Corporations must pursue purpose and not just profit, for people and planet
What is the purpose of a corporation? To generate profit and serve shareholders?
It’s clear that approach has proved successful for many corporations and individuals over the course of decades. But solely using growth and profit as a guiding principle has not served the best interests of people or the planet. By pursuing profit above all else, companies are led to act in ways which are fundamentally short-sighted and unsustainable. And we are finally coming to terms with that fact.
Good Energy is different in that it was founded with a clear purpose to give consumers the power to tackle climate change by choosing renewable power.
In the 20 years since, and as a recent adviser to the British Academy’s Future of the Corporation programme, I have seen first-hand how thinking has changed among international businesses. For its new Principles for Purposeful Business report, the British Academy spoke to a range of industry voices; from mining companies to private equity firms, from academics to large retailers. They all acknowledge that business as usual is no longer a viable option, that profit should now be a product of a corporation’s purpose, not the sole reason for its existence.
Good Energy is different in that it was founded with a clear purpose to give consumers the power to tackle climate change by choosing renewable power.
A landmark moment occurred earlier this year at the American Business Roundtable. Since 1997, the group has issued a public statement which defines the purpose of a corporation as serving the interests of its shareholders. But now, the statement has changed to endorse stronger corporate responsibilities, including a duty to “protect the environment by embracing sustainable practices across our businesses.” The group of 181 CEOs includes some of the world’s largest and well-known companies.
The UN’s Sustainable Development Goals (SDGs), a framework for addressing social and environmental impact, are now being taken seriously by corporates as well. Recent research by PwC found that 72% of companies now mention the SDGs in their annual corporate or sustainability report. The goals most cited as a priority are climate action, responsible consumption and sustainable economic growth. These companies recognise they have a central role to play if we are going to achieve the global goals by the 2030 target date.
Businesses can be a tremendous force for good, especially if they focus their attention on solving global problems. At Good Energy, our purpose runs through everything we do and informs how we operate on a day-to-day basis. Back in the 1990s, we realised that to give consumers control over their energy use we needed to grow the market for home-grown, clean power. That’s why we source all our power directly from a group of 1,400 independent generators. This provides customers with an opportunity to grow that market further when they choose our 100% renewable tariff.
We have also given people a way to support our purpose by incentivising the uptake of clean technologies, such as roof-top solar panels, and providing share offerings and a pioneering bonds scheme. The first Good Energy bond, for example, led to the development of 13 solar farms in the UK, and 150 megawatts of new capacity. Our latest corporate bond raised £16 million from investors which will be used to support new consumer offerings in electric vehicles, digital technology, and battery storage. All tied back to our founding goal of empowering people and tackling the climate emergency.
Recognising the importance of sustainability is the first step. But changing how a business is run can be difficult and not always matched by practice. That’s why the British Academy has created its framework of eight principles which aim to serve as an agenda for business as we enter a new decade.
Businesses can be a tremendous force for good, especially if they focus their attention on solving global problems.
These principles place purpose at the heart of a corporation and determine how it will behave; first committing into law the company’s purpose, to seeking shareholders and investors which are committed to the same values. On top of that, a proper governance and measurement process needs to be in place to keep the company on track and held to account.
The Academy’s principles act as a template for change, and the conversation needs to continue around how to create positive cultures within business. Old ways of thinking are often deeply embedded into how many large organisations operate, especially ones which regularly turn a profit from polluting the planet.
The task of changing these companies to adapt to the modern world has already begun. The positive responses from some of the world’s largest brands serves as a starting point to bring about real change and radically different business models. One thing we know is that if they want to, businesses can move fast. Let’s hope they do.
