We have entered an age in which key figures appear to be forcing a reset in the way we do business.
The signs are self-evident: US companies are cancelling diversity, equity and inclusion (DEI) programmes, as is the government. Business leaders have spoken about the need for ‘masculine energy’ in corporate culture. There is a push under way for more oil and gas drilling alongside a general attack on the concept of environmental, social and governance.
Tensions are running high. Even normally sedate LinkedIn – a friend calls it the ‘domain of the banal’ – has turned into a platform hosting heated arguments about diversity and climate change.
All of this spills over into accounting and finance. The US will likely kill off its efforts to introduce mandatory climate-risk reporting, while politicians and business voices openly talk about pushing back on the extra-territorial effect of European Union non-financial disclosure rules contained in the Corporate Sustainability Reporting Directive.
In the jargon, business has been persuaded to take greater care of its ‘externalities’
Sense of purpose
This can all be seen as an effort to push back the past 15 years in which business has increasingly accepted its societal role. Companies have become central to the climate transition, ensuring workplaces remain discrimination-free and, more recently, safeguarding biodiversity. In the jargon, business has been persuaded to take greater care of its ‘externalities’; it has to be more purposeful.
Cambridge professor Colin Mayer perhaps captured the business zeitgeist best in a 2021 report for The British Academy. ‘Twenty-first century business should be about solving problems of people and planet through innovation, imagination and creativity. Profits should flow from doing that. But too often companies also profit from producing problems.’
Companies from around the world adopted this outlook. Some, like Unilever, Patagonia and the Body Shop, became famous for it.
It seems many politicians would have governance return to its single-minded focus on profits
Let’s put it another way: governance used to be about compliance and removing barriers to profit. Then it expanded to ensure companies reduced the harm they do while making profits. Another step many are taking is making profits from doing good.
Now, it seems, many politicians would have governance return to its single-minded focus on profits.
Painful blip
Is the reset likely to work? There is good reason to think this is a blip, albeit painful and anxiety-inducing. First, the drive is centred on the US and it’s not clear it will influence the rest of the world.
Global investors managing big pension funds continue to push for sustainability and diversity, though perhaps with less fanfare than before.
More progressive attitudes to sustainability have become deeply embedded in big business
More progressive attitudes to sustainability have become deeply embedded in the strategies of both big business and governments alike. Global projects like international sustainability disclosure standards are still yet to fully play out, but it looks like they will be widely adopted.
And business leaders continue to back a more progressive notion of business. To illustrate the point, Roger Barker, policy director at the UK’s Institute of Directors, recently said that British businesses should continue with their DEI policies: ‘A constructive approach to inclusion and diversity makes sense from a business perspective, despite the political headwinds.’
There may be a determined effort under way to take business back to the past but, hopefully, it’s too late. Momentum is locked in. And we should make sure it stays that way.
