Business leaders call for creation of ‘purpose-first’ economy in green recovery
Written by Tim Greenhalgh
CEOs of global companies are calling for the creation of a new economic system that focuses on purpose-first businesses committed to solving societal problems.
Chief executives of Philips, Mastercard, Danone and L’Oreal are among those who have signed an open letter pledging to help build an economic system where planet and society can “thrive for generations to come”.
The signatory companies together employ more than half a million people and have annual revenues of more than $100 billion (£76.5 billion).
The letter says that purpose-led companies in the “fourth sector” already play a significant role in addressing global challenges outlined by Sustainable Development Goals and the Paris Agreement so are ideally placed to drive the economic reconstruction after the shocks of the COVID-19 pandemic.
Its publication coincides with warnings from Schroders in its Climate Progress Dashboard that radical policy changes are needed, despite reductions in greenhouse gas emissions accompanying the global economic slowdown. Global temperatures remain on course to rise by 3.9°C as of the end of June 2020.
Building it better
The 15 signatories to the open letter appeal to public and private sector leaders, emphasising a six-point framework designed by the Leaders On Purpose (LOP) platform to “building it better”.
Governments should “catalyse the power” of this sector by launching recovery packages prioritising businesses with a strong and proven record of enhancing their social and environmental footprints, or that provide goods or services designed to reinforce sustainable development.
The alliance of CEOs say in the letter:
“This is essential, both for ‘Building it Better’ and for achieving the global 2030 agenda in the post Covid-19 world. The time has come to formalise this emerging fourth sector of the economy and take purpose-first business to scale.”
“Purpose-first” or “for-benefit” enterprises comprise nearly a tenth of GDP in the US and Europe, and already play a “significant role” in addressing global challenges, the open letter emphasises.
State packages could include targeted policy incentives for purpose-led businesses and policy barriers for high-carbon businesses as well as incentives help the financial sector innovate its products, valuation models, risk assessment and ratings processes.
The letter states:
“We resolve to build an economic system that leaves no one behind, overcomes the structural barriers to equality and transparency and puts purpose first, so that our planet and society can thrive for generations to come.
“This approach can enable purpose-driven business to assume a larger part of the responsibility for addressing key global challenges like inequality, health, mechanisation, and climate.
“The purpose-first economy will ensure that in times of crisis, businesses will be both compelled and empowered to act for the benefit of society. The time has come to formalise this emerging fourth sector of the economy and take purpose-first business to scale.”
The CEOs believe that these measures would be the catalyst for new standards in measuring and disclosing value, strengthening the growth of businesses focus on environmental, social and governance (ESG) criteria.
The letter stresses that other actors, including academics, investors and philanthropists can help businesses and policymakers create these incentives and policies, with reshaped education and training a key element.
The CEOs also call for a “just” recovery, that does not leave behind the developing nations, with costs and long-term benefits of creating a sustainable future shared fairly between socio-economic groups.
The six-point plan
- Recognise the purpose-first sector. Governments can acknowledge the mosaic of innovations we have identified as a distinct (and diverse) fourth sector of the economy. They can thereby enable and scale purpose-first businesses through the systematic provision of support and removal of impediments. This can include targeted policy, financing, procurement, contracting, taxation, accountability measures, capacity building, and more.
- Carefully craft incentives and policies. Encourage other economic actors — the private sector, civil society, investors, academia, philanthropy, and citizens — to engage in the co-creation, employment, and expansion of the fourth sector and its growing ecosystem.
- Incentivise innovations of financial products, risk assessment, valuation models, and ratings. Develop standards for assessing and accounting for social and environmental impacts of purpose-driven enterprises. Support implementation, i.e. through corporate charters.
- Design for a safe, educated, and healthy society. Support colleges, universities, and research centres to collaborate and access capital, talent and shared resources. Expand community building and educational training, develop regional platforms and new curricula. Equip policymakers, practitioners, and students with necessary knowledge and skills for careers in the purpose-driven economy.
- Leave no one behind. Support economies to climb the development ladder by enabling and accelerating the growth of purpose-first businesses and investment to successfully deliver on the Decade of Action in pursuit of global climate and sustainability goals.
- Enable a supportive ecosystem. Building a better post-COVID-19 economy by creating an enabling ecosystem that serves both purpose-first businesses and conventional businesses that want to transition toward a purpose-first logic.
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