Redirecting Business Performance

“What governance and policy framework will align financial profit of business with environmental sustainability and social flourishing?”

That is the question that must be answered if we are to achieve the wellbeing we seek and avoid the catastrophes we face.  That is the question that holds the key to unlocking successful policy initiatives around the world.  That is the question that this new blog series aims to tackle.

The reason why it is the key to resolving current dilemmas is simple. So long as the financial profit of business is not aligned with environmental and social flourishing then no amount of government intervention, inspiring business leadership, or international collaboration will stop business creating as well as solving problems.  There will remain a fundamental defect in our capitalist systems.

Critical to addressing this defect is an alignment of interests and objectives between government and business. To date, those interests are often seen to be in conflict – the public sector in social wellbeing and human flourishing, and the private sector in financial gain and profit.

The purpose of the “Redirecting Business Performance” initiative can be summarized as follows:

• Many global problems, such as climate change, involve environmental and social dysfunctions. These cannot be overcome through disjoint initiatives of businesses, policymakers and civil society within existing policy and governance frameworks.
• Under the current system, businesses are compelled commercially and legally to prioritize financial performance over minimizing their climate footprint or “leaving no one behind”. Therein lies a major systemic failure of modern capitalism: the “rules of the game” are not designed to promote environmentally sustainable and socially inclusive outcomes.
• Voluntary contributions by businesses to environmental and social causes cannot address the underlying problem, since such promises cannot be kept when they endanger business viability.
• It is for this reason that new policy and governance frameworks need to be developed that establish “rules of the game” which align business objectives with wider social and environmental goals. The new rules of the game aim to allow businesses to fulfil their intended purpose, namely, to benefit people and planet.
• The requisite policy and governance framework needs to be developed in collaboration between business, policy and civil society, powered by relevant experts. The framework will include laws and regulations, tax-subsidy incentives, government targets, government procurement conditions, and licenses to operate.
• For problems that are global, such as climate change, the framework will need to specify common goals, while different countries and regions will need to articulate distinctive pathways towards these goals, consonant with their political, social, economic and environmental circumstances.
• The framework will define general international and regional rules as well as specific national rules that set incentives and constrain business behaviour, thereby creating a level playing field for business competition.

The Global Solutions Initiative and the Oxford Rethinking Performance initiative (Said Business School, Oxford University), together with various international organisations, are developing a conceptual framework for achieving alignment of public and private interests. It ensures that the financial gain of commercial organizations derives from enhancing, not detracting, from environmental sustainability and social flourishing. It involves “profit without harm” – financial gain and profit that come from producing solutions not problems for individuals, societies, the natural world and the environment.

It is a very simple but powerful idea that has the potential to transform the nature and functioning of business and government.  It aims to address the current environmental and social concerns, alleviate political divisions, reduce regulatory burdens, enhance economic performance and create greater financial value for business. It therefore has the potential to act as a unifying force in our currently divisive economic, political and social systems.

The blog series will be open to stakeholders from academia, business, policymaking, research and civil society, with the aim of identifying:

• inhibitors to business delivering socially and environmentally desirable performance,
• policies and governance changes to overcome the inhibitors,
• consistent measures of social and environmental as well as business performance,
• reporting simplifications to create a level competitive playing field,
• needs of different countries to pursue distinctive pathways to common goals.

The point of departure for this blog series is a simple premise: The purpose of an economy and therefore of business is ultimately to deliver wellbeing for people living in thriving communities and a sustainable natural world.

Over the past few decades, however, the forces of globalization, technological advance and financialization have decoupled business success and socio-environmental progress. The process of recoupling requires abandoning the default premise of economic decision making that social progress follows financial performance. Instead, it calls for a redirection of business performance to ensure that the pursuit of profit becomes compatible with the achievement of social flourishing and environmental sustainability.