What is the role of business in society?
Last week I took part in a panel discussion that debated “What is the role of business in society”. I thought you would be interested in what I had to say.
My position is simple, the role of business is to create wealth. The word "wealth" comes from two old English words - "weal" and "th" meaning "the condition of well being" or as Robert Kennedy put it "the things that make life worth living".
I would argue that the role of business has always been the same, to build and maintain the condition of well being. It's clear that over time society's views and perceptions of business's license to operate has changed but one thing has remained central, the drive for success and competitive advantage. We often talk about business as if it is a living entity in its own right, but business is a community of people, a cross-section of society, open to normal human frailties - largely motivated by greed and fear. So in this context, should we be surprised that the shorthand for well being has become profit, financial return and monetary reward.
The motivation of the Lord Mayor’s current initiative on restoring trust in the City points to this issue - its starting point is to question what motivates business today; if its focus rests on two simple questions, is it legal and is it profitable...business is unlikely to develop the sustainable wealth creating engine that is critical for a successful society.
But I sense that the role of business in society has been challenged at various points in history, particularly as society has developed and business - or more particularly business leaders - has been seen to be out of sync with public expectations around this condition of well being. So over time there have been changing views within society and business on: whose well being matters, what form does wealth take, and how should wealth be shared and distributed.
When thinking about the purpose of business we must first focus on the role it plays in meeting the world’s increasing needs and desire for goods and services. One can question the intrinsic value of some, but as we know, they range from the creation of life saving drugs, technological innovations which are transforming our lives through to the froth of "The X Factor", Hello Magazine and designer coffee.
We are also aware of business’s central role in providing financial prosperity, but what we often forget is how diverse these financial benefits are; remuneration for all those employed in the organisation and across its supply chain, taxation paid in numerous forms, which goes to support an array of public services (schools, hospitals, roads...) and dividends and interest that fund our pensions and support our savings. What we also forget is that every man and women in this country is ultimately a direct beneficiary of business as employees, consumers, pensioners, savers, voters.
Another critically important element of the condition of well being created by business is often ignored or taken for granted. We forget that for most adults the place of work is where we spend the majority of our waking hours; for many, business provides a sense of community, a place to congregate, and place of safety, familiarity - we also need to keep busy and business is one outlet for this basic human need - one that is critical to the dynamic of Western society where our privileged position means we have moved beyond subsistence living and all its challenges.
But at this time when trust in business is at an all time low, the picture I paint may lack resonance. If this is the case I believe it’s because this picture has been obscured by a predominant mindset which pervades much of society, where wealth and self esteem are defined by financial gain.
Central to this is a floored business measurement model, a model that focuses on financial performance to the exclusion of most other aspects of well being. That's not to say financial performance isn't important, but we need to know more about the consequences of how it is achieved. As we now know, today's model was conceived at a time when people believed that resources were infinite, that many inputs to business, such as water, eco systems services and the environment were free at source. We now know better, and we should be encouraged that business’s view of well being is being rethought as we speak.
So as we look to the future, I see a dramatic repositioning of the role of business in society taking place - the green shoots are here today and can be seen by the way companies are reporting on their performance:
- Puma's has just calculated the cost of carbon and water across its supply chain - a 100 million Euro cost - half its reporting profit
- Rio Tinto, the mining company has just produced a separate report to explain the tax contribution it makes in every country in which it operates
- A number of companies have produced socio- economic reports explaining their contribution as a business, both positive and negative, to employment, to knowledge creation, to public services, local communities and the environment.
These companies, I believe, understand their license to operate and what wealth creation is really about - and yes they are in a minority, and yes their views are shaped by NGOs and others - but they do provide us with a picture of their business purpose.
In conclusion business is about sustaining the well being of all those who interact with it, it is in most cases a force for good and in the long run its success will, in my view, be central to society's success.
Did I get it right? Let me know your comments and questions.