Local government needs to reinforce purpose-led business to rebuild trust in corporations.
Speaking at the Local Government Procurement Expo, Chris Bradley, head of commercial development at the East Hampshire District Council, called for a “paradigm shift from shareholder primacy to purpose primacy”.
Bradley said: “Companies with a purpose, beyond profit, represent a powerful tool for solving the problem facing people, planet and profitability. Over the last decade, we've seen the steady erosion of trust in business. Trusting corporations to do good, or at least to do no harm, is in short supply. ”
He referred to events such as the financial crisis, PPI mis-selling, bosses' salaries, aggressive tax avoidance, Carillion, G4S-run immigration detention centres and numerous contract failures.
Company shareholders have benefited from business but recently stakeholders and the wider community have lost out, said Bradley, so local government needs to question how it can create an environment of trust while protecting the public interest.
This involves building greater accountability within business and addressing growing concerns regarding social inequality, the environment, competition, consumer protection and privacy in the digital market, he added.
The need for a shift to purpose-focused business comes at a time when private companies make up a significant majority of the public sector supply base and the public sector can use this buying power positively, Bradley said.
“Corporations now play a significant role across the public sector, working on complex projects, back office administration and public facing services. Local government spend on suppliers in 2014-15 was £69bn. The public sector as a whole spends more money on contractors than on providing services itself. How can we leverage our considerable buying power and the local government to promote small businesses?”
Bradley also suggested building upon the Social Value Act 2012 to instil principles beyond profit, establishing a set of procurement pre-qualification selection criteria or contract performance metrics that will uphold suppliers’ accountability, and supporting small, purposeful businesses.
This will help develop the direction of the government and “support the development of legislation and regulations that enables the shift from the shareholder policy to purpose”, he said.
Bradley referred to a statement by the former head of the National Audit Office, Amyas Morse, in response to the collapse of Carillion, which said “that doing a thorough job of protecting the public interest means that the government needs to understand the financial health, sustainability of its major suppliers and avoid creating relationships with those which are already weakened”.
He highlighted that the private sector also needs to “help to drive urgent change”, as neither sector will be able to resolve the issues alone.
A gradual change can been seen through industry initiatives.
This week, The British Academy published Principles for Purposeful Business, a purpose-led agenda for corporations for the 2020s and beyond, including a framework proposing eight principles for business leaders and policymakers and how to deliver these, Bradley said.
In October, construction firm Amey launched the Social Value Supply Chain Charter to increase support for social enterprises.
In September, a coalition of 87 companies committed to keeping the global warming temperature below 1.5 degrees following the UN Climate Action Summit in New York.
In August, 181 CEOs signed a statement at a US business roundtable to move away from shareholder primacy.
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