The Future of the Corporation

“I am in the food business. That means I don’t just take responsibility for my customers. It means I take responsibility for the millions of children starving every night facing shorted lives. It means I take responsibility for the millions of obese children facing shorted lives. It means I take responsibility for 40% of food waste and environmental damage of food production.” Paul Polman, BA Future of the Corporation Launch

 

What is the purpose of the Corporation in the 21st Century?

 

The question could not be more urgent or more timely, and last month, the British Academy launched a three-year initiative to find out. Led by Colin Mayer, and bringing together the brightest minds in research and business, The Future of the Corporation will see £1.5m invested to define what the purpose of the corporation must be in the 21st century, and how business needs to change to rebuild the social contract.

 

As an advisor to the initiative, I will be reporting on its findings regularly, and I invite you all to engage with the program of events and share your own experiences as leaders in business and policy making, in the spirit of collaboration and transparency that sits at the heart of this effort.

 

The penetrating insights of its launch report – The Voice of Business, led by Lucy Parker of The Brunswick Group – revealed the task at hand is complex. Summarising the mind-sets, barriers and preoccupations of 16 of the UK’s most influential leaders, Parker reflected on four major points.

 

  1. All business leaders understand the need to build trust. But this trust – and therefore sense of purpose – is often narrowly located in the product or service they deliver, not a holistic sense of social contribution.

 

  1. The short-term dominates everything. Quarterly reporting pressure is ‘visceral’ for CEOs. It drives everything – truly ethical and sustainable business will not evolve until this system is changed

 

  1. Authentic purpose is not about why. It’s about how. The business model – not the rhetoric – is where business purpose truly lives. Values that are not designed into the core of a business will not deliver.

 

  1. Change is the no. 1 preoccupation. Every leader is concerned with the need to redefine their right to exist in their industry. And yet this radical time of rethinking, rebasing, reshaping is the opportunity of now: the rare chance, in this moment of flux, to create a better model of business.

 

As initiatives like B Labs UK are proving, this change is attainable. The launch panel, who featured some of the most enlightened business leaders in the western world today, were testament to this, and their comments are worth sharing.

 

For Peter Norris, CEO of Virgin Group, investors in this automated age are no longer looking for ownership, they’re looking for returns – a point echoed by Paul Polman, who cited the “phantom economy”: the $600trn “moving like tornados around the world” chasing financial returns, and never social outcomes. The investment model is broken. Shareholder focus enshrined in business law has become, for Norris, “a uniquely limiting factor” for business reform, and must be shifted to a stakeholder focus.

 

For Sacha Romanovitch, CEO of Grant Thornton, leaders must tap into the humanity of their people to achieve great things. “My colleague asked me, ‘why, at work, do we aspire to be the best, but at home, for my family, I want to make the world a better place? We need to ask ourselves and our teams, what legacy do we want to leave for our children? What sort of world do we want to make? We need to be more ambitious.”

 

And for Paul Polman, CEO of Unilever, the message is simple. “We live in a world that is more concerned about the next quarter than the next generation.” And it’s a flawed business case. “The cost of not acting is more expensive than acting. Sustainable Development goals cost 4% GDP. The cost of war globally is 9% GDP. The cost of environmental damage 12% GDP. Business leaders need to be able to look people in the eye and say I positively contribute to society. ‘Zero harm’ is not enough.”