Scottish businesses must be motivated by more than the financial bottom line if they are to help build a fairer and greener Scotland.
That’s the conclusion of Better Business, a ground-breaking study published today (Tuesday 19 January) into responsible business practices in Scotland.
The study, the first of its kind in Scotland, was conducted by Social Value Lab and delivered in partnership with social enterprise development agency Firstport, CEIS, and the Scottish Business Awards. The project was supported by Scottish Enterprise, Highlands and Islands Enterprise, CGI and Caledonian MacBrayne.
Research included a nationwide survey of over 1,000 businesses of all shapes and sizes across Scotland, in-depth interviews with 34 business leaders and CEOs and detailed case studies illustrating good practice. Researchers also analysed the corporate social responsibility and reporting practices among Scotland’s 500 leading companies.
Over half (52%) of the business leaders that responded agreed there was a clear business case for investing in community, social and environmental issues but, more worryingly, almost a third (29%) felt the sole responsibilities of companies was to maximize profit.
While nine in ten Scottish companies (89%) felt they were delivering on their social and environmental responsibilities, the study concludes there is still a long way to go in areas such as representation of women in senior positions and involving staff in decision-making, for example. Of Scotland’s top 500 companies, only 13% of all board posts are held by women and over half (56%) of the firms have none at all. Just 4% of CEOs are women.
Social Value Lab director Jonathan Coburn explained: “The face of business in Scotland is changing. The traditional notion that business is simply about making money no longer holds true. There is growing influence from the emerging generation of business leaders whose personal values are reflected in how they do business, while the public is more ethically motivated and less tolerant of corporate negligence and corrupt practices.
“There is recognition by business leaders that people are more likely to admire, work for, buy from and support companies that they perceive to share their values. With social media, there is nowhere for businesses to hide – reputation is everything, as the Volkswagen emissions scandal showed.
“Many businesses are trying to do the right thing but face intense competition, tight profit margins and the costs of meeting existing responsibilities – they struggle to release the money or time to go further with their commitments. The aim of this study is to get a realistic picture of corporate responsibility and explode the myths. We wanted to get a balanced view.”
Karen McGregor, chief executive of Firstport, who supported the research, said: “Social enterprises are leading the way in this area, operating ethically in the marketplace, doing the right thing by employees, and making a real impact in communities across Scotland. We would urge the private sector to look at how they can work alongside social enterprises, for example using them as suppliers, as well as learning from existing good practice.”
Deputy First Minister John Swinney said: “There is a wealth of international evidence to suggest that promoting competitiveness and addressing inequality are important interdependent ambitions. Creating a fairer society is not just a desirable goal in itself, but is essential to the sustained, long-term prosperity of the Scottish economy.
“To that end we launched the Scottish Business Pledge in May last year. This is a voluntary commitment made by Scottish businesses to promote and practice the principles of fairness, equality, and opportunity. Through championing a culture of innovation, internationalisation, gender balance and fair work the Pledge helps companies to become both fairer and more productive, improving society and the bottom line at the same time.
“It is encouraging to learn that more than half of all business leaders surveyed believe there is a clear business case for investing in community, social and environmental issues. I am sure this proportion will continue to grow and I would encourage all those surveyed to learn more about the Scottish Business Pledge and what it can do for their businesses.”
The study shows that the larger the business, the more likely it is to formalise its commitment to corporate responsibility. For example, 32% of small companies reported specific initiatives, rising to 62% of mid-sized companies and 90% of large ones. This confirms the view that corporate responsibility in small businesses is driven by the owner/leader’s values, largely unplanned and with no desire for recognition. In contrast, some of Scotland’s largest companies are delivering well publicised and resourced CSR programmes and are more influenced by the interests of employees, public opinion and business image.
Maggie Morrison, Director, Public Sector Scotland, at leading provider of information technology and business process services CGI, said: “Acting responsibly as a business is the starting point to everything we do and we believe success comes from the strength and commitment of our employees. The CGI model of employee ownership means that our employees have the opportunity to share in the challenges and rewards of building the company. CGI has demonstrated across the world that it is possible to build a profitable and sustainable business whilst being responsible – transforming public services, bridging the digital divide, and supporting communities wherever we operate.”
Martin Dorchester, Managing Director of Scotland’s biggest ferry operator Caledonian MacBrayne, said: “Caledonian MacBrayne doesn’t just sail to remote communities – it has been part of them for more than a century and a half. The responsibility we feel to both our staff and the communities we serve is genuine and significant. It makes absolute sense for us to go above and beyond the simple remit of a transport operator and employer to play a meaningful role – whether that is as a major customer of small suppliers, providing stability and a platform for growth, or as a promoter of quality local produce, for example running pop-up tastings on board our ferries bringing products to the attention of new audiences, then we are committed to doing this. Development of our staff is intrinsic to the success of this. We listen, we are constantly learning and we endeavour always to be a good major employer, loyal customer and a thoroughly responsible company.”
The Better Business study sought to identify potential barriers to changing corporate behaviour and make practical recommendations to encourage more responsible and progressive business practices. The two main obstacles cited were the ability of companies to meet the costs and the lack of staff capacity to get involved in discretionary activities.
Business leaders said commercial realities and growing financial pressures to meet existing obligations, such as paying the UK living wage and dealing with pension auto-enrolment, and limited staff time and skills often separated what they would like to do from what they can do.
Others cited challenges of public ownership and shareholder expectations, with pressure to place short-term profits and share price above non-financial considerations, operating in highly competitive markets with low margins, and unscrupulous competitors who fail to bear the full costs of social and environmental responsibility, making it difficult for others not to follow suit.
Some business leaders voiced a lack of clarity about which voluntary actions – and under which circumstances – could lead directly to financial returns and which actions can help to create a more favourable business environment. The prevailing view among the business leaders was that action on corporate responsibility must come from companies themselves rather than further government legislation which could be difficult to enforce, might reduce competitiveness, and is unlikely to lead to meaningful or sustained behaviour change.
Around one in five businesses didn’t see any role for further government intervention. Instead they called on government to increase engagement with representatives of the business community to develop a realistic understanding of what is possible and identify agreed measures. Others called for government and its public bodies to show leadership and demonstrate behaviours now expected of the business community, while championing and celebrating the contribution of business rather than reinforcing unfair negative stereotypes.
The full report is available in our resources.
For further information on Social Value Lab and the work they do, visit www.socialvaluelab.org.uk