Profiting responsibly? Business in the Big Society October 2011
Speech by Giles Gibbons at Battle of Ideas
Richard Reed, the founder of Innocent drinks calls his company ‘the biggest fruit charity in the world!’ he knows how hard it is to be profitable and responsible. Hard maybe, but certainly not impossible.
After all, we live in a world of choice. And this means the lifeblood of companies is making people choose their products again and again.
So it makes sense to do something that can on some level make people like you more.
What’s that got to do with responsibility? What’s to say that responsibility drives likeability and therefore profit?
Well in today’s world the way a company acts and behaves matters to many people. It’s not just what a company does that’s important, it’s also the way in which it does it.
If it acts responsibly – by which i mean with a sense of concern for the impact it is having on society and on the world around it – it makes a difference to what many people think about it.
If you can see that a company tries to source materials in a sustainable way, or treats its employees and suppliers well – then you are more likely to feel a sense of warmth towards it.
The fact that everyone who works at John Lewis shares in its profits makes people feel good about it. The fact that birds eye uses fish that’s certified as sustainable in their fish fingers gives people another reason to choose them. The fact that B&Q employs people, young and old, warms people to the brand.
So the way companies act matters.
What they do matters too. If a company uses its powers of innovation and creativity to create products and services that create social value – perhaps helping us be healthier in an easy way (think innocent drinks), or enabling us to use less energy (eon energy fit), or revolutionising the way we connect with each other - that makes a lot of people feel good about them too.
Supermarkets are in interesting example.
They’re on the very front line in terms of the battle of choice, especially in a time of austerity. And of course they’re all promising low price guarantees. But some are also demonstrating that they do business in a way that cares about people and the planet.
That’s why Sainsbury’s talks about its values as well as its ability to offer value. It makes has ambitious commitments around fair trade and buying British as well as around price. It has set challenging water and carbon reduction targets. It believes its values make it different. And that they will drive consumers’ choice.
And it’s not just Sainsbury’s and not just the supermarkets. Look at Unilever with a corporate strategy to halve its environmental impact while doubling its profits. Or M&S with its aim to be the most sustainable retailer by 2015.
Of course these are all consumer-facing companies – or companies that own consumer-facing brands. How about all those businesses which don’t have direct consumer relationships?
Well, exactly the same logic applies. They might not care whether consumers like them more. But there are undoubtedly people or players that they do want to like them.
Big mining companies know that showing that they care about the communities they operate in will make it more likely that they’ll be allowed to remain there.
Companies which build schools and hospitals or supply prison meals know that demonstrating they act responsibly will help them win government contracts.
All companies have stakeholders that they need to win over to keep winning business. All companies have a strong rationale for doing what they can to make these people like them more.
So, even if you don’t believe in the inherent value of trying to be as much of a force for good in the world as possible, there’s a totally hard headed business reason for business to act responsibly.
Of course there are examples of companies that are doing well while acting in an entirely irresponsible way. And there are lots of profitable companies that don’t care a jot about the world around them.
I’m not saying that responsibility and profitability always go hand in hand. Or that people don’t buy products from companies they don’t like if they want them enough. Of course they do.
All I am saying is that, given a choice, a growing number of people would rather buy them from a company that cares.
About ten years ago, a survey of people in a Walmart car park found that over 50% of them said they hated Walmart. They thought it behaved badly. To its suppliers, to its employees, to the environment.
Fast forward ten years today and what do we see? That Walmart has bold ambitions of being a global leader in sustainability. It has set itself some of the most ambitious targets of any business - including being supplied by 100% renewable energy, creating zero waste, and selling products that sustain people and the environment.
Walmart wasn’t happy to be hated - who would be? – even if it didn’t stop some people in the short term shopping with them and making them a hugely profitable. It knew these people would choose a competitor the moment they felt they could. And that it was losing potential customers who felt the same way about it and weren’t willing to overlook it. So it made business sense to try and change things.
But perhaps even more importantly, it was also simply something the people at the helm of the company wanted to do. As its CEO made very clear, they knew the company had the scale and reach to make a real difference to the world. They wanted to take on the challenge. They wanted to show how Walmart could be a force for good. They wanted to be liked.
So what does this mean looking forward? Are we on a path to a lesser or greater form of responsible capitalism?
Well i think a lot of the answer to that question comes down to people - consumers, you & me. You been a major driving force behind the fact that many companies are now battling to demonstrate that they think about the way they do their business.
And i think this is where our responsibility meets business’s responsibilities. And where it all meets the big society. The big society isn’t really about business and never has been. It’s about people. It’s about people getting up and doing what they can to help do the things they want done.
It’s about you all coming here today, having a debate, asking questions, being engaged.
We see this engagement in the city protesters too, which is why I support them up to a point. They’re engaging with the issues of our day. They’re getting up and doing something they believe in and trying to hold parts of the business world that quite clearly didn’t act responsibly to account. But the problem with the protests and the reason why i part company from them is because they don’t know what they want to change, they’re wrong to just rail against capitalism as though it’s a monolithic entity that someone owns and which moves as one - as though it’s the system that’s the problem.
It’s not. Capitalism is the greatest engine for innovation and growth the world has even seen. It’s created the wealth which has fuelled social progress. It has enormous capacity to drive change.
And it can do all this in many different ways.
Because capitalism is what we make of it. It can be irresponsible. It can be responsible. It’s people that make the choice, that make the difference. It’s us. And the more we all make considered choices about what we buy and hold business leaders to account and challenge our governments to do the same - the more responsible capitalism will be.
