MLBs could be better captured over time?

Why do we need to capture quantitative data on MLBs? ‘MLB’ is very much a self-selecting label: even the title ‘social enterprise’ has a grey area around it… and any definition will need to define what ‘led’ means. Some companies objectively recognised as mission-led do not recognise the definition and some which may claim to be mission-led may not objectively be so…

A case in point would be Natura, the Brazilian cosmetic and toiletries company. It is a for-profit company owned 60% by its founder and 40% by general shareholders and its direct employees are in a profit-sharing scheme. But its mission is defined as ‘well being well’ (Bem estar bem) and as the world’s largest Benefit Corporation it has an employee engagement and environmental record, not east in sourcing products sustainably from the environmentally sensitive Amazon basin, that would match the best. But is it led by profit (which it probably was when it started in 1969), backed up by a fine USP, or is it now genuinely mission-led?

In Britain uptake of the Social Value Act could be regarded as quantitative data. According to Social Enterprise UK one third of local authorities now ‘routinely consider social value in their procurement or commissioning’ (http://www.socialenterprise.org.uk/uploads/files/2016/05/procuringforgood1.pdf) which clearly puts an obligation on some businesses – actual and potential suppliers to those councils – to develop or exhibit a degree of social mission over and above any required by contract. It is doubtful that many of these companies, with the exception of social enterprises, would regard themselves as led by their missions.

4. Why would a business set up as or become an MLB?

To deliver goals associated with a non-financial mission about which they are sufficiently passionate to make a public commitment.

Although there is evidence that MLBs can be more successful than mainstream, profit-motivated but otherwise comparable businesses, I’d hope that the possibility of making bigger profits did not become a motive for choosing a MLB path; the passion and conviction generated by the qualitative mission is the basis of what makes an MLB successful. However, a business that adopts a social mission in order to generate an appropriate marketing angle should be encouraged – but only if that campaign is meaningful, sincere and sustained.

5. How do you see MLBs developing over the next decade?

I will answer this in terms of social enterprises, B Corps, the Social Value Act and other ways.

There is ample evidence that the world of social enterprise will grow, especially where delivery of a social service (either in collaboration with a public service or parallel to it) or an environmental goal is concerned. Amongst social enterprises only a minority have assumed CIC status to date and I don’t expect this proportion to change, though the number of CICs will grow. The labelling of social enterprises as ‘not for profit’ is incorrect: they allow surplus revenue (‘profit’) to be fully utilised or recycled in support of their mission rather than being removed from the company as dividend.

B Corps status was recently relaunched in UK, having been established in USA some 10 years ago. There are still fewer than 100 B Corps in this country but this massively understates the number of ‘for-profit’ companies which have a degree of social mission. There is an element of ‘cult’ status to the B Corp movement but it has a valuable role to play and I suspect that over a decade this community will become a thriving ‘B2B’ operation, a sort of ‘business for good’ club. On the other hand, I don’t expect to see a massive increase in their numbers. (In the USA there exists a complementary legal status of Benefit Corporation but there is no need to develop this legal form in UK as there is no legal obligation here to prioritise the needs of shareholders).

In mainstream business I suspect that the operation of MLBs will grow (even without regulatory or legislative change) but there will be no rush to adopt the MLB label. It will grow because:

  • Examples of good practice in mission-led business practices will grow in number and status (such as the Unilever 10-year sustainability programme) leading to a desire to learn and copy
  • Opportunities to deliver either formerly public services or services complementary to public services will grow but commissioners will (should) be more discerning when awarding contracts, emphasising that providers of such services should exhibit values and missions compatible with the long term delivery of such services
  • The commercial benefits of being associated with a charity or a good cause will continue to attract companies (despite some recent examples of where this may not have worked to best effect, such as E.On/Age UK)
  • In a world of social media and ever closer public scrutiny, the damage to a company’s reputation caused by corporate behaviour that is not socially, environmentally or financially responsible will force changes in behaviour which may then be interpreted as being mission-led
  • SEUK reports that one third of local authorities now utilise the Social Value Act to some extent in moderating and promoting responsible behaviour and community engagement.

Currently the Social Value Act is being actively implemented only in a minority of councils and in different ways. Only in places like Manchester and Birmingham can it now be said that if a  business wishes to do business with the Council it will need to demonstrate a social mission over and above the detailed confines of the tender which they are seeking to win and implement. A recent SEUK report (op.cit.) made four sensible recommendations that would have the effect of encouraging more councils to opt in to using the legislation and make it easier for them to implement it and I support that call.

But why stop there? Some companies already make social value-type demands of businesses in their supply chains and whilst some of these are backed by legislation (action against modern slavery and corruption, for example) others are designed to support brand values – such as no testing of ingredients on animals – yet others are simply exercising a social conscience on behalf of the commissioning company. An example of this would be Boots’ support of the BITC ‘Ban the Box’ campaign, whereby a condition of being a supplier to the corporate is that a business does not arbitrarily discriminate against ex-offenders in its employment practices.

The Social Value Act, as it sits on the statute book, represents an option, in many respects, for local authorities and their private sector suppliers to follow. Social enterprises, which come ready-equipped with a social mission, are well placed to exploit opportunities provided by the Act but its purpose was never intended to exclude the mainstream private sector. Rather, it provides an example which any commissioner of services from a third party could follow and companies should be encouraged to adopt social value principles voluntarily in their own commissioning and supply chains. To complement this, there should be no legislative barrier to any company adopting these principles and practices.

6. What are the practical steps that a business can take to make a commitment to deliver on its intention to have a positive social impact?

Where to start?

  • Adopt a mission, purpose and values which can include and involve the company and its stakeholders and by which the company can be judged
  • Ensure that the above can be justified by a business case (or at least will not be deleterious to the interests of the company)
  • Explore how to engage the workforce better with the mission of the company: convince them that they are there not just to deliver excellent products and services but to be create a responsible corporate citizen, too, a company for which they are proud to work
  • The above may involve becoming a Living Wage Employer and giving greater opportunities for the workforce to influence the management of the company
  • Have a meticulous sourcing and procurement policy in the supply chain, especially when sourcing from countries and environments which are vulnerable or at risk
  • Adopt the principles of the Social Value Act voluntarily (even if the Act does not apply directly to a particular business)
  • Work with local community organisations within the immediate neighbourhood of the company’s base(s) to establish which of their needs the company could help them meet and how
  • Engage the workforce in creating an agenda of how the company could behave more positively towards the environment and community
  • Whilst acknowledging the need to ‘make the books balance’ in the short term, nevertheless adopt longer term perspectives and goals alongside this
  • Where necessary, persuade shareholders of the business case to justify the strategy.

Tomorrow’s Company (http://tomorrowscompany.com) has published a number of reports on aspects of mission, purpose and values in business.

7. Do you think these steps could be better communicated to entrepreneurs and businesses?

Yes!

Many small entrepreneurs arise spontaneously, which means that discussion of the social purposes of business in either school curricula or business schools may not reach them in their formative years. However, it should be included in both. Business support networks and organisations need to be aware (convinced?) of the business case for including social impact within business purposes.

8. The loss of focus on social and environmental aims has been identified as a potential problem for MLBs (‘mission drift’). When do you think this is most likely to happen? What could be done to prevent this?

Many charities have learned how to protect their missions against the crosswinds of pressures from donors, commissioners and governments – though some have not, and some have thereby suffered damage, not least to their reputations. Businesses, however, are under no such pressure; in fact, the ability to adapt to changing market conditions is seen as a positive virtue. In that sense, ‘mission drift’ is not such a problem for the private sector as it is for the third. It is important for businesses led by a social mission to preserve their mission’s values, to stay in control of their mission, rather than preserve every single activity in aspic. The way a start-up company demonstrates its mission will be different from that adopted by the same company ten years later as it achieves scale; though the arguments in favour of a social mission also dictate that as a company’s business ambitions rise its social impact should, too.

9. Have you identified barriers to new entrepreneurs or well established businesses who want to easily convert their intent to make social impact into a long-term or binding commitment? Please provide details in particular those that may be caused by regulation

There are no insurmountable barriers to developing mission-led SMEs. Although my research shows that time and cost – always major issues for the owner/manager – are perceived as barriers to community engagement by SMEs these are false barriers. Those that have passed through the barrier say that, in retrospect, it is the way one thinks about community engagement which is critical, rather than the time spent thinking about it. And, handled carefully, the costs of such initiatives can be seen as an investment which pays for itself in due course through the business gains from better engaged (and thus more productive) employees, enhanced brand reputation, access to innovation and collaborative working.

The true barriers to MLB in the SME community are attitudinal, caused by lack of information, advocacy and leadership on the issue.

10. What are the barriers to a large corporate becoming a MLB or owning a MLB within its group structure?

There are no insurmountable barriers to developing mission-led corporates, as Unilever has shown. For example, a few years ago Unilever replaced quarterly financial reporting to its shareholders with an annual return. The impact of this was to reduce the influence of short term investors (hedge funds) over the company resulting in a more stable share price. This, in turn, allowed investment and other business decisions to be made for the longer term, a position which is conducive to better environmental policy implementation and the downgrading of the pursuit of shareholder value as the be all and end all of business purpose.

Whilst Unilever was making this decision government ministers were actively considering changing the law to allow companies to abandon quarterly reporting. Yet Unilever had clearly demonstrated that no such change in the law was necessary to achieve this outcome. Again, the real barrier to the development of corporate MLBs is one of leadership both within the business community and within government.

Another attitudinal barrier is risk aversion, which is ironic – as some behaviours associated with being a MLB can actually reduce risk.

11. Do you think MLBs have or should have a different culture / values system to traditional business? Please provide examples.

By definition a MLB will have a different culture from its traditional counterpart. The tools it uses – investment, employment, technology, innovation, production, marketing and the rest – will be the same. Yet because it is led by its mission (rather than led by the need to maximise profits) its culture will balance collaboration with competition, promote inclusion and not subservience, recreate the culture of the family rather than that of the parade ground and take a longer term view of the business environment rather than maximise short term returns at all costs.

12. What challenges do MLBs face when engaging with potential customers, employers and investors about social impact?

I think it is a myth that concern in business is regarded as a sign of weakness, as popular depiction of corporate life might have one believe. People who care for their families, neighbours and communities need not switch those values off between nine and five; however, business people too often behave like Hans Anderson’s Emperor, with few daring to suggest that the new clothes of machismo don’t actually need to be there…

If becoming an MLB involves a complete culture change then issues of credibility will have to be tackled, partly because of the ‘oil tanker’ analogy (it takes a long time to turn round and to do so too fast may sink the ship) and partly because any Damascene conversion is only as good as its marketing!

13. What do you think of the role of certification systems or frameworks in helping MLBs engage with external stakeholders?

Business would prefer a framework to a certification system: frameworks allow ‘wriggle room’, acknowledge indefinite evolutionary change and discourages a pass/fail mentality. Certification also carries the risk of a ‘minimum compliance’ approach (to change so as to comply with regulations but no more).

Although fair trade is a widely recognised system of certification it took many years to become established. Once it took off it was clear that it had shortcomings including, ironically, failure to recognise behaviour that was more advanced than fair trade criteria required – whilst changing the criteria makes it difficult to make longitudinal comparisons. Certification systems like FSC (ethical timber) are now thought to be weaker than they should be. Successes like the Ethical Tea Partnership originated within a specific industry and may have little cross-over potential.

B Corps offer a comprehensive approach to certification but the length and complexity of the process, combined with the fact that certification needs to be reaffirmed every two years, is seen as a disincentive, especially for larger companies (http://bcorporation.uk/b-corps-in-the-uk). Responsible 100 is an alternative emerging system which is much simpler and perhaps better acknowledges business priorities (http://responsible100.com).

The foremost UK framework is Blueprint for Better Business which proposes five principles for business to adopt. It has some high profile mainstream supporters (Grant Thornton, Boots, BT, Unilever) and few detractors (http://www.blueprintforbusiness.org). Worldwide programmes like the Global Compact have suffered from constant revision and have lost some supporters as a result although recently they have commendably decided to align the programme with the Sustainable Development Goals (https://www.unglobalcompact.org). Programmes aimed at narrower audience bases, like the FTSE 4 Good family (http://www.ftse.com/products/indices/FTSE4Good), clearly don’t have universal application and whilst the Sustainable Development Goals (https://sustainabledevelopment.un.org/?menu=1300) aren’t associated with a specific framework or certification system they do lend themselves to approaches like Blueprint.

Trading for Good is neither a framework nor a certification system but is a tool that encourages small businesses to engage with communities and to talk about it (http://www.tradingforgood.co.uk). It is therefore not onerous and because it has no pass/fail criteria there is no downside if a business simply updates their profile regularly.

14. What are best practice examples of social impact measurement and how are they being applied by MLBs?

A number of tools are available to business for measuring their social impact. However, none are widely used or well established – which is not surprising, given that so few companies are obliged to report on their social impact, according to current legislation. Charities, which have had to focus more on social impact measuring and reporting in recent years than in the past, have not evolved any widespread common approach and this is not surprising, either! Small and large organisations have different priorities and no one has yet created a common measure because of the intellectual difficulty in comparing an hour’s volunteering with a gift in kind, an increase in capacity with a carbon saving. There is even a dispute as to whether an hour of employee volunteering should be costed at a commercial rate, at cost or at a standard rate such as the National Living Wage. The London Benchmarking Group has worked commendably to achieve common reporting standards amongst its 100+ commercial members (http://www.lbg-online.net) and these clearly have wider potential application.

Smaller companies could measure their social impact using free tools like Measuring the Good (http://volunteeringmatters.org.uk/employee-volunteering/measuring-the-good-project/).

15. Have you identified specific barriers to the growth of MLBs? Please provide details in particular those that may be caused by regulation

I do not believe that there are any barriers to growth to corporate MLBs which do not exist for other corporates.

16. What do existing MLBs need in terms of support and what do you think can be done to incentivise the creation of more MLBs over the next decade? Who is best placed to do this?

Other than perhaps extending the ambit of the 2006 Companies Act on reporting of social impact I do not see the need for legislative change to support MLBs. Indeed, poor legislation can encourage both an attitude of minimum compliance and resentment of ‘red tape’.

What has been lacking from Government over many years has been a positive adoption of the business case for ‘responsible’ or mission-led business. It has adopted a vaguely pro-CSR position, where CSR is seen as an ‘optional extra’ to business life, coupled with a general encouragement for business to engage more but without a clear idea of with whom and for what purpose. Indeed, a specific Coalition government campaign associated with the Big Society was ‘Every Business Commits’, though it was never clear what businesses were supposed to commit to! It has to be said that the business case for community engagement has never been at the forefront of 30 years of campaigning by Business in the Community, either; they appear to have assumed that it was just a good thing to do.

What MLBs need is encouragement, exhortation, facilitation and the right ‘mood music’. This is not consistent with a ‘predator’ view of big companies and it is not helped by international businesses behaving in ways which are, whilst legal, close to unethical in the public mind (taxation and executive pay levels are cases in point).

If and when the Government does introduce its promised right for employees of larger companies to ask for up to 3 days of annual volunteering leave it is important that this is not a wasted opportunity. If it is used on fundraising, low-skilled activity or team building exercises then it will have been wasted; if it can be focused on raising the capacity of charities, exchanging knowledge and skills between companies and community organisations and delivering a measurable social impact then it will be a step in the right direction and support the goals of mission-led businesses.

ShareAction and refugees at the Astra Zeneca AGM

Here’s Tom’s report of the Astra Zeneca AGM on 29 April 2016, which he attended on behalf of ShareAction. 

‘Companies work and live in the societies they serve’ is a good maxim for corporate giants to remember. It was, word for word, part of the Chair of Astra Zeneca’s board, Leif Johansson’s, response to my question on helping refugees at the company’s AGM in April, 2016.

Representing ShareAction, I asked how the company could best help communities across Europe respond to the current crisis. Could they provide medicines and kit to help organisations serve destitute refugees with nowhere else to turn? Could they recruit appropriately skilled and properly settled refugees into their talent pool? Specifically, would they engage positively with a UNHCR initiative to coordinate corporate responses to the challenge that those fleeing Syria now present?

‘Yes’ was, in short, their answer. The Swedish Chairman stated that Sweden had accepted more refugees per head of population than any other European country to date, and that Astra Zeneca was already involved in initiatives both there and in France. After the meeting I touched base with a couple of senior people before handing over to ShareAction to take the relationship forward – and make sure that the UNHCR invitation gets sent.

Earlier, I’d congratulated the company on adopting the UK Living Wage. Whilst possibly few of their UK workforce needed that boost it was good to see a company make such a commitment just as Government is demanding a lower standard of pay, dignity and engagement than the ‘official’ Living Wage campaign advocates.

Another questioner raised executive pay; later, I voted on ShareAction’s behalf against the doubling of senior executive salaries (which had been endorsed by a previous AGM). The final 5 of the 13 largely technical questions opposed a new research centre in Cambridge where drugs could be tested on animals, also the subject of a two-person demonstration outside the west end hotel where we were meeting.

Astra Zeneca makes a commercial success out of developing a wide range of medicines which modern society needs. That commitment links to a wider appreciation of corporate responsibility which they can afford to discharge positively, not least in helping those who are arriving in Europe in such numbers, fearing for their lives.