Written by Alex Baldock, CEO, Currys plc
First published on August 4, 2021 in Retail Week
‘Purpose’ and ‘ESG’ (environmental, social and governance) are buzzwords on everyone’s lips. We all know, don’t we, that companies aren’t just about making money anymore.
Surely, then, shareholders must be content with lower returns as companies spread the goodies more widely in society, as good corporate citizens must.
“It’s not about shareholder value any more” as I heard one chief executive put it recently. Companies have rushed to craft uplifting purpose statements, and an ‘ESG strategy’, to sit (often uneasily) alongside their commercial strategy. Surely this is all to the good?
Don’t get me wrong. Of course progressive companies are animated by a powerful sense of social purpose and to play their full part in fighting climate change.
Of course modern business leaders must satisfy a broader set of stakeholders. But I’d argue that good corporate citizenship is not in conflict with shareholder value – it’s now essential to it. It’s not one or the other – profit and purpose go hand in hand.
After all, corporate finance 101 tells us the no-regrets route to equity value is sustainable cash flows – sustainable in that shareholders must believe the cash will keep coming in future years.
Who will believe that today of a company that isn’t a good corporate citizen?
Colleagues now only want to work for a responsible business. Customers increasingly make their decision on where to shop based on whether the retailer is good for the planet as well as for their pocket. Government and regulators increasingly demand the same. Meanwhile, investors themselves are looking for ethical homes for their money.
Profits and purpose
Shareholder value isn’t in conflict with good corporate citizenship – it requires it. Social responsibility must therefore be intrinsic to the business model, not an inauthentic afterthought tacked onto it.
How we make money must be responsible now. That’s why I reject the separate ESG strategy and the separate purpose statement.
At Dixons Carphone, our purpose is to help everyone enjoy amazing technology. That’s not pasted on, it’s the first line of the strategy and we try to make sure that everything we do – every priority, every decision – flows from that.
We believe, in a category that can be confusing and expensive as well as exciting, that customers value help in choosing, affording and getting the most out of their technology. We believe that plays to our strengths.
So, yes, it’s how we make money. But it also has powerful societal benefit baked in. Haven’t we all seen, throughout this pandemic, the power of technology to improve people’s lives, to keep them connected, productive, healthy and entertained?
By bringing these benefits within reach of tens of millions of people, we can feel good about what we do.
And helping customers enjoy their technology means, as well as helping them choose shiny new tech, giving longer life to the tech they already have. Here, we lean on being number one in protecting, repairing, trading-in, reusing and recycling technology.
Giving their technology longer life is good for the customer’s pocket and for the planet, and it’s good for us commercially, too – profit and purpose going hand in hand, as they must.
They must because nobody will believe a business acting against its own commercial interests. They don’t believe such action will stick and they’re right.
Profit is how we win the right with our owners to keep building a business valuable for all stakeholders for the long term.
Of course, profits themselves have broader societal benefits, too. Profits pay for taxes, which pay for schools, hospitals, police and roads. Profits pay pensions. And profits pay for supporting good causes, such as our work to eradicate digital poverty by getting laptops into the hands of less privileged children and our partnership with Age UK.
Profits are good – so long as they come from doing good.
So, yes, purpose matters. Good citizenship matters. The environment matters. But there’s nothing in here to worry shareholders.
On the contrary, taking all these things seriously is how we in business give investors confidence that we’re here for the long term – confidence that colleagues will want to work for us, customers shop with us, regulators smile on us and society give us licence to operate.
Good citizenship is at the root of sustainable success – if it’s genuinely ingrained in your business model. Tacked-on buzzwords will only take you so far.