It’s now well acknowledged that the biggest and most pressing issues of our time are climate change and wealth inequality. We know that climate change is changing our planet and affecting the world’s ecosystem, potentially beyond repair, affecting the poorest and increasing the number/severity of natural disasters. We also know that more unequal societies lead to political instability, shorter lives for both rich and poor as well as more corruption and crime.
So why are we still predominantly measuring and managing business performance through how much money is made? The system is rigged towards financial gain being an end in itself, and one which leads to its own set of behaviours, which do not sit comfortably with the goals of social and environmental justice.
At a time when there is much talk about ‘purposeful business’ and ‘building back better’, there has been some movement in recognising that the current system is not working and needs changing, but the question is whether the proposed solutions will make any real difference.
Businesses which are primarily driven by social/environmental objectives rather than the need to create profits for shareholders, need to be at the forefront of how the world views business, not just an afterthought or add-on
Recent developments, such as ESG (Environmental, Social and Governance) reporting, attempts to link activities to the UN Sustainable Goals (SDGs), and businesses seeking to prove their sustainability standards through the B Corp assessment process, do not in themselves tackle the fundamental problem of wealth inequality, which has been highlighted by campaigners including the TUC and Oxfam:
• In 2019 the TUC and High Pay Centre reported that returns to shareholders in the FTSE 100 increased by 56% from 2014 to 2018, while the median wage for UK workers increased by just 8.8%.
• In 2019, Oxfam reported that the combined wealth of the world’s 22 richest men outstrips the wealth of all of the women in Africa.
Research like this proves that the shareholder-first business model, which has become entrenched in our society, is contributing to rising inequality on a global level. It is only by limiting the power of shareholders to expect the same financial returns whatever the social and environmental impact, along with a greater empowerment of stakeholders to drive business goals, that we will see the fundamental change that is required to address society’s most pressing issues.
Social enterprises and the wider social business family, including cooperatives and mutuals, are leading the way in this regard, as businesses that have a social/environmental purpose at their very core, rather than as an afterthought or CSR initiative. As shown in our recent Making a Mark competition, social enterprises went above and beyond in their response to the Covid-19 outbreak, adapting to the constantly changing situation to provide much needed support to local communities and wider society.
As we look to recover from the economic and social effects of the pandemic, these types of businesses, which are primarily driven by social/environmental objectives rather than the need to create profits for shareholders, need to be at the forefront of how the world views business, not just an afterthought or add-on. We need to emphasise how important social enterprises will be to the recovery and in creating a more resilient and fair economy moving forwards.