What if the purpose of business was to help human flourishing? That simple question launched our leadership research project in 2015 and continues to shape it today. Answering it required looking beyond the boundaries of the traditional leadership concept. It meant asking questions about political economy, governance, accounting and sustainability. What is the role of business in society? To whom do organisations owe their responsibilities? What should we measure? How can businesses use resources to enable profit, people and planet to flourish? These questions lie at the heart of responsible leadership, where the focus is on the relationship between leaders and stakeholders: customers, employees, suppliers, investors, communities, and Mother Nature. This is about a strategic focus on realising value for all. Rather than giving priority only to the bottom line and one stakeholder, e.g. shareowners, attention is spread across all as a systemic perspective. This may sound idealistic and naive. We thought so too. Good intentions alone are insufficient; businesses need evidence that creating wider value strengthens commercial performance. This became the foundation of our Good Dividends project. The idea is simple. Businesses possess multiple forms of capital: human, financial, operational, knowledge, place and reputation. Investing in one often generates returns across others. Strengthening community relationships, for example, can enhance reputation, deepen employee engagement and improve long-term business performance. As these dividends flow through the system, value grows for every stakeholder. This is Good Growth. But let us assume good dividends and good growth still seem unrealistic and half-baked. Why? NOT ADAM SMITH’S FAULT The modern economy often traces its intellectual roots to Adam Smith, particularly his observation in The Wealth of Nations that “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest”. This passage has become shorthand for the idea that self-interest drives prosperity through an invisible (guiding) hand of the marketplace. The self-interest permeates through to an axiom that the purpose of business is profit. Yet this reading overlooks Smith’s earlier and, in his own view, more important work, The Theory of Moral Sentiments. For Smith, the invisible hand works through social and cultural norms that shape what people expect from one another, how they should think and behave. He makes the point with an example about clothing: “A man would be ridiculous who should appear in public with a suit of clothes quite different from those which are commonly worn, though the new dress be ever so graceful or convenient”. The norms and expectations of the 18th Century shaped Smith’s central argument in the Wealth of Nations, hence the selfinterest of the butcher, the baker and the brewer. Are societal assumptions of the role of business the same today? Perhaps. But in a glacial way things are changing. Ideas are emerging of a different role. The B-Corp movement is but one of many responses to changing assumptions. And the Good Dividends project at Lancaster is another. We have engaged with more than 200 SMEs here in north-west England and in the south-west (with LUMS alumnus Dr Stewart Barnes) to explore a purpose-led multi-capital approach. PURPOSE IN PRACTICE One example is Cotteswold Dairy, a family-owned business in Gloucestershire that has supplied milk for more than 85 years. Employing around 470 people and sourcing milk from 65 local farms, its purpose is ‘To be at the heart of a responsible and sustainable dairy community.’ Following Covid-19 and Brexit, however, the company faced a significant challenge: recruiting and retaining staff. I shared with them a story of a business I had worked with that was tackling labour shortages through working in partnership with a local charity supporting survivors of modern slavery. Some months later, Cotteswold Operations Director Justin Young described how Cotteswold had adapted this thinking to develop a partnership with a local open prison, offering placements to prisoners preparing for release. The initiative required careful planning. Employees needed reassurance, operational procedures had to be 8 |
RkJQdWJsaXNoZXIy NTI5NzM=