From Davos to the Australian financial sector, businesses and investors are having conversations ‘regaining the community’s trust’ and ‘social licence to operate’ in a manner that suggests business exists in a parallel universe to society.
That somehow a ‘social purpose’ gives companies an entry ticket to exploit communities for their commercial gain, and that this approach is acceptable.
Here’s a thought, when businesses recognise they are part of an interdependent society, then they would realise they already have a ‘social purpose’. A few actually.
- Businesses provide useful goods and services to customers and in return they get paid for these goods and services. Without customers the business doesn’t exist, so that is quite a good reason to look after your customers.
- Businesses provide jobs for people and in return those people provide skills, experience and commitment to help a business thrive. Without employees they don’t exist, so that is quite a good reason not to screw your employees over.
- Businesses pay (or should pay) tax based on their earnings to the government of the jurisdiction and in return they get access to decent infrastructure (power, water, telecommunications, roads etc) and educated people who can get medical help when they are sick (and healthy people are better for the economy). They may also get government agency support in establishing export pathways overseas, they may benefit from the research paid for by taxpayers at universities in developing their product and they may receive subsidies to develop those products. These are very good reasons to pay your taxes and contribute to the society in which you operate.
- Businesses need a supply chain to operate. Without suppliers it is difficult for businesses to operate in our highly specialised world. For example, it does not make economic sense for every business to make its own paper, have a power plant to generate its own electricity or maintain a team of tradespeople to fix the air-conditioning, do the plumbing and the like. So that is a good reason to have a good relationship with suppliers and have reasonable payment terms.
- Businesses may also contribute to their communities through:
- supporting education institutions and in return they help create their future employees and product lines;
- Support local sporting and other community clubs and in return that may generate custom and goodwill, which means revenue;
- They may invest in developing employees in remote and regional destinations where they work and in return they also get a cheaper workforce that doesn’t need to be flown in, are likely to stick in the job longer and they contribute to a stronger and economically stable community; and/or
- Not pollute the environment from which they earn their income.
Businesses are part of the community, they are members of the society they live in, and like all members, they have interdependent relationships in those communities. Their survival, or social licence to operate if you must, depends on it.
Of course, this all goes to custard with businesses, and the investors that provide their capital, start to think that they belong at the top of the tree of power and that they should benefit at the expense of their customers, employees, suppliers, host governments and communities.
They can sustain this for a while by taking advantage of the significant power imbalance, but after a time, people understand that this behaviour has done profound damage environmentally, culturally and socially and they start demanding something better.
Surely the social purpose of business is to contribute to the community by creating wealth through buying and selling of useful goods and services that do not destroy the environment and people’s lives, providing employment and contributing to creating a community that we all want to live in.