MBIE is inviting comments before the briefing is released to Parliament. Long-term insights briefings are designed to inform Treaty partners and stakeholders about "issues that matter for the future wellbeing of the people of New Zealand". The context of this report is for there to be a broader approach to understanding the outcomes of government policy than GDP and that businesses are changing.
WHAT IS A PURPOSE-LED BUSINESS?
A purpose-led business is one that wants to achieve a purpose beyond creating profit. These are businesses that see their existence as going beyond providing value to customers through selling goods and services, to thinking about long-term sustainable value. Maori businesses and iwi have business models that incorporate this long-term value by including social and environmental outcomes as part of the kaupapa of the enterprise.
Current definitions of purpose-led business focus on impact, i.e., the business having social and/or environmental impact beyond the main operations of the organisation.
Operating alongside Cargill Enterprises is Potiki Poi, another enterprise with a purpose. Georgia Tiatia Fa’atoese Latu’s business creating poi balances cultural outcomes with environmental impacts and a social purpose of helping people with Api-Syndrome (Down syndrome).
There are several perspectives on purpose-led business. A dated approach, led by economist Milton Friedman in his classic 1970 article in The New York Times, argues that business has no mandate to act on anything outside the profit-making imperative - primarily, he says, because business has no expertise in areas outside the profit mandate.
However, this has been challenged for many years for ignoring that businesses are part of society and need to act as good corporate citizens. Or that all businesses have impacts on society and the environment in their profit-making endeavours so that impact should be measured and managed (preferably for good outcomes) by the business too.
Indeed, we are now seeing many types of business models, such as social enterprises, in which entities are run as commercial operations but the profit is channelled to social good. Therefore, and as the MBIE report asks, given these changes to businesses, the environment and the social contract, is it time to revisit the role of the Government with purpose-led business?
The World Economic Forum produced a report last year that focused on a transformation from a shareholder-based model of business to a stakeholder model. The report considers the way in which social enterprises have responded to crises such as Covid by adapting and often being the first to develop solutions for these key issues. Given the ongoing threats from climate change and social inequities, working with and partnering with social enterprises and purpose-led businesses across value chains is seen as a way to create greater impact.
In Aotearoa New Zealand we see this in the rise of social procurement, with the likes of the Auckland Council’s sustainable procurement framework creating supplier diversity, quality employment, local suppliers, zero waste and reducing carbon emissions, and the Government’s social services procurement plan. These activities provide support for the purpose-led business.
In Canada a group of businesses wrote to their federal and national government to ask for them to "build back better" and create a purpose-led economy. Quoting Larry Fink of investment firm BlackRock, the group argued that companies with an understanding of how to create value for their stakeholders would be better placed to work through Covid and the aftermath. They suggested the Government support with tools, clusters and roadmaps to enable a transition to a purpose-led economy for Canada.
The Global Governmental Forum created a panel to consider how to enable small business to grow back better after Covid, that recommended governments explore non-traditional partnerships as a form of support for such enterprises to flourish.
MBIE’s long-term insights report has suggested the Government could provide tools and measuring systems, help set strategy, remove legislative barriers, use tax incentives, mobilise procurement and use regulatory tools to help enable purpose-led business.
The ministry is looking for feedback on a couple of questions in particular: Do you think that there is a greater role for businesses in contributing towards social impact? What is the role of government to support such businesses?
Sara Walton is Associate Professor of Sustainability and Business at the Otago Business School, University of Otago. Each week in this column, one of a panel of writers addresses issues of sustainability.
