British Academy calls for ‘purposeful business’

The British Academy has published a second report, considering the role of business, capitalism, the future of humanity and the future of our planet.

Building on the 2018 report, Reforming Business for the 21st Century, the new report revisits the case for change and highlights that climate change, the urgency of delivering on the UN SDGs, technological developments, the increasing dominance of companies without significant tangible assets, and negative perceptions of business.

Principles for Purposeful Business sets out a series of principles to guide lawmakers and business leaders in any jurisdiction towards the policies and practices that can release the potential of business to profitably solve the problems of people and planet, and to prevent business from profiting from harm.

In the earlier report the Academy concluded that the purpose of business is to solve the problems of people and planet profitably, and that profit, in itself, was not the cause of problems. The new paper identifies how corporate purpose assists people, organisations, societies and nations to address the challenges they face, while at the same time avoiding or minimising problems companies might cause and making them more resilient in the process.

Principles for Purposeful Business proposes eight interconnected principles for business leaders and policymakers:

• Corporate law should place purpose at the heart of the corporation and require directors to state their purposes and demonstrate commitment to them.
• Regulation should expect particularly high duties of engagement, loyalty and care on the part of directors of companies to public interests where they perform important public functions.
• Ownership should recognise obligations of shareholders and engage them in supporting corporate purposes as well as in their rights to derive financial benefit.
• Corporate governance should align managerial interests with companies' purposes and establish accountability to a range of stakeholders through appropriate board structures. They should determine a set of values necessary to deliver purpose, embedded in their company culture.
• Measurement should recognise impacts and investment by companies in their workers, societies and natural assets both within and outside the firm.
• Performance should be measured against fulfilment of corporate purposes and profits measured net of the costs of achieving them.
• Corporate financing should be of a form and duration that allows companies to fund more engaged and long-term investment in their purposes.
• Corporate investment should be made in partnership with private, public and not-for-profit organisations that contribute towards the fulfilment of corporate purposes.

In 2020, the Future of the Corporation programme will convene a series of ‘purpose summits’ to examine the role that purposeful business can play in solving the problems of people and planet.

Full report here.

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