Most businesses reject pure profit in favour of ethical stance

Most businesses consider their main purpose is not solely to generate profits, new research by the Institute of Directors has found.

Companies were putting the emphasis on their stakeholders, rather than a narrow focus on maximising value for shareholders, the IoD’s study found. This has led to a number of major UK employers committing to defining a social purpose for themselves, said the business body.

Of more than 700 directors responding to the survey, 62% said were for wider purposes than just profit, and almost half felt that companies should have a stated social purpose to help solve problems in society. Just over nine out of 10 businesses said they had a purpose, mission, or vision that guides themselves and their companies.

Nearly a third, however (28%), of respondents agreed with the statement in the survey that “the sole purpose of a company is to make money and generate shareholder profits”.

The report said: “Businesses are increasingly taking a broader view of their purpose so that they serve the interests of all their stakeholders, rather than a sole focus on maximising shareholder value. This has led to a number of major UK employers committing to defining a social purpose.”

Firms were also considering their impact on the environment much more seriously than in previous times.

The IoD is supporting the Better Business Act campaign, which seeks to place stakeholders at the heart of companies, with 51% of directors believing that the Companies Act focuses too much on shareholders and not enough on stakeholders. The campaign is urging legislators to amend Section 172 of the Companies Act 2006 so that companies are legally obligated to operate in a manner that benefits their stakeholders, including workers, customers, communities and the environment, while seeking to deliver profits for shareholders.

Amin Aboushagor, policy adviser at the Institute of Directors, said: “Corporate purpose has taken on a greater emphasis during the pandemic, particularly seeing how many businesses grappled with the challenges posed by Covid-19.

“The way that customers, employees, suppliers, and other important stakeholders are treated matters, and their views and interests must be considered alongside that of shareholders. In this new business world, we encourage directors to reconsider the purpose of their companies and the societal problems that they seek to solve.”

Almost half of the business leaders said that companies should have a stated purpose to help to solve problems in society. The overwhelming majority, 90%, said that companies should have a purpose, mission, or vision that guides themselves and their companies.

The IoD has recently called for stronger rules relating to how companies report on climate change, and for a government-backed fund to invest in the green economy. It said the proposals would allow businesses to “regain the trust of wider society while at the same time avoiding an extreme lurch to heavy-handed regulation or outright nationalisation”.

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