Corporate purpose: Repurposed to the UN Sustainable Development Goals

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PhD candidate Linda Bennison, Professor Ellie Chapple and Professor Kerrie Sadiq, Accounting for Social Change research group, QUT Business School, Queensland University of Technology, Brisbane, Australia.

Corporations, corporate activity and the Anthropocene age

The Anthropocene age refers to the current planetary age where human activity is the dominant influence on climate and the environment. Human activity has created a plethora of sustainability issues for the planet. Evidence in the 2009 planetary boundary framework (Stockholm Resilience Centre) suggests that human activities have altered the functioning of Earth systems with at least four planetary boundaries now breached. The concept of planetary boundaries has since been used to develop global sustainability policies.

Here, we reflect on whether a co-operative business structure, and co-operative principles and guiding values, provide an opportunity to better organise ourselves for a less destructive existence. These thoughts are contextualised within the corporate law discipline.

Corporations and Sustainable Development Goals

By intertwining corporate purpose and the United Nations Sustainability Development Goals (SDGs), we find that much of the capital backing for large-scale polluting and destructive activities is facilitated by the corporate form. Corporate law focuses on the legality of corporate transactions while balancing the legal duties and responsibilities of corporations and those who own and manage them.

Legislation that enables corporate registration and regulates the corporate form generally provides comprehensive instruction for corporate operations. However, any statement as to the public interest in allowing incorporation or a requirement as the purpose of the corporation is generally absent from such legislation. This vacuum around purpose is not evident in co-operative business structures where mission is at the forefront.

The perceived need in historical terms for a corporate structure has fluctuated from the imperative to achieve some public good in return for the privilege of incorporation, through to a profit imperative to accumulate wealth for its shareholders. The legacy of four decades of neoliberalism appears to have prioritised profit concentration and distribution. One percent of European, American and Chinese populations now share 40 percent of global wealth, up from 28 percent in the 1980s (Credit Suisse Global Wealth Report, 2020). Such wealth concentration reinforces the trend of inequality although the true figure may be masked by financial globalisation where complex corporate structures obfuscate the money trail.

Questioning the role of corporate purpose

Questioning the role of corporate purpose provides us with the opportunity to gaze beyond the corporate box to reorientate corporations. Corporate structures may encompass broader goals such as sustaining local communities, and responsible and equitable use of resources. We posit that one solution has existed outside the box, hiding in plain sight. Co-operative business forms have survived for centuries, borne from an imperative to prioritise relationships built on a common purpose, resilience in times of transition and a strong focus on community.

The potential of cooperatives uncovered

Based on data we collected in Australia, longevity comparisons of the largest 50 Australian co-operatives with Australian listed companies reveal that the average age of co-operatives is 82 years compared to 65 years for corporations. That is, co-operatives outlive companies by an average of 25 per cent. Resilience of co-operative structures is demonstrated by the more than three million co-operatives that provide work or job opportunities to ten percent of the global employed population (International Co-operative Alliance). One in six people on planet Earth have co-operative membership although this figure rises significantly in Australia where co-operative membership is closer to 5 in 6 people (Business Council of Co-operatives and Mutuals). It is perplexing that with such a high personal participation rate, why co-operatives are perceived as obscure business forms?

The co-operative puzzle

Again, using Australian data, we find that there are over 2.5 million registered companies and approximately 2,000 co-operatives. CBH Group Ltd, Australia’s largest co-operative, commenced operation in 1933 and in 2020 had an annual turnover of $4.19 billion, is proof of the resilience and power of the co-operative structure. Automobile clubs are very popular in Australia with over 8 million members or 40 per cent of the adult Australian population. These organisations use the co-operative business structure, yet many members are unaware they are co-operative members (Business Council of Co-operatives and Mutuals).  

Long-term planning by co-operatives is in sharp contrast to short-term corporate foci where increased production at low cost can drive systems to create profit for shareholders with little regard for other stakeholders. Co-operatives, being purpose-based, maintain a shared goal among members. Profit in this environment is important for the economic viability of the common purpose but may not be the dominant driver. For example, during the global financial crisis, large financial corporates required government bail-outs whereas members of financial co-operatives (also known as mutuals) were more likely to maintain the co-operative, supporting the notion that co-operative action sustains the business through common purpose.

The concept of sustainable corporate purpose

The first step in our research for the Daughters of Themis Conference on Corporate Purpose articulates the research question: Can the purpose of corporate law be prioritised in the 21st century through a change of mindset that allows profit to exist to facilitate community needs, and legislative reforms that support more sustainable business?

The existing co-operative business structure shows these elements of sustainability, as co-operatives are defined by their seven principles: voluntary and open membership; democratic member control; member economic participation; autonomy and independence; education, training and information; co-operation among co-operatives; and concern for community. We suggest that a regulatory framework for corporates coupled to the 17 SDGs would be beneficial. This action provides an opportunity for corporate law to establish an overarching corporate purpose for all business from a societal perspective and to refocus the lens through which we view the world to achieve a more equitable distribution, and sustainable use, of resources. The key elements that underpin the SDGs, people, prosperity, planet, partnership and peace, illustrates the synergy that exists between co-operative business principles and SDGs. 

SDGs work to reduce inequalities, encourage peace and justice, and create a better world. The introduction of compassionate elements in corporate law, tied to profit distribution, may result in positive change for this planet and its inhabitants.

Tags: Daughters of Themis, Sustainability, Planetary boundaries
Published Apr. 8, 2021 2:41 PM - Last modified Apr. 29, 2021 2:59 PM