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SHARON WHITE: Companies must not allow social goals to distract them from profits

The role of businesses in society has become a huge debate, particularly in the two years since I took over as chairman of the John Lewis Partnership. 

The public are demanding more of business – they want business to be more active on social and environmental issues. 

But there also needs to be a recognition that companies are set up to make money. Only when they have done this can those profits be invested in doing good. Making a profit is a passport to doing good.

Sharon White is chair of the John Lewis Partnership

Sharon White is chair of the John Lewis Partnership

The demands on business are coming particularly from younger generations. A recent report by PwC found that almost 90 per cent of Millennials want to work with companies whose values they share.

Companies in every sector are making declarations about social purpose. Shell wants to ‘power progress together with more and cleaner energy solutions’. Nestlé is aspiring to ‘unlock the power of food to enhance the quality of life for everyone.’

Funds that invest in activities that are viewed as being positive for the environment or society are growing 30% a year and could exceed conventional funds by 2025.

The public are looking to business to walk the talk. Trust in business is at its lowest ever level according to Edelman’s latest barometer.

But, as I said in my speech at the Resolution Foundation last week, the role of business in society has got caught up in the culture wars. Business taking on social missions has been dubbed as ‘woke capitalism’ and ‘virtue signalling’.

Critics argue that companies should focus on maximising shareholder returns, creating wealth and growing jobs rather than getting embroiled in society’s big debates.

Proponents – and I count myself as one of them – argue that doing good and doing well can and do go hand in hand.

Business has long played a role in society. From the Roman and Medieval times when wealthy landowners provided housing, security and food for their workers.

To the co-operative movement in the 1800s which started off providing affordable food and necessities and expanded into education and other social activities.

Many notable companies started out in the nineteenth century with a strong social outlook – Macy’s funded orphanages and Cadbury’s famously provided housing and education to their employees in Bournville.

The John Lewis Partnership represents an evolution in the history of socially minded business, combining employee ownership with strong social purpose.

'You cannot have profit without purpose. And you cannot have purpose without profit', Sharon White says

‘You cannot have profit without purpose. And you cannot have purpose without profit’, Sharon White says

The Partnership is today the UK’s biggest co-owned business, with two main brands (John Lewis and Waitrose), nearly 80,000 employees (we call them Partners), 20 million customers and sales of £10bn.

It started life as a private family business. John Lewis began his eponymous shop in 1864. The Jeff Bezos of the day. He created the department store – a one stop shop where you could buy everything you needed under one roof at competitive prices.

He was cunning and ruthless. Paid his workers as little as he could get away with. In 1920, workers threatened to go on strike because of the poor conditions. And in the end, 400 of the 500 staff left the business.

It was his son John Spedan Lewis who had the vision for a Partnership. He felt it was wrong that the workers who made the profits saw so little benefit from it.

He had a vision which would take him 35 years to achieve – to gift the company to its workers, who would be known as Partners. It is sometimes referred to as ‘social capitalism’. Profits would go to everyone, not a select few.

He wanted Partners to have the same opportunities as the professional middle classes.

He introduced health care before the NHS; social clubs and subsidised hotels; and housing.

He set up democratic channels so that Partners could have a direct say in the running of the business. He saw the Partnership as an alternative to communism. If people could have a good life at work, why would they be tempted to turn to communism?

Remember, this was just after the second world war, before the Beveridge Report and the modern welfare state.

Profits were initially paid out to Partners as paper shares – IOUs. Cash bonuses didn’t become a regular feature until 1970.

Spedan wasn’t running a charity. He was a highly astute retailer. He understood that if workers were happy, customers would be happy and profits would be higher.

Today, our business model as a mutually owned partnership means that we need to make sure profit and doing the right thing go hand in hand.

We believe if people are happier – our Partners, customers and suppliers – that makes for a happier business and ultimately a happier world because we can play a bigger role in our communities.

It is the reason that we invest 20 per cent more in our Partners than our competitors; last year introducing six months paid parental leave and paid leave for pregnancy loss.

It is the reason that brilliant customer service, quality, value and sustainability are at the heart of the offer to customers.

It is the reason that we’re supporting young people experienced in the care system to find jobs in the Partnership.

Our Partners give more because they own the business, and have a say in how it is run. We’re not perfect. But we try hard. We don’t set ourselves on a pedestal. But we do think our model offers something unique.

For public companies, this can become more difficult. External shareholders are now pressing companies to prioritise everything from addressing climate change to a string of wider societal issues. 

We support efforts in all these areas. But it can put bosses in a bind. Do they prioritise the societal problems of tomorrow and potentially sacrifice today’s performance? Some have even called for firms’ fiduciary duties to be extended beyond shareholders to workers and the wider society.

To my mind, a change in law is unnecessary. Companies are already responding to the demands of their shareholders and customers to be more socially aware. 

But to really deliver on this agenda companies need to turn a profit. You need to do well to do good. Profit is what gives business the firepower and resources to address the issues that are bigger than one business or even one country.

You cannot have profit without purpose. And you cannot have purpose without profit. This is what I call Common Sense Capitalism. Amidst all the noise, we should not lose sight of the fact that the most successful companies create jobs and wealth as well as giving back to society.

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