A report from the thinktank Demos has suggested that getting companies to value social and environmental impact, in addition to profit, could give the UK economy a much-needed boost. The report calls for rewriting Companies Act in a way to balance purpose with profit. Demos argues that the outcome of this change would generate a financial injection of £149bn for the UK economy. Purpose-led firms, of which there are already more than 1,600 in the UK according to B Lab UK, are seen as proof that this approach can deliver profits whilst also being socially and environmentally responsible. Chris Turner, B Lab UK’s campaign director, said these companies were “among the fastest growing, most resilient and most innovative in the country.”
Critics of the proposal say that anything other than profit is unnecessary to business growth and development. The Institute of Economic Affairs called the report “extremely dangerous”, insisting that it “attacks the profit motive”. However, proponents of the movement have been adamant about its potential economic benefits. According to Demos’ director of policy and impact, Andrew O’Brien, failure to do so would mean that “the UK is left behind on the world stage”.
This proposal isn’t without scrutiny, and some have called for even further investment in the ethical business model that measures its impact on social and environmental issues. Last year, B Corps joined over 500 US companies to pledge their commitment to the interdependence of people and the planet. Meanwhile, leading economist Kate Raworth’s Doughnut Economics model outlines the importance of ensuring businesses operate within social and planetary boundaries.
Demos’ report has echoes of economist Kate Raworth’s Doughnut Economics concept – that firms must operate within social and planetary boundaries. It has become a blueprint for many purpose-led enterprises, and indeed the city of Amsterdam. Demos is calling on politicians to usher in a bold new era for corporate boardrooms. “Reforming the governance of UK companies could unleash tens of billions of pounds of capital investment, turbocharge spending on research and development, and boost the wages of the lowest paid by thousands of pounds a year, all leading to higher levels of economic growth,” said O’Brien.
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