6 minute read
Welcome to the purpose economy
A conversation with Michael Hayman by Michael Young
What is the role of the corporation in society? Should shareholder interests and the profit motive be the singular focus of businesses, or can corporations be a force of good and agents of change?
In the age of COVID-19 and amid calls for greater social justice, climate action and racial equality, corporations and their CEOs are under intense scrutiny about the role they play in either driving real change or simply skirting responsibility and reinforcing the status quo while profiting handsomely. How consumer, employees, investors and society should judge corporations is by no means a settled question.
Recently, I had the opportunity to speak with entrepreneur and author Michael Hayman about this topic in detail. Michael has an international business background and in 2018, he was appointed Honorary Professor of the Purpose Economy at the University of London’s School of Advanced Study (SAS). Michael and I got into a wide-ranging discussion about his role and the evolving role of the corporation in society.
Tell us about the Purpose Economy at the University of London.
The goal of the Purpose Economy within the University’s School of Advanced Study is to examine the human aspects of how businesses, in partnership with stakeholders, can create a more purposeful world; to study the systemic change required and investigate what business as a force for good is, and what being an agent of change in society could actually mean in practice.
Many of the institutions within the University of London have been looking at the issues around social change for some time. Given the pace of change in the world right now and a number of systemic issues with global and trans-generational impact, there is an opportunity to bring together social, economic and political perspectives about the purpose economy into an area of more focused study.
How should we define corporate purpose and why is it important to broaden our understanding of the role of corporations?
Purpose speaks to the intention of an organisation and the change it seeks to affect. It is a belief system and a set of organising ideas about the future of the planet, the future of society, and fairness within society.
The notion of corporate social responsibility (CSR) has been around for more than 20 years, and while these initiatives were often eye-catching, they always ran the risk of never truly being integrated into the business strategy. In turn, the negative externalities of the business were never accounted for, let alone priced.
Today, with the advent of reporting frameworks and methodologies such as Environmental, Social and Governance (ESG) there can be closer alignment between the interests of shareholders and stakeholders. Investors now view exposure to environmental risk, leadership diversity, worker safety, pay equity and social equity in terms of financial risk and corporate survivability.
These issues are no longer nice-to-have. There are very stark economic consequences for organisations that do not manage environmental, social and governance risks. The pandemic has ‘pulled the future forward,’ and we are seeing studies which prove that companies that are prioritising people, planet and profits are outperforming peers and competitors.
There is much scepticism about the notion of a purposeful corporation. How should we respond to that criticism?
There is no question that we should judge a corporation by their actions and not by their words. The actions of corporations are more visible and discoverable, which is good news for transparency.
Tone and deed must be firmly connected and aligned. The days of purpose-washing or virtue signalling are over. And it is not just investors that are making decisions about where to allocate capital that will hold businesses to account, but also consumers and employees, both current and future, who are making decisions about which brands to buy and which companies to work for that will last for generations.
Within organisations around the world there is definitely change afoot, and COVID may have accelerated elements of that change, but we are seeing leaders stepping forward to meet a broader set of environmental and social obligations and responsibilities.
One of the early exemplars of the idea of conscious capitalism or corporate purpose was John Mackey, the founder of Whole Foods. Doing good isn’t only about doing good for good’s sake. It was because good has a better outcome. Good had the outcome of building a better company.
Mackey saw the rise of the conscious consumer: the consumer who knows what they want to eat and why they want to eat it. He saw that this was going to be the future of choice, the future of good corporations, and it was an authentic passion that didn’t just drive the founder of this company, it drove everyone you met from the shop floor right the way through to the CEO’s office. The sense of purpose had a phenomenal, galvanising effect on the attitude, spirit and culture of the team.
How will the Purpose Economy at the School of Advanced Study contribute to our understanding of the role of the corporation in society?
The job of a university is to pose the questions and not lead with the answers. And as it relates to corporate purpose, the jury is still out. There are companies that are not making the changes fast enough that are still successful companies and may well go on being successful companies.
At the same time, there are other companies that are incredibly connected to and aligned with their stakeholders. The issue is that we’re living in this process of accelerated change, but we don’t know yet where the change is going. I think that the job of a university is to approach issues like this with a fair and open mind to actually understand the consequences of that change now.
For many campaigning for equality, diversity and fairness the charge to corporations has been to change what has been promised before, but ultimately was never delivered upon.
Now, there is a renewed sense of urgency because COVID has provided a glimpse of the future that no one likes, and if we continue to leave social issues unaddressed there will be grave planetary consequences. So, a hypothesis to work on is whether a global crisis can actually create the impetus for a different type of change – one which brings new ideas that have a better chance of affecting change now, than they had before.
If I were to answer the question on a personal basis, I have a positive outlook. I believe that business has the potential to be an improving force in society and an obligation to do what it can to do so. But there are lots of examples and there are lots of challenges – especially as we emerge into a technological age where we have to put a lot of trust in young corporations, and this poses questions that remain unanswered.
What we hope to explore within the Purpose Economy is a better understanding of corporate purpose that will help shape issues of accountability and guide evolution of our understanding of the role of businesses right the way around the world.
Michael Young graduated from the University of London with a BSc International Relations and is a US Alumni Group leader. He is the founder and CEO of Actual Agency and hosts the Purpose, Inc. podcast, where he talks to industry leaders about corporate purpose and stakeholder capitalism. Listen to the podcast at: actual.agency/podcast
Michael Hayman CBE DL is Honorary Professor of the Purpose Economy at the University of London, where he also holds an Honorary Doctorate in Economics. He is an entrepreneur, broadcaster, and co-author of the book, Mission: How the Best in Business Break Through (Penguin, 2016). He is co-founder of firm Seven Hills.
