Purpose: What drives a modern successful business
The current pandemic has highlighted worker exploitation and deepened existing inequalities. Meanwhile – as the crisis shakes the stability of our economy – the rise in environmental, social and governance (ESG) strategies shows how being a good employer is becoming an asset.
In 2019 alone, more than 5 million people were in low-paid and insecure work, 1.4 million people suffered from a work-related illness and a quarter of UK employees reported being bullied at work. Since the start of lockdown in the UK, 7.6 million people are reported to be at risk of permanent layoffs, temporary furloughs, and reductions in hours and pay, with low-income workers likely to experience the impact more acutely. Boohoo’s centres in Leicester and Sports Direct are only two amongst many retail giants who have been accused of exploiting workers and failing to safeguard its employees against COVID-19.
Although Boohoo and Sports Direct may still dominate the online marketplace, there has been a major shift in individuals and investors alike to prioritise purpose over profit. ESG (Environmental, Social, Governance) investing skyrocketed to USD$1 trillion during the pandemic whilst ethical consumer spending hit a record £41 billion at the end of 2019. Moreover, data-driven solutions generated by, for example, recruitment and ratings platforms, product labels and workers’ rights apps, could help prompt companies to improve working conditions. Here’s why:
More and more consumers are using their purchasing power to choose ethical products and services – and by doing so, they expose exploitative practices. Studies show that the majority of young people are willing to pay up to 17.5 per cent more for ethically made goods and about 80 per cent refuse to buy goods from companies involved in scandals.
Labelling can provide consumers with a helpful cue to what they’re buying into. However, the lack of clear and trustworthy information makes it challenging to navigate multiple packaging messaging and prevents consumers from buying ethically. The abundance of labels – ranging from voluntary certifications like Ecolabels or multi-stakeholder initiatives such as Fairtrade International – make it incredibly difficult for consumers to understand who and what to trust.
Data-driven solutions are key. Innovation in product labelling shows promise with new technologies such as microscopic electronic devices, genetic markers for agricultural products, and a new generation of barcodes. Ethical rating apps, such as Good On You and CoGo, are also a great solution to answer the needs of a growingly conscious generation of consumers. According to a Behavioural Insights Team study, rating systems are in fact much more effective at nudging consumers than product-based labels as they capture the overall company’s performance.
For the past 50 years, companies have been told to put profit first, prioritising shareholders’ interests above their employees, the environment or communities. This behaviour has provoked backlashes during the COVID-19 crisis, where companies put profits before the welfare of their workers.
“The COVID-19 pandemic and consequential economic crisis have proven that our economic system is not as resilient as we need it to be. To get there, we must reimagine and rebuild an inclusive, equitable, regenerative economy that works for all and for the long term.”
Andrew Kassoy, B Lab Co-Founder and Global CEO
Despite chronic job losses and business closures, the pandemic has prompted a surge in companies wanting to demonstrate that they are doing the right thing by their staff and supply chains. The Certified B Corporation (B Corps) has enlisted 3,500 companies and is now targeting multinationals in an effort to advance more sustainable and resilient business models. Similarly, investors are changing their tune as they become more concerned about putting money into companies that have clear sustainability and social goals; ESG investing reached $USD 1 trillion globally in 2020.
Key levers for long-term change include a more harmonious regulatory environment and robust data. The regulation of banks forced better behaviour in an aggressively profit-driven industry. Sometimes, however, regulation can remove the onus on companies to willingly be or become better. Two years ago, large companies were mandated by the government to publish salary data in a bid to reduce the gender pay gap – yet the UK still has one. Collaboration between regulators and businesses is key and helps to move beyond a culture of blame, instead fostering an open, learning one that improves not only the ethics of a company but its performance, compliance and innovation.
Linked to this is an urgent and moral necessity of getting companies to publish transparent data. Rather than hiding behind positive public declarations about how companies value their employees, suppliers and communities, data would show who really is behaving ethically – and who’s not.
Innovation requires trust and transparency, but if you’re a precarious worker, speaking out about your employers’ unethical behaviour isn’t always an option. A further challenge is that many certifications or labelling schemes aren’t devised or co-created with the input of the affected people. This can lead to odd outcomes, such as product boycotts that the workers themselves don’t actually want. Whilst some labels offer indicators about how ‘good’ a company is, a new study defined schemes, such as Fairtrade International, as a ‘flawed concept’. According to the study, these fail to improve the ethical conduct of large corporations and are serving to entrench abusive business practices. Unfortunately, as most initiatives are voluntary, companies often disclose more about their policies than how they implement them.
Accreditation systems need to put people at the centre of their solutions by co-designing them with the workers themselves. For instance, Investors in People assess companies based on a ‘people framework’. By working closely with employees, the framework rates indicators like trust in leadership teams, how people are rewarded and supported if struggling as well as opportunities to develop and thrive at work. Companies are then certified (standard, silver, gold or platinum) and supported with tools and strategies to help them improve people practices.
Technological innovation can also play a positive role where collective bargaining has declined. The growth of workers’ rights platforms has proved this to be the case. These innovations use collective action, data-driven campaigning and crowdsourcing to hold companies accountable in a safer, often anonymous way. Organise successfully mobilised tens of thousands of people to petition Amazon so that employees working through the pandemic got a bonus. Workerbird allows users to track their hours and pay, recommending action to be taken if workers are not paid the legal minimum. Another app, Earwig (the ‘Trip Advisor for Construction’) allows construction workers to review recruitment agencies, identifying which jobs are good and which aren’t.
The aggregation of data is a powerful tool for improving work culture. Job boards such as Indeed and Glassdoor allow companies’ behaviour to be rated and tracked directly through the lived experiences of affected workers. Analysis of 1.4 million reviews on Glassdoor revealed that employees rated leadership highly for communication and integrity during the pandemic.
The COVID-19 pandemic has made us value essential workers more. It has also promoted widespread action for calling for business models that are purpose-driven. Increasingly, we are seeing investors who value care for staff and suppliers and are willing to lead positive change through their decisions. The key to unlocking this potential is data; making it transparent and readily available to businesses, government and workers in precarious work. Each one of us plays an important role in the UK’s recovery and ensuring we really do ‘build back’ much, much better.
Nesta has previously urged for a labour market that provides people with good-quality, meaningful work. Find out more about our projects and research.
Originally posted here