"The role of business in society" Speech by Sharon White, Chairman of the John Lewis Partnership, at the Resolution Foundation

Monday 21 February 2022

Check Against Delivery

Resolution Foundation - 21 February 2022.  Time: 6:30pm - 7:30pm

Format: speech by Sharon White, Chairman, John Lewis Partnership Followed by a response by Jesse Norman MP and Q&A Chaired by Lord (David) Willets

Introduction

It’s great to be back at the Resolution Foundation. 

I was last here in 2013 talking about the spending review, in my role as Director General of Public Spending at the Treasury. 

The Coalition was repairing the public finances. Things seemed tough then. Little did we know just how tough they might become less than a decade later. 

The Resolution Foundation continues to go from strength to strength and is now the leading think tank for insights into the labour market and income inequality. 

I have been an avid consumer of the Foundation’s work on Covid. 

My great thanks to David and Jesse tonight. I have known them both for many years. They share that rare distinction of understanding politics, policy and history and the interaction between them.  

I want to talk tonight about the responsibility business has to society,  from the vantage point of the John Lewis Partnership - a commercial enterprise with social mission at its heart. 

The public are demanding more of business 

Consumers and the wider public are wanting business to be more active on social and environmental issues. 

This desire for greater activism stems in large part from the demands of tackling climate change. 

The shift in public mood is happening even as the Government is growing the state. The tax burden is set to be at its highest levels since 1951. And public spending as a share of national income will be at its highest ever (pre pandemic) levels, driven by Covid and an ageing population. 

The demands on business are coming particularly from younger generations. 

A recent report by PWC found that almost 90% of Millennials want to work with companies whose values they share.  This generation will account for three in four workers by 2025 globally. 

Gen-Zers are significantly more likely to trust, buy from and recommend to friends and family companies that support a social cause or are viewed as socially responsible. 

This trend has been hardened by the pandemic. 

Businesses are responding. 

In a recent survey two in three CEOs of big corporations said they had now made social purpose part of their mission statement. Similar numbers said they wanted to be more socially minded by reducing their carbon footprint. 

The number of companies achieving B Corp certification (requiring demanding social, environmental and transparency standards) has doubled since 2018, albeit still small numbers.  

Companies in every sector are making declarations about social purpose. 

In retail, Patagonia has a mission ‘to save our home planet.’ 

Shell wants to ‘power progress together with more and cleaner energy solutions’. 

Nestlé is aspiring  to ‘unlock the power of food to enhance the quality of life for everyone.’ 

Funds that invest in activities that are viewed as being positive for the environment or society are growing 30% a year and could exceed conventional funds by 2025.

More companies - including the John Lewis Partnership - are able to access cheaper credit by committing to do more to tackle climate change. 

The public are looking to business to walk the talk. 

And trust is a huge issue. 

Trust in business is at its lowest ever level according to Edelman’s latest barometer. 

The same survey shows most people want business to do more to tackle social issues. 

Only 9% think that business is doing too much. 

Culture wars - an aside 

Which takes us to the culture wars.  The role of business in society has got caught up in the culture wars.

Business taking on social missions has been dubbed as ‘woke capitalism’ and ‘virtue signalling’. 

Critics argue that companies should focus on maximising shareholder returns, creating wealth and growing jobs rather than getting embroiled in society’s big debates. 

Proponents - and I count myself as one of them -  argue that doing good and doing well can and do go hand in hand. 

Work by Alex Edmans, Professor of Finance at the London Business School, shows that a strong focus on social purpose is a good indicator of a company’s long term financial performance.  As a proxy, the top 100 US companies to work for outperformed the stock returns of their peers over a 28 year period. 

Larry Fink, head of Blackrock, summed things up well. 

“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke.’ It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism.” 

I like to call it ‘Common Sense Capitalism’. 

History of business in society

And there is important historical context here. 

Business has long played a role in society. 

From the Roman and Medieval times when wealthy landowners provided housing, security and food for their workers.

To the co-operative movement in the 1800s which started off providing affordable food and necessities and expanded into education and other social activities. 

Many notable companies started out in the nineteenth century with a strong social outlook - Macy’s and DuPont in the US, Krupp in Germany, Cadbury’s in the U.K. 

Macy’s funded orphanages. 

DuPont supported schools, construction and new highways. 

Krupp set up extensive employee welfare programmes 

And Cadbury’s famously provided housing and education to their employees in Bournville 

Following the Great Depression, US companies got tax breaks for  providing health and pensions benefits. 

History of the John Lewis Partnership 

The John Lewis Partnership represents an evolution in the history of socially minded business, combining employee ownership with strong social purpose. 

The John Lewis Partnership is today the UK’s biggest co-owned business, with two main brands (John Lewis and Waitrose), nearly 80,000 employees (we call them Partners),  20 million customers and sales of £10bn. 

It started life as a private family business. 

John Lewis began his eponymous shop in 1864. 

The Jeff Bezos of the day. He created the department store - a one stop shop where you could buy everything you needed under one roof at competitive prices. 

He was cunning and ruthless. Paid his workers as little as he could get away with.  In 1920, workers threatened to go on strike because of the poor conditions.  And in the end, 400 of the 500 staff left the business.

It was his son John Spedan Lewis who had the vision for a Partnership. 

He felt it was wrong that the workers who made the profits saw so little benefit from it. 

He had a vision which would take him 35 years to achieve - to gift the company to its workers, who would be known as Partners. 

It is sometimes referred to as ‘social capitalism’. Profits would go to everyone, not a select few. 

He wanted Partners to have the same opportunities as the professional middle classes. 

He introduced health care before the NHS; social clubs and subsidised hotels; and housing. 

He set up democratic channels so that Partners could have a direct say in the running of the business. A weekly newspaper - the Gazette - still runs today and any Partner can write freely to the Chairman. 

He saw the Partnership as an alternative to communism. 

If people could have a good life at work, why would they be tempted to turn to communism? 

Remember, this was just after the second world war, before the Beveridge Report and the modern welfare state. 

Profits were initially paid out to Partners as paper shares - IOUs. Cash bonuses didn’t become a regular feature until 1970.

Spedan wasn’t running a charity. He was a highly astute retailer. He understood that if workers were happy, customers would be happy and profits would be higher. 

Today’s Partnership 

Coming back to today, with people seeking greater Purpose, the Partnership should be the business for our times. 

We have a new Purpose- ‘working in Partnership for a happier world, happier people, happier business, happier world’. A modern take on Spedan’s desire to ‘.. make the world a bit happier’. 

We believe if people are happier - our Partners, customers and suppliers - that makes for a happier business and ultimately a happier world because we can play a bigger role in our communities. 

It is the reason that we invest 20% more in our Partners than our competitors; last year introducing six months paid parental leave and paid leave for pregnancy loss. 

It is the reason that brilliant customer service, quality, value and sustainability are at the heart of the offer to customers. 

It is the reason that we’re supporting young people experienced in the care system to find jobs in the Partnership. 

Our Partners give more because they own the business, and have a say in how it is run. 

Our customers trust us because they know when they shop with us that they are getting independent, impartial and expert advice from people who own the business. 

The strength of our brands isn’t an accident of  being a Partnership. It is because we are a Partnership. 

Being a Partnership is what got us through the pandemic. 

Our Partners have a sense of mission which motivates them to go above and beyond. 

Quadrupling the size of Waitrose online. Operating John Lewis fully online during lockdown. 4,500 Partners in John Lewis opting to help out in Waitrose rather than go on furlough. 

Having no external shareholders, means we have also been able to think longer term and to innovate. We were the first business to automate warehousing and were one of the pioneers of online retailing twenty years ago. 

And now we are expanding into housing and financial services - where trust matters.  

We are in the most competitive retail market ever. Being a Partnership does not insulate us from having to take the tough decisions, even though we are constitutionally bound to make sufficient profit not the maximum possible. 

We try to take even these tough decisions in ‘a Partnership way’ with more open sharing of information with Partners about our financial situation and performance than would be usual in a conventional business.  

We’re not perfect. But we try hard. 

We don’t set ourselves on a pedestal. But we do think our model offers something unique.

Conclusion and debate 

With the growth of responsible business, three issues that we might discuss tonight: 

1. Are there downsides to government and business being activist at the same time in terms of lost productivity or is it justified by the scale of the issues and climate change in particular? My take is that this ‘double’ activism is justified by the scale of the challenges. 
2. Given differences in attitudes between the generations (and sometimes between employees and customers), how do businesses speak to all our customers and avoid alienating one group of customers or other? This is a hugely sensitive issue and there is no substitute for being clear about what your brand stands for and having a deep understanding of your customers. 
3. Is there a case for public companies actually changing their fiduciary duty to extend to society and workers not just shareholders? As proposed by the Better Business Act campaign. I don’t believe there is. 

Over to Jesse …

About the John Lewis Partnership

The John Lewis Partnership owns and operates two of Britain's best-loved retail brands - John Lewis and Waitrose. Started as a radical idea nearly a century ago, the Partnership is the largest employee-owned business in the UK and amongst the largest in the world, with over 80,000 employees who are all Partners in the business. Profits made are reinvested into the business - for customers and Partners. John Lewis operates 42 shops plus one outlet across the UK as well as johnlewis.com. Waitrose has 331 shops in England, Scotland, Wales and the Channel Islands, including 59 convenience branches, and another 27 shops at Welcome Break locations. The retailer's omnichannel business includes the online grocery service, Waitrose.com, as well as specialist online shops including waitrosecellar.com for wine and waitroseflorist.com for plants and flowers.