James Perry – Faith in Business

Transcript:

Hello. I’m Richard Sargeant, and this is Faith in Action, a podcast about how faith affects the way we live and work today.

What difference does faith make in business? With me to explore faith in business is James Perry, co-founder of the ready meal company COOK, and also the director of B Lab UK, which is a support organisation for B corporations.

James, welcome. What are B corporations? Why do they matter?

B corporations have been created in response to this idea that business has become quite narrow in its focus, particularly in the second half of the 20th century, and become very focused on maximizing shareholder value. Whereas business can potentially perform a much broader role in creating value for communities, the environment and employees. So, B corporations are a different kind of company.

They sound a bit like community interest companies, or co-ops. Where do B corps sit in the mix of social economy firms?

So, there’s about 3.1 million different enterprises in Britain. About 2.7 million of them are companies limited by shares, and about 400,000 are a sort of salami-sliced group of community interest companies, industrial provident societies, co-operatives, companies limited by guarantee and so on. B corporations are about companies limited by shares, which mean they have no asset lock. So, they are for-profit companies. The other 400,000 in the social economy have some form of asset lock, which means that they cannot access mainstream capital, which creates a constraint on their ability to grow and mainstream. Business is the most powerful force invented by mankind, it shapes our society in more profound ways than any other man made institution, and I suppose our point is that business can be repurposed to intentionally create social and environmental value, rather than just seeking to create shareholder value and obey laws.

How do we know this isn’t just greenwash? What did COOK have to do to become a B corporation?

Well, there are two things that one has to do. The first one is, one has to change one’s constitution. So, in America, they literally have created new laws, because it’s illegal to do anything other than maximize shareholder value within their current corporation. So, they’ve created benefit corporations. ; they’ve passed laws in 31 states. In Britain, we have a more flexible companies act, but to become a B corporation you have to change your memorandum and articles of association to assert that the company is being operated for stakeholders, defined as communities, the environment and employees, as well as shareholders, and they rank alongside one another, rather than having this default system of shareholder primacy in regular companies. So, that’s the first part. You have to change your legal constitution. And the second part is, you have to pass a performance assessment, of how well you perform against those other stakeholder groups. So, you have to complete what’s called a B impact assessment, which assesses your performance against your employees, communities, the environment and governance, as well as your impact business model. So, it’s a pretty comprehensive certification.

It sounds a bit techy. What are the practical differences for staff, or for people shopping at COOK, that they might notice from becoming a B corp?

So, a lot of the changes are about fixing the roof, in terms of your business practices. We had to change, literally, hundreds of things when we certified as a B corporation. For example, we never used to measure our water usage. Now we do, and we have found that we are using about a quarter of the water per portion produced than we were before we started measuring it. So, a lot of it’s to do with measuring what matters, and you’re incentivized to deliver better performance on those sorts of things. There are other, bigger things, such as we never used to have a profit share, but we now have a profit share for all employees. We used to always seek to employ vulnerable or marginalized people, but we never did it intentionally, and now we have a target, so that of our 850 employees, two percent of them come from underserved groups, such as former addicts, or offenders on release from prison, and we’re moving that from two percent to three percent this year. And things like that, where you start to intentionally measure your positive impact is basically what it’s all about.

Is this something the staff notice?

One of the reasons we did it was, we always had a problem when we were talking to our staff, and saying we wanted the business to be positive, socially and environmentally, because they didn’t believe us. And they said, “Well, ultimately it’s a private company. It’s making you rich. We know you want to believe this, but, actually, at the end of the day, that’s the effect of what’s going on here. So, why are you burdening us with all these additional things?” And the minute we became a B corporation, they realized we were serious. We changed the legal constitution of the company. It was like it opened up the doors of perception to them, in terms of what their role was. So, instead of coming to work to be paid, to give us what we want and then go off in their free time and do what they want, what we found was they started realizing they were coming to work to be the change they wanted to see in the world, and they could actually use our business as a platform to effect that change. So, the ideas started coming. And what’s incredible is this unleashing of creative energy when people start to conceive of business as a platform to do those things, rather than just enrich shareholders.

And how far has this got – the B corporations movement in the UK? Where is it going next?

So, it started in the US about nine years ago, but it’s a global problem in terms of this narrow role that business has been assigned, or restricted itself to. And now it’s a movement that’s in about 48 countries, in about 131 industries. There are 1,700 B corporations. The B corporation economy, globally, is the same size as a small country. $28 billion of revenue. And it’s growing very fast. We launched in Britain in September last year. There are 89 B corporations now in Britain, with revenues of about £700 or £800 million pounds. So, it’s very early days. You know, we see this as something which has the power to really change the whole economy, but, obviously, it’s going to take time.

I think, James, you previously said that you were looking to combine care with capital, and profit with purpose. I wondered if you might reflect on that, and perhaps explain how you saw faith fitting in.

Yeah, I mean, I suppose I go back to the moment when Jesus died, and the curtain in the temple was ripped from top to bottom. And for me, what that symbolizes is the end of a sacred-secular divide. And I think what we’ve done in our society is institutionalized a sacred-secular divide, particularly with respect to money and capital. So, I think that what the Bible is teaching is, effectively, stewardship. It’s teaching a holistic care and concern for all of God’s creation. And I think in modern society, in modern Western society, what we’ve done, we’ve essentially made the error of separating the sacred from the secular. So, we sort of go to work from Monday to Friday and earn money, and on Sunday we go to church. And I think in the way we manage our money, we’ve also replicated that. So, we invest our money in some fairly rapacious places which don’t do any good for God’s creation, and then we give it away to charities to try and repair some of that damage. And I think that what the Bible teaches us is a much more holistic approach, and I think that’s really where this is rooted.

And where did you come to this sense of integration, of stewardship? You’re Christian yourself, James?

Yes. And, I mean, it was really from that point, I suppose. I was raised by my parents as a Christian. The thing that I suppose I rebelled against, in terms of my faith, was what I perceived to be a sacred-secular divide, and a certain level of dissonance between what I heard on a Sunday and what I saw going on from Monday to Saturday. And that troubled me. And so, when I started my career, I assumed, as a Christian, that one would integrate spiritual and social considerations along with material considerations. But I learned quite quickly that’s not how the economy was structured, and that’s not how I was trained to think. And that troubled me, I never really accepted it, and I’ve been rebelling against it ever since.

And what does that look like? How did your faith actually work itself out in work? When it came to COOK, for example. Those spiritual or social considerations. Did you take some decisions early on that were influenced by your faith?

Well, another thing, I suppose, is that, you know, I never really believed in creating– in the spirit of not creating a sacred-secular divide, of creating this kind of ghetto, where Christians exist in isolation of the real world. And so, when we were designing the business, we were trying to design a good business. You know, we weren’t– It wasn’t a theocracy. We were deliberately trying to create something which was inclusive, so the faith, if you like, was intrinsic rather than extrinsic. And that’s definitely something which I feel quite strongly about. I think Christians pursuing their faith, and expressions of their faith in the world, is a very powerful thing. I think when they decide not to do that in the world, and to do that behind closed doors, amongst other Christians, it becomes rather exclusive and can be counterproductive. So, that’s one of the reasons I like working with secular movements, like the B corporation movement, which is not a faith movement. There’s plenty of people of faith in the B corporation movement, but it’s not a faith movement in itself, and I think that that’s sort of my theory of change.

James, you’ve worked on both the retail side and also the investment side of the social economy, with a firm called Panahpur. Could you tell us a little about what Panahpur does, and how that’s also influenced by the sort of integrated principles of faith and life that you describe?

Yes. So, Panahpur was founded in 1907, by Col. Sydney Long Jacob, who was an engineer in the Indian Raj. And he came across some orphans by the side of the road, who weren’t being cared for, and he created a community, and raised them in this community, and gave money, and the village was called Panahpur, which means “place of refuge” in Hindi. And over the years, he and his descendants gave money into this foundation called Panahpur, and when I became involved 15 years ago, it was operating as a very old fashioned grantmaking charitable trust. It had financial assets in the city that were maximizing their financial returns, and then it was using the income to give grants to alleviate social distress. And it seems to us that that was completely insane. The evidence was suggesting that the financial markets were leading to increased inequality, that the social distress that the charities we supported were seeking to alleviate was, in large degree, caused by some of the injustices institutionalized in the current financial system. So, with our capital supporting something which we were then using the income to try and alleviate. And that didn’t seem to us to be a very efficient way to go about things. So, we said, “Instead, why can’t we use our capital, our firepower, for our purpose?” which was to support excluded and vulnerable people. And doing that, we started looking for investments which had a positive social and environmental impact.

A lot of social funds seem to be limited by the appetite of the investor community to take lower returns. Is that the case at Panahpur, or do you think that this has, again, a broader relevance for investment funds and investors?

On one hand, there’s been an ethical investment movement, which is based on negative screens. So, “I don’t want to invest in tobacco, or porn, or arms, or alcohol.” Those kind of things. And that’s effectively an exclusion of those stocks. Now, those stocks might be quite high performing stocks. You know, tobacco stocks, over the last 10 or 15 years have performed very well, and by excluding yourself from high performing stocks you then have a lower return. And that’s broadly been the experience of the ethical investment market. We’re talking about something very different here, which is a positive screen. It’s saying, “I want to invest in things that are having a positive impact on social environments, society or the environment.” And so, you might, for example, find a renewable energy public utility company, like Good Energy. Now, that stock has performed very well, because, actually, it’s on the right side of history, it’s on the right side of the policy environment, it’s on the right side of where the consumer sentiment is going. And those sorts of businesses can create a greater level of value over the long term, because sustainability is designed in, they attract better talent, because people want to work for good businesses more and more. And there are a bunch of reasons why those sort of businesses are pretty well set up to thrive in the longer term. So, I think this is a kind of whole new approach to investment, which is still very immature, but it’s not necessarily a trade off between doing well and doing good.

Do you think that it is just the passage of time that we’ll see the social investment market expand, and the B corporations and social economy expand, or are there particular blockers in the path of trying to do well and do good?

I mean, I think both. There are certainly blockers. Not all things can provide a risk adjusted return. That’s why there are substantial policy interventions from government to try to overcome the asymmetry between the supply of capital and the demand for capital amongst part of the social economy, and that’s quite right. That’s how it should be. So, you know, a lot of charities wanting to raise capital to support bids for contracts to government, the upside might not cover the potential downside, and there’s some sort of subsidy required. And that’s part of developing that side of the market. And then there’s the non-asset locked side, and the mission-led business side, where those constraints don’t necessarily exist. So, I think there are blockers, but I think the broad overview is that the worm has turned, and shareholder capitalism, short term-ism, all those sorts of things, are unsustainable, and I think more and more people realize that. And younger people, the millennials, coming through into leadership just don’t want to see that persist.

On that optimistic note, James, thank you so much.

Pleasure. Thank you.