Purposeful Business

We hear a lot about business and purpose these days. In particular in July the UK’s revised Corporate Governance Code was published. Among other things the Code identifies that shareholder primacy needs to be moderated and introduces the concept of the purpose for businesses. 

Going beyond profit

This can be seen in the context of a wider public narrative questioning profit maximisation as the purpose of the business. It is an empty vessel; it says nothing about what the business does.  There is nothing wrong with earning a living, it is just that the profit model is a means of delivering a purpose and not a goal in itself.  Indeed, profit maximising might well be understood as ultimately undermining the success of a business. It plunders the supply chain and the natural and social resources businesses depend on for success.

Lessons from nature

In thinking about purpose it is illuminating to think about it from a different angle, from the perspective of nature. The relationship of business and nature is an increasingly hot topic as companies pay more attention to their dependencies and impacts on the environment. Hence we see nature being framed in a language that is meaningful to business with words like ‘capital’ and ‘assets’ used to describe it. The Natural Capital Coalition, which ICAEW led on establishing and hosts, defines natural capital as:

‘the stock of renewable and non-renewable natural resources (e.g., plants, animals, air, water, soils and minerals), that combine to yield a flow of benefits to people.’

One of those benefits is wisdom or insight: nature can show us solutions to problems, ways of operating and how complex systems function. Thinking in systems is I believe becoming recognised as one of the necessary key skills for the business leader. A system is an interconnected set of elements organised in such a way as to achieve a goal.  It has a function or purpose.  Viewed in this way we can understand businesses, like schools, groups and communities as systems and like natural systems they have a goal or a purpose.

Nature also teaches us that in achieving their goal or purpose, systems are dynamic, constantly changing and adapting to survive. Everything is in a state of flux and must be adaptable to a change in environment, even the purpose.

Embracing change and uncertainty

Applying this to organisations means that they must be living institutions open to change and uncertainty. Their initiatives and strategies are like hypotheses and implementation of them through products and sales are tests through which they learn and adapt. 

Our desire to keep everything in a state of stability means we try to arrest this constant change.  In so doing we undermine the resilience necessary to adapt and when the system – the business - experiences a shock it isn’t able to adapt.

Meeting society's expectations

Purpose carries with it a sense of acting responsibly and meeting or exceeding society’s expectations about how the corporate world treats communities and the natural environment. Now more than ever business and the accountancy profession need to demonstrate that they can command the public’s trust. In a world where it becomes normative to consider businesses’ dependencies and impacts on society and nature the bar on trust will almost certainly be raised.  Having clarity and authenticity of purpose and being able to adapt to rapidly changing circumstances will be necessary for business success.

So, what is a strong economy?

Given that businesses are sub-systems of the bigger economic system all of this then raises the questions of what is the purpose or goal of the economy and what characterises a strong economy?