Solving, Not Creating, The Planet’s Problems
Published April 2021
Colin Mayer, Peter Moores Professor of Management Studies at Saïd Business School, has written an article for Reuters about how the Economics of Mutuality empowers business to outperform its current self while restoring its positive impact on society and the planet.
Selected highlights have been reproduced below. Click the button to read the full article.
The need for firms to put the rhetoric of purpose into practice has never been greater. But how do companies bridge the gap between making well-intentioned pledges and delivering on legitimate corporate purposefulness?
With Bruno Roche, former Mars Chief Economist, I recently published a freely available Oxford University Press digital book entitled: Putting Purpose into Practice: The Economics of Mutuality, in which we put forth the case for a new perspective on management. It is one that empowers business to outperform its current self while restoring its positive impact on society and the planet. Breaking down the core elements of this management innovation, it is possible to offer a step-by-step guide that puts purpose-talk into practice.
In realising corporate purpose, business must first acknowledge and accept three statements: The purpose of business is not to create profit. The purpose of business is to create profitable solutions to the problems of people and planet. It is not to profit by creating problems for people and planet.
That’s not to say that there is anything wrong with profits. They are the lifeblood of business, and are needed to sustain it as well as provide it with resources to fund growth, investment, and research. But the maximisation of profit for the benefit of shareholders at the expense of other stakeholders is a mistake grounded in the presumption that this is the best way of making profits. Firms must realise that it’s their commitment to corporate purpose and to those who contribute to creating the common purpose that will define their success and profit.
It is this commitment to purpose that fosters reciprocal relations of trust between the firm and its stakeholders. In turn, this gives rise to more loyal customers, more engaged employees, more reliable suppliers, and more supportive shareholders and societies. And this results in higher revenues, lower costs, and more profits.
In doing this, business must also look for new metrics for assessing non-financial performance – in other words, there’s more to business than just money. As the saying goes, in business “you manage what you measure”, so you should expect good performance from good management. For business to be purposeful about becoming a force for good in society, it needs the metrics, management practices and incentives that will drive corporate behaviour towards this goal. Without business enlarging the core of what it measures, mobilises and manages, it will never truly change its behaviour.
