‘The Future of the Corporation’ in two minutes
by Lilian Barratt
22 Jun 2020
Business shapes the prosperity and destiny of our society on a global scale. But is the corporation adequately equipped and structured to deal with the challenges of our future? How can it make society better, and more prosperous for everyone? The Future of the Corporation aims to contribute its research and expertise to a paradigm shift that redefines business in the 21st century and builds trust between business and society.
The Future of the Corporation - Purpose Summit
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Corporations were historically established with clear, public purposes, with profit as a product of corporate purpose. It is only over the last half-century that the purpose of business has come to be equated solely with maximising profit. The way businesses behave when in pursuit of this purpose has been damaging for trust in corporations because it limits their potential to achieve social and environmental goals alongside financial outcomes. This aggravates their detrimental impacts on the environment, inequality and social cohesion.
We are now living through a crisis few could have anticipated. The COVID-19 pandemic has exacerbated the fault-lines across society. Mounting challenges have intensified the need for a reconceptualisation of the corporation around the idea of purpose. These global issues cannot be mitigated without corporations themselves helping to drive urgent change, a case the British Academy made in its 2018 report, Reforming Business for the 21st Century.
The Future of the Corporation programme represents the most comprehensive attempt to date to develop a new contract between business and society, developed over two years through extensive academic research and consultation with business leaders, investors, policymakers, civil society and regulators. It is centred on a clear definition of the purpose of business:
“To profitably solve the problems of people and planet, and not profit from creating problems.”
This programme aims to illustrate what this type of business looks like in practice. Over the course of 2019, the Future of the Corporation programme explored these issues in more depth with a range of experts, business leaders and academics to produce a set of eight Principles for Purposeful Business:
A corporate purpose expresses how a business can contribute solutions to societal and environmental problems. Corporate purposes should create value for both shareholders and other stakeholders – including customers, employees, communities and suppliers. However, for companies to deliver on their purposes, they need appropriate structures, systems, processes, financing, measurement and incentives as part of a wider enabling environment for purposeful business. The Principles aim to illustrate what this new environment could look like.
This understanding of corporate purpose is grounded in international scholarship and draws on the experiences of businesses from publicly listed corporations to benefit corporations and the social enterprise movement. With growing concern around the climate emergency, 2019 saw a step change in business commitments to a purposeful approach, including the US Business Roundtable representing the largest US companies and the many businesses seeking to achieve B Corp certification.
With the resilience of both business and society pushed to the limit by the COVID-19 pandemic, these commitments are being tested in unprecedented ways. The social and economic ramifications of the pandemic have tested our assumptions around the role of business, investors and government in society.
The Future of the Corporation now aims to build on the eight Principles by looking at practical reforms to policy and practice that enable the implementation of purposeful business. The humanities and social sciences have a major part to play in examining the role of the corporation and in building a more sustainable, inclusive and equitable relationship between business and society.
Lilian Barratt is Senior Policy Advisor at the British Academy. Find out more about the Future of the Corporation programme.