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  1. Politics
7 November 2014

Labour and business: from mutual suspicion to natural partnership

Doing well by doing good.

By Stephen Kinnock

“The Labour Party is pro-business, but not pro-business as usual”. It’s a brilliant soundbite, but do we as a party know what it means, and does the electorate have any idea what we’re talking about? Unfortunately the answer to those questions is: no, we don’t, and no they haven’t, largely because every time we try to get the ball rolling on a debate about the role of business in society we get accused of being closet Marxists.

Ed Miliband has only to float the notion of “responsible capitalism” and he is duly branded “Red Ed”, the man with a cunning plan to re-nationalise the entire British economy. And there the conversation ends.

It is critical that we have a grown-up discussion about the business values, leadership, behaviours and models that our economy needs for the 21st century, and it’s frustrating that the coalition government and its cheerleaders in the media keep snuffing this debate out before it can gain any real traction.

However, the good news is that limitations of the current debate are by no means the end of the story. The fact is that the business community itself is increasingly pushing these issues up the agenda, and the number of business leaders who “get it” is growing every day. From the giants of the FTSE 100 through to the small and medium-sized companies that form the backbone of the British economy, and to the social entrepreneurs who are re-inventing the relationship between the public and private sectors: the world of business is changing.

The increasing prevalence of a more balanced approach to doing business is great news for Labour because this quiet revolution is gradually transforming the relationship between the Labour party and the business community from one of mutual suspicion to one of natural partnership.   

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There’s nothing new about the realisation within the business world that ethics and values matter, but it’s clear that business leaders have started to wake up and smell the coffee. This “awakening” has emerged as a defining feature of the post-2008 crash reality, and it is driven by a powerful combination of four drivers: survival instinct, market forces, transparency and employee engagement.

Of these four drivers, survival instinct undoubtedly plays a central role. It is now generally acknowledged that the global economic meltdown that came to a head in 2008 was caused in large part by the get-rich-quick corporate culture that had existed for decades before, and lessons have been learned. The 2008 meltdown served as a wake-up call, reminding business leaders that there are clear links between high standards of responsibility and long-term commercial performance.

And the more enlightened corporate leaders are also seeing that sustainability is good for the bottom line: more environmentally friendly supply chains are generally more cost-effective in the long run; more socially progressive management strategies create happier workforces; and happier workforces are invariably more productive workforces.       

The second driver is market forces, best described in this context as the rise of the aware consumer. The fact is that we are more concerned than we have ever been about the provenance of the food, fuel and fashions that we consume. When we pick up an item of clothing and it says “Made in Bangladesh” on the label, we want to know whether it was made by a nine year old child in a sweat-shop, and if we find out that it was, then it’s increasingly the case that we won’t buy it.

When we spot a ready meal lasagne on the shelf at our local supermarket, we want to know whether it’s really been made of the ingredients that are listed on the label. And increasingly large numbers of us are getting seriously interested in making the next family saloon a hybrid or electric. The rise of the aware consumer is a powerful trend, and it’s a trend that’s only going to go in one direction. If you are a business leader who is failing to see the signs and respond appropriately, then your days are numbered.

Increased transparency is the third driver of this quiet revolution. Gone are the days when the accident at the factory, the dodgy mortgage, the brown envelope slipped to a customs official, the illegal chopping down of trees in the Amazon or the sale of tear gas to a repressive regime could be brushed under the carpet.

The exponential rise of social media, the camera phone and 24 hour rolling news have conspired to ensure that companies are now under constant scrutiny, and they had better be ready with some convincing rebuttals when the Twitter storm starts to break. Prevention is of course far better than cure, and so the business community has come to understand that investing time and resources now to get your house in order is a far better option than panic-stations crisis management.            

The fourth and final driver is employee engagement. The fact is that increasing numbers of executives are looking for a deeper meaning in what they do for a living. Yes, the bottom line is still important, but for many it is no longer enough. How else can we explain the tremendous increase in the amount of pro bono work that so many of the big law firms are doing? How else to explain the popularity of Teach First, an organisation whose entire ethos is founded on the premise of persuading high flying graduates to spend the first two years of their career working in some of the nation’s toughest schools? Teach First is now the UK’s largest employer of graduates. And employers are valuing the skills and social values that such graduates bring to bear in the workforce.

In the past people used to talk about Corporate Social Responsibility (CSR). But CSR always felt like window-dressing, or green-washing. CSR was about how companies should be spending their profits, but the new, more responsible business models that are now emerging are about how companies should be making those profits. The fact is that the ethical values, behaviours and strategies that used to be a nice-to-have for so many companies are now becoming business-critical.

This seismic shift represents a tremendous opportunity for the Labour party, as it brings with it a meeting of minds and a convergence of outlooks. Suddenly, Labour politicians, advisers and activists are speaking the same language as business leaders: the language of mutuality, of rebalancing the relationship between risk and reward, and of fulfilling environmental and social obligations.

There is much that Labour can do to broaden and deepen this convergence of interests and turn it into tangible outcomes, but here are three initial proposals:

First, Labour should identify five to 10 like-minded FTSE 100 CEOs who are spearheading these changes, and we should engage them in a conversation about re-thinking the role of business, leading to a set of recommendations about how a Labour government can and will work in partnership with big business to accelerate the shift to more balanced and sustainable growth and business models that are based on more responsible corporate cultures. In essence, these recommendations need to answer the central question, which is: how can we build a policy, regulatory and fiscal framework that encourages and rewards good corporate citizenship?

Second, we should build a stronger alliance with the small and medium-sized enterprises that form the backbone of the UK economy. Many of these businesses are family-owned, which generally leads them to have a far more long-term perspective as they are not driven by short-term interests of shareholders. We can and should learn from these businesses: what can they teach us in terms of corporate governance, focus on long-term performance, and clear alignment of executive incentives with measures of sustainability?  

Third, we should develop policies and strategies to support the development of social impact businesses. To do this we should engage with organisations such as Ashoka and the Young Foundation that are doing ground-breaking work across the UK to promote and foster social entrepreneurship. Here, it’s essential that we learn the lessons of David Cameron’s failed rhetoric about the Big Society, which has essentially become a byword for cuts in social services.

We need to listen to the advice of social entrepreneurs on the ground making real change in their communities. People like Faisel Rahman, who launched Fair Finance to help thousands of over-indebted borrowers escape the grip of loan sharks and unscrupulous payday lenders. Or former Welsh international football player Kelly Davies, founder of Vi-ability, a social enterprise operating across Wales that helps young people acquire business skills through working in local sports clubs. These are the innovators with the imagination, know-how and drive to make change that we need to be listening to.

Labour has a once-in-a-generation opportunity to re-set its relationship with the world of business against the backdrop of an unprecedented level of shared agendas and overlapping interests. To make this happen we need to get out of the Westminster Bubble and listen to the people who are driving business forward as a force for good in society. Let’s learn from them, and let’s develop policies that will incentivise others to follow suit. Let’s work together with the big corporates, the SMEs and the social entrepreneurs to re-write the future of a “responsible capitalism”.

By grasping the emerging opportunity to build real engagement with the private sector Labour can and will demonstrate that we are a one nation political movement, truly committed to calling time on business as usual.

Stephen Kinnock is the Labour candidate for Aberavon

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