Major new report highlights social enterprises as a model for private sector to learn from
Scottish businesses in the private sector must be motivated by more than just money if they are to help build a fairer and greener Scotland, a report backed by third sector groups says.
The Better Business report is a ground-breaking study which investigated responsible business practices north of the border.
It is the first of its kind in Scotland and was conducted by consultancy Social Value Lab but was delivered in partnership with third sector organisations Firstport and CEIS, as well as the Scottish Business Awards.
There is growing influence from the emerging generation of business leaders whose personal values are reflected in how they do business
Research included a nationwide survey of over 1,000 businesses, in-depth interviews with 34 business leaders and chief executives 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 almost a third felt the sole responsibilities of companies was to maximise profit.
While nine in ten Scottish companies 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 and 56% of the firms have none at all. Just 4% of chief executives are women.
Karen McGregor, chief executive of social enterprise development agency Firstport, said the report highlighted that private sector businesses could learn a thing or two from social enterprises.
“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,” she said.
“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.”
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.
Social Value Lab director Jonathan Coburn said it is clear the face of business in Scotland is changing but added many businesses trying to do the right thing face intense competition and tight profit margins making it difficult to release the money or time to go further with their commitments.
He continued: “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.”
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.
Around one in five businesses didn’t see any role for further government intervention while others called for government and its public bodies to show leadership and demonstrate behaviours now expected of the business community.
Of the report, deputy first minister John Swinney said: “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.
“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.”