SCVO response to SCDI Business with Purpose Commission

What’s your view of how purposeful business practices generally are in Scotland now?

SCVO has supported voluntary organisations to make Scotland a better place since 1944. The past few decades have seen a significant shift to the ways the public, private and voluntary sectors work towards improving lives, communities and the environment. The traditional view has been that businesses lead economic progress, and the public and sector drive social and environmental change. However, there is an increasing blurring of boundaries, making actions perhaps more important than the organisational form. There is now a wide spectrum of organisations operating in Scotland which talk about their contribution towards economic, social and environmental outcomes, from the smallest volunteer-led organisations that SCVO supports to large multi-national corporations. A key differentiator is how these organisations secure funding and investment, and what they do with any surpluses or profits they generate.

Many charities and voluntary organisations are focused on their social or environmental purpose without the ability to generate financial returns. Investment from government, funders or the public expects these organisations to achieve impact related to their purpose, rather than financial returns. The past decade has also seen huge growth in the number of social enterprises, who aim to generate profits by selling goods and services but reinvest this into their social or environmental purpose. There are now over 6,000 social enterprises operating in Scotland, a growth of 8% in the two years before the pandemic. Scotland is recognised as a world-leader in the development of social enterprise, and this is to be celebrated.

For-profit businesses have also been working to improve the action they take on  social and environmental issues, as the Commission has demonstrated. New types of businesses have emerged, including mission or values led business and B Corporations. Publicly traded companies have had greater Environmental, Social and Governance (ESG) expectations placed on them by investors and regulators.

Government policy in the UK and Scotland has made some contribution towards this change, with new regulations, standards such as the Scottish Business Pledge and conditions such as paying the Living Wage promoted and required as part of procurement processes. These are positive and encouraging developments, moving the focus away from the cost to the customer and financial returns for investors, to recognition of the importance of all sectors contributing to wider societal and environmental outcomes.

Perhaps a bigger driver for the growth in social enterprise and the focus on ethics in private business has been the changing attitudes of customers, who are paying closer attention to the behaviour of companies. This is clearly a global trend, and not unique to Scotland.

However, this attitude change has created risks. Businesses understand that ‘being good’ is what customers want, and will actively promote how they contribute to social and environmental issues, but it is increasingly hard to distinguish between depth of impact and good marketing or PR. Many businesses will have a positive impact and good intentions, but just as ‘green-washing’ has been identified by environmental campaigners, it’s likely ‘purpose-washing’ will become increasingly common. Charities are paying more attention to what donations they accept and corporate partnerships they enter into, recognising these risks.

There has also been criticism of some business owners, whose personal philanthropy takes the focus away from the bigger social and environmental impact they could have by improving the way the business is run; for example, improving environmental credentials and increasing workforce pay and conditions.

These risks are also not confined to private businesses. As different types of ‘social’ businesses have proliferated, there is no guarantee that a social enterprise or Community Interest Company has the impact it claims to, solely because of its legal structure or having an asset-lock.

However, while there are challenges, Scotland is in a good position to deliver significant social and environmental impact. Partnership across sectors is going to be key to unlocking this. More robust shared measures of impact would also help identify those organisations and businesses whose impact is more than just superficial.

How should businesses, with partners, show leadership in the pursuit of purpose orientated goals?

Solving tough environmental and social issues is not within the gift of one sector. Partnership will be crucial to achieving purpose orientated goals.

In a recent article for SCVO, Sandy Macdonald, Director of Policy and Communications and Scottish Financial Enterprise talks about the example of these impactful partnerships, including:

• Linking up with organisations such as CareerReady, the Prince’s Trust, Poppyscotland, Black Professionals Scotland and the Social Mobility Foundation to recruit a more diverse workforce.

• Working with LGBT Youth Scotland to improve the experience of young LGBT+ employees in the workplace.

• Partnerships between financial services firms and charities like Turn2Us to support their customers to improve their financial security and resilience.

However, recent research carried out by SCVO demonstrated that there is still some mutual mistrust between the voluntary and private sectors that needs to be addressed. Relationships are perceived to be ‘transactional’, often related to requests for resources, rather than more strategic opportunities to achieve shared goals. The voluntary sector is perceived to be flexible and responsive, and connected to communities, but is curtailed by challenging short-term funding arrangements.

Business should consider extending the nature of their partnerships with the voluntary sector, and providing appropriate resources to support the work, to see them as key partners in the delivery of their purpose. Both businesses and voluntary organisations should seek to develop relationships with each other beyond simply giving or seeking time or money.

In what ways should purposeful business be encouraged? (For example, through government policies.)

There is a need to move away from the simplistic idea that businesses drive economic outcomes, and the public and voluntary sectors drive social and environmental change. The reality is that businesses have a crucial role to play in social and environmental change, and voluntary organisations make an important contribution to economic outcomes.

Government planning at national and local levels should seek to more proactively engage whichever sector is not normally represented. Businesses should be encouraged to form partnerships with public sector bodies and voluntary organisations. Charities and voluntary should be encouraged to consider the ways to engage businesses in supporting the achievement of their own mission, beyond the traditional approaches of funding and volunteering.

Representative bodies, including SCVO, should promote good practice in cross-sector collaboration in order to breakdown barriers and build trust across sectors. Government and other stakeholders should celebrate examples of major societal and environmental impact as part of economic development work, extending the focus beyond economic growth.

While levers such as procurement and standards feel straightforward to implement, evidence from the Commission’s research and academics is that ‘people power’ can be more persuasive and impactful. Therefore, consideration should be given to how to support the public, customers and investors to have their voices heard in strategic decisions and influence businesses to further develop their social and environmental impact.