“Why leadership matters – how business must change its relationship to society”

Good morning. Thank you for inviting me here today.

Yesterday morning I was at a very different conference.

I was invited to take part in a panel debate at the CBI in London in front of the ‘big beasts’ of the UK economy.

That’s a rare opportunity for a Co-op.

Of course, there was no reason for me to feel like I was Daniel entering the Lions’ den.

After all, the Co-op Group is a £10bn a year operation. We have three and half thousand Co-op food stores across the UK and we supply wholesale to more than 5,000 shops run by Nisa partners and Costcutter.

In addition, we’re the country’s biggest provider of funeral services with 1,000 funeral homes. We offer legal help too and we’re now the number one provider of probate in the UK and we have a successful insurance business.

Most members of the CBI have no idea how significant the mutual and social enterprise sector has become to the UK economy.

Until recently, we were even underestimating it ourselves. We commissioned some research a few months ago to give us a better picture of the significance of values driven businesses to the UK economy.

We called the report ‘The hidden revolution’. Because there really is a revolution underway. But few people have noticed that it’s happening.

Certainly not the CBI.

Businesses like our Co-op, the Nationwide building society and 100,000 smaller organisations, are generating £60bn into the UK economy – which is 150% more than previously thought.

Together, we employ 2 million workers. That’s the same as all of the creative industries in the UK combined.

The top mutual and social enterprise businesses pay more tax in the UK than Google, Amazon, Facebook and Apple combined. Although, that may say more about them than us!

This would all be ‘new news’ to most of the people in the audience at the CBI. As would the fact that business categorised as ‘Social Enterprise’ is currently the responsibility of the Secretary of State for Culture Media & Sport!  That doesn’t strike me as taking the sector seriously in government.

Businesses driven by a social purpose are on the increase.

There are good reasons for this, which I’m going to come on to.

[BREXIT]

As you can imagine, Brexit was dominating the conversation at the CBI. And shortly after my panel discussion we heard from the Prime Minister and the leader of the Opposition. You probably saw it all on the news last night.

I think we must remember that most of the social and economic challenges facing our country existed long before June 23rd 2016.

In business itself I’m thinking of issues such as: trust, corporate transparency, accountability, executive pay, diversity, gender and inclusion.

As for the broader social issues: I had in mind

  • the growing economic divide between the most and least well-off, both in the UK and around the world.
  • the consequences of a global way of doing business that’s left too many people – and whole communities – as losers.
  • A Health Service under incredible strain
  • the lack of affordable homes for a younger generation, and the likelihood that today’s young people entering the workforce will be less well off than their parents or even grandparents’ generation.

And then there’s climate change.

From Ke-roola in India, to Cumbria in the UK, extreme flooding is already causing regular chaos and destruction.

Watching the terrible news of the dead and the missing after the wildfires in California, it’s clear that even the richest state in the richest country in the world cannot protect its citizens from climate change.

As an insurance provider, climate change already has to be factored in to our business planning.

But despite all of the evidence that global warming is no longer a potential risk but a current crisis, we’re still failing to face into it.

All of these huge challenges were ‘in play’ long before Brexit. And they will be with us regardless of how, or even if, we leave the European Union.

So in many ways, although Brexit, if it happens, will be a turning point in our nation’s history, we can over-state its long-term significance.

[Pause]

All of which brings me to the title of this speech: “Why Leadership Matters”

The leadership I’m thinking of is not the personal leadership of any individual CEO, me included.

I’m talking about the leadership of the entire business community.

It’s the leadership we should offer collectively in addressing the greatest challenges of our age.

[NEVER MORE DIVIDED]

Not only are the challenges we face considerable, our ability to tackle them is hindered by our divisions. We have never lived in a more divided society:

  • The distrust towards government and traditional sources of authority
  • The Brexit arguments which divide households across Britain
  • The growth of strident nationalism across Europe
  • The tribal ‘culture wars’ that are scarring the United States

There is much that is broken in societies across the world.

And I believe business needs to acknowledge its part in creating this situation.

Trust in big business is at an all-time low.

It appears to be part of the problem, not part of the solution.

That’s due to a lack of transparency, a perception of tax avoidance, a feeling that there’s too much greed in the boardroom.

Of course most businesses don’t deserve this kind of harsh criticism. But there’s too many that do. And too many that think they’re doing a better job than they really are.

And that impacts on all of us. 

[THE GREATER SCHEME OF THINGS]

I’m convinced that every business, however big or small, needs to understand its role in building a better Britain.

No single business operates entirely independently of the rest of society.

Both the ‘inputs’ and the ‘outputs’ of any corporation are more complex and interconnected than CEOs and Boards may care to think.

But if we do think about it the benefits can be huge.

[MILLENNIALS]

Business should care about their contribution to the communities they serve because all the research tells us that the upcoming generation of employees and customers care about it very much.

A younger generation is demanding and expecting that business becomes more responsible.

Deloitte found that 92% of millennials believe that business should be measured by more than just profit and should focus on a social purpose too. In just seven years’ time, millennials will make up 75% of the global workforce.  On what criteria do you think they’ll choose where to invest their time and talent?

The growing size of the mutual and social enterprise sector is partly explained by this generational shift in attitudes and understanding.

We need to be listening to this generation.

[A CO-OP HEAD START]

At the Co-op we’ve always thought in terms of a social purpose. So I like to think we have a head start on this.

For us, the question has never been: “Do we have a social responsibility in addition to generating profits?”

But rather: “How do we best express the social responsibility we were set up to address in the first place?”

It strikes me that this approach to business looks more relevant and more needed than ever before. It feels like our time is now.

So how will we, sat here today, passionate about generating social value, respond to the opportunity and challenge in front of us?

[Pause]

[RUNNING A SUCCESSFUL BUSINESS]

One thing the Co-op has learnt over the years is that you cannot ‘do good’ in society unless you are also running a good business.

We have to be commercially successful. We do not operate in some kind of ‘Co-op bubble’ untouched by the rest of the world.

If we fail to compete, if we fail to keep up with changing trends and demands from our members and customers, then we will fail completely.

Even our most passionate co-op members will not stick with us if our food shops are shoddy or our services are second rate.

Running a good Co-op must be about running a good business.

But equally, we must not forget why we’re here.

There’s no point being exactly the same as everyone else. In our case, we could succeed as a business, but fail as a Co-op.

So we must compete but we must do everything we can to compete using our positive Co-op difference.

[NOT CHARITY]

Mainstream business often makes the mistake of thinking that social enterprise is charity by another name.

That’s a huge misunderstanding of what’s going on.

At the Co-op we don’t see the good things we do for the community as some kind of corporate philanthropy. Nor is it merely a cost to our marketing budget.

We see generating social value as a measure of our business success.

But more than that, we see the value we create as not just an ‘output’ of our business but a critical ‘input’ too. We believe it:

  • generates competitive advantage,
  • increases sales and increases profit,
  • motivates our workforce and attracts talent into our businesses!

Let me give you three examples of what this looks like. The last is a brand new announcement we’re making today.

[THREE EXAMPLES]

[Community Fund]

In 2016 we relaunched our Co-op member rewards.

Every time you buy a Co-op branded product or service we give back 1% of what you’ve spent to a local cause. Since 2016 we’ve returned £40m to 12,000 local projects.

We prioritise local causes that are bringing people together, addressing social issues, or strengthening the capacity or resilience of the community.

From village halls and youth groups, through to projects tackling loneliness and social isolation, crime prevention and training initiatives. Groups like these, and many others, are all benefitting from our support. And in the process, our front line colleagues build relationships with these causes and in turn get to know the communities they serve.

On average, they each receive about £5,000. That’s a big boost for small organisations. For some it’s been the difference between closing their doors or keeping them open.

We know that members who choose a local cause for their 1% put more in their baskets the next time they shop with us.

That’s because they understand that their money stays in their community when they choose Co-op. It doesn’t end up swelling the coffers of investment portfolios in the City of London.

In the months and years ahead, we’re aiming at making an even bigger difference to local communities.

We’re targeting support for community space and community collaboration. We’re looking at doing this both physically and through digital platforms – connecting communities so that good intent, good will and good talent can all be brought together.   

[Pause]

[Co-op Academies, apprenticeships, digital]

My second example relates to education and training, and this is really close to my heart.

We’ve always known at the Co-op that education is a route out of poverty. 

Today we have 16 Co-op Academy Schools across the north of England in some of the most deprived parts of the country.

They take Co-op Values & Principles and apply them to running every aspect of the school – from classroom teaching to governance.

We choose these schools because we see that they face great challenges. And we place Co-op colleagues in governor roles as a really practical way of sharing our talent.

A good day at work for me is when I get to visit one of our academies. I always leave more inspired and more convinced about the power of co-operation than when I arrived.

Take our very first academy, which opened in north Manchester eight years ago. For more than a third of the students English is their second language. In fact, more than 50 languages are spoken in the school – including Mongolian!

Two-thirds of the children are entitled to free school meals.

The school used to have some of the worst truancy in the whole of the country.

Not anymore!

Now it has one of the best attendance records in the UK and it’s used as a model for others to follow. 

We have turned this school around and radically changed the future prospects of its students.

But it’s not just the children that benefit from what we’re doing.

Turning around a school can become the engine of change for a whole community, restoring much needed pride and self-respect.

The model is working so well that we’re looking to greatly expand it.

Within 4 years we plan to have 40 Co-op Academies. That means there’ll be 40,000 children with Co-op on their school uniform, learning Co-op values. 

But how does this create a commercial ‘input’ into the running of our business?

Well, if we want to run a co-op business, then we need co-op minded people to come and work for us. Being co-operative is a skill in itself. And we want the best co-operators to come to us.

So we’ve begun to establish a pipeline of co-op educated talent into our business, including offering Co-op apprenticeships to pupils attending our Academy schools.

We have primary school academies, secondary school academies, a sixth form academy and, within our Food business, a degree level apprenticeship available.

So the next generation of Co-op leadership will be locally and co-operatively educated and trained. 

[DIGITAL]

But what kind of world should we be preparing them for?

What jobs will there be in the Age of Artificial Intelligence?

There’s a serious danger of a whole generation being left unready and unskilled for the world before them. 

And not just a younger generation.

Workers now in their 50s, who may need to work for another 20 years, could soon find themselves with skillsets that make them unemployable.

I believe it’s in the best interest of the business community to take an active role in tackling the multi-generational displacement facing our workforce.

At the Co-op’s Federation Building, just ten minutes’ walk from here, we’ve created a centre of excellence in the North West for digital entrepreneurs.

Our Co-op teams work alongside digital start-ups who can rent low cost office space from us. And together we share learning and ideas. One business in Federation is teaching coding to young people and has rapidly improved their employability. 

That’s just one example of a business response to re-skilling.

But this is clearly going to be a huge issue for society in the coming decades. I don’t have all the answers. But I do think the answers will need to come from business itself. 

[Pension fund]

My final example is a new announcement.

I’m pleased to be able to use this conference to tell you how our employee pension fund is choosing to invest in community housing projects.

Our pension fund is going to invest up to £50 million into the development of up to 350 affordable homes over the next 2 years.

Again, this isn’t charity, this is sound business thinking tied to a social value agenda.

What we’re doing is a sustainable long-term investment which will give our pension members solid returns. But also help address the housing crisis, especially for key workers like nurses and teachers who can’t afford to live where they need to work. And we’ll look to expand this commitment over time.

The examples I’ve given you are long-term commitments that strengthen our business by strengthening the communities we serve. To quote Hazel Blears, one of our Board Directors, “Doing good is good business”.

Our thinking is now operating at multiple levels.

We want to make a local impact that will be meaningful for individuals, their families and their communities.

But by thinking and acting locally, we build a sustainable foundation for change at a national level.

And as a national business, operating in every postal area in the country, we choose to speak out and campaign on issues of local concern to our millions of members.

Social Isolation, Modern Slavery, and Safer Communities are three issues we’re campaigning on and talking about at a national and local level.   

[NEW VENTURES]

I don’t want you to think that we’ve totally cracked how to be a socially driven business operating at a national scale.

We still have much to learn. 

We have been thinking about the new markets we should be entering to address today’s social challenges for our members.

Issues like healthcare and financial wellbeing. We’re working through what a co-operative response to broken markets should look like.  This is a debate about staying relevant in the decades ahead.

[CO-OPERATION FOR OUR TIMES]

Let me give you a final example of why I think co-operation, in its broadest sense, is so right for our times.

I’ve talked about our local and national thinking as a co-op. But there’s an international dimension to social responsibility and the creation of social value too.

I talked earlier about climate change.

It’s an issue which has no respect for national borders.

We need international level playing-fields if business is to take the necessary actions to radically reduce our dependence on a carbon based economy.

Governments, acting internationally, have to lead on this. But politics and long-term thinking don’t always go together.

So business must help by giving our politicians the confidence and economic mandate to go further in their legislation and planning.

At the Co-op, we’ve already committed to banning all single use plastic over the next few years. And we’ve introduced new compostable carrier bags. The energy used to heat and light our food stores comes from renewable sources.

But I don’t want this to be a marketing advantage for us. I want every retailer to do this.

In fact, we want to share the technology behind the carrier bags with our competitors. That’s what real co-operation should look like.

[BUSINESS IMPERATIVE]

So, thinking about social value and social impact is no longer a ‘nice to do’.

It’s become a business imperative.

If the communities we trade in are vulnerable and fragile, what will happen to our markets?

If we don’t think about education and training, we won’t have a workforce worth recruiting.

If we don’t think about climate change we’ll find our supply chains disrupted or even destroyed.

Addressing these kind of issues is why business leadership matters.

The problems we face today need all parts of society to ‘step-up’.

On this basis, I welcome the cabinet office’s announcement yesterday that positive social impact will now be a critical measure in the government’s procurement process.

If we want to address the biggest issues we face as a nation, and indeed as a planet, then we all need to start behaving differently.

I want to finish with some 17th century poetry which I believe has even greater resonance today than it did when it was first written.

John Donne, wrote: “No man is an island, Entire of itself”.

Well, no business is an island either.

We need to think beyond ourselves and our immediate commercial self-interest. Not only out of a sense of social obligation but out of a recognition of how society actually works.

Thank you!