A balancing act: Redefining the fundamental purpose of business

Changing expectations around the role of business in society reflect a significant shift in mind-sets over the last 15 years. The idea that business can, and should, balance profit with
purpose is challenging the long-held view that the role of business is purely about maximising short-term profit.

Not long ago, “the business of business is business” was the accepted mantra.
Few companies saw sustainable development as part of their mission. However,
a number of converging factors have led to a growing discussion about the
purpose and role of business in society. Taken together, these have started to
reframe our understanding of what business is and should be, supporting the
emerging view that business needs to play a role that is more than just money-
making.


BUSINESS IS PART OF SOCIETY

Growing concerns over the negative impacts of economic activity have prompted
discussion on the fundamental role and responsibility of business in society.
From being viewed as ‘the root of societal problems’, business is increasingly
seen as having the scale, skills and resources to deliver solutions and social
change.

This is closely linked to the early perception that business was somehow autonomous from society at large. Today, more business leaders realise that their
ability to thrive depends on well-functioning and stable societies and a healthy
environment. Contributing to this must be part of the business objective. This,
in part, means incorporating scientific knowledge into corporate policy-making
and business projections. It is no longer only a matter of succeeding or growing,
it is a matter of surviving.


TOWARDS BROADER VALUE CREATION

At the same time, leading corporations are looking beyond models that simply
minimise negative impacts to those that focus on maximising the positive.
Delivering profit does not need to conflict with addressing environmental and
social concerns. On the contrary, it is now generally agreed that these factors
are essential for delivering long-term sustainability and growth.

There is a vibrant discussion about the purpose of business and the economy.
We need to broaden the concept of ‘value’ beyond the purely financial,
and incorporate this new understanding in business performance metrics.
Today, some business leaders are starting to take a more long-term view, and
to develop visions, goals and targets which implicitly take broader societal and
environmental changes into account.


LEADERS ARE PAVING THE WAY

More companies are now positioning themselves as a driving force for sustainability, going beyond mere compliance with minimum standards. Achieving
more equitable, greener outcomes becomes a factor in decision-making. New
innovations, technologies, and business models build social and environmental
considerations into products and services.

Some companies have adopted the language of “net zero footprint”, looking
to achieve zero carbon, water or waste, and setting ambitious social targets to
ensure, for example, gender balance. Leaders have established concrete goals
for zero footprint levels within a fixed timeline. This stance sends strong signals
from the business community to governments that they are ready for better
regulatory regimes, accommodating the sustainability needs of the new millennium.

“My initial attitude was, ‘Look, we’re a heavy industry. Child labour has nothing to do with us.’ But when you start to look at it in terms of supply chain, it does becomes an issue. We’re putting ethanol in gasoline, which comes from sugar cane in Brazil, and the sugar cane industry has a big problem with child labour. So nowadays we would say, ‘Of course it does.’ I think the Global Compact played a part in increasing concentration on the supply chain.”
SIR MARK MOODY-STUART, CHAIR OF THE FOUNDATION FOR THE GLOBAL COMPACT FORMER CHAIRMAN OF ROYAL DUTCH SHELL

With evolving expectations of business impact, what has been the role
of the Global Compact in catalysing this change?


PRINCIPLED BUSINESS

Possibly the greatest contribution of the Global Compact in the past 15 years has
been in changing the perceptions and understanding of the role of business in
society, spreading the idea that business has a shared responsibility for the development of society. The ‘principled business’ approach conveys that business
must be based on shared values which support society, and contribute positively
to solve global challenges. This is a paradigm shift from the view that business
by default is essentially unsustainable.

The Global Compact has raised the profile of sustainability issues and their
relevance to business, in particular with regard to the scale of the issues and the
extent of inequalities in the world. As an advocate and educator on the issues,
the Global Compact has raised awareness of what can be expected of business,
which has in turn helped to raise expectations on corporate responsibility.


CREATING PARTNERSHIPS

The wide range of issue platforms created under the umbrella of the Global
Compact has worked to make connections between companies, governments
NGOs and society. Through these networks, the Global Compact has been able
to promote the understanding and sharing of ideas on the issues, opening the
floor for a wide range of opinions, and influencing the mind-sets of a range of
stakeholders.


DOING GOOD

An important element of the Global Compact has also been to encourage
companies to go beyond minimum requirements, and engage in activities that
contribute positively to sustainability goals. The new Sustainable Development
Goals will be an important framework for aligning business priorities with
societal goals going forward.