Ethics, growth and the smaller company conundrum

Jeremy Leggett, founder of Solarcentury does not mince his words.

In his FT review of a new book, “Eminent Corporations” by Andrew Simms and David Boyle, he encapsulates the challenge that most people in the sustainable business world would agree is paramount:

“…what chance do I think a social entrepreneur such as myself has of building a corporation that sticks to its original purpose? The answer, I have to admit, fills me with dread.”

The history of corporate responsibility is, in the minds of some, littered with the moral corpses of small firms who became so successful the temptation of real cash just became too much.

The Body Shop, Ben & Jerry’s, Stonyfield Farm, Innocent, Honest Tea, and many more, all sold up, more or less, when big money hit the table.

They are not the companies they once were. That much, at least, is definitively true.

Whether you believe they sold out for cash or seized the chance to ‘mainstream’ their corporate values depends on your point of view.

The founders sometimes did not have much of a choice (Innocent, given ownership structures) or credibly justified the shift so they could scale up the positive impacts of their business (Stonyfield, and also Innocent)

But retaining that small company innovative ethos, and closeness to customers, suppliers and stakeholders simply becomes exponentially more difficult as a much bigger firm, at best.

The core mission inevitably suffers dilution, pressures grow.

The firm and its executives and shareholders become increasingly detached from other stakeholders.

At worst, it becomes impossible to maintain the core mission, and the brand simply remains as a shell of its former self.

Is the answer to forego the desire for growth?

Not for it’s own sake, I would suggest.

That is, simply arguing against growth is not something even environmentalists such as Jonathon Porritt do much of any more.

That won’t, and never did, wash.

It’s about the kind of growth.

The type of business expansion you seek defines the character of your business.

Look at it another way for a moment.

My two favourite stand-up comedians (well, they are a bit more than that really) are Daniel Kitson and Stewart Lee.

In Lee’s recent book, he revealed how he and Kitson had agreed on what constituted sustainable audience growth.

The goal? To make a decent living whilst not losing their ‘edge’. Make too much money in the creative industries (and others) and that quickly happens, it is a well documented fact.

Their solution is to evolve their material carefully, to keep the right kind of customers coming back and grow the audience sustainably.

Not to aim at stadium gigs for three years and then burn out.

Part of their plan is a stated aim to drive away those they don’t want as customers, by taking elements of their acts to the extreme. To keep those that get it, and push away those that do not.

Another tactic is never to play venues which are ‘too big’, so as to keep the audience numbers to a manageable level, where interaction is still possible.

They want to make a living, and grow the audience.

But not so much as to lose sight of what they are trying to achieve.

That’s the key balance to strike for sustainably-minded smaller business.

And it ought to be possible, given that most companies are simply not able to grow that fast anyway.

There’s not many companies that grow more than 5-10-20% per year. And when they do, it’s not for a sustained period.

So adopting a sustainable growth paradigm can work, as long as you have clear sight of your eco-system, your place within it, and what your values will support.

At least, that’s the conclusion I have come to with Ethical Corporation after ten years of attempted growth beyond a couple of million pounds turnover a year.

I am not unambitious, but I’ve learned to accept the above. We have a place in the ecosystem.

But equally I can’t lie and tell you I think we can quadruple the size of the business in the next three years. We tried, even in the good times it doesn’t work that way.

That’s not to suggest smaller companies cannot become large and successful. Some can. All large companies started small.

But you have work out whether the trade-offs are worth it, and whether the eco-system will allow it. Sometimes it just won’t, and that’s a good thing, not a failure.

It doesn’t mean you can’t start another company in a different sized eco-system, for example.

Where this argument falls down, of course, is with large existing companies. What to do there?

Leggett writes that “Simms and Boyle focus on employee ownership. They see a renaissance for mutuals and other people-powered businesses. They laud the Co-operative Group and retailers John Lewis and Waitrose: all successful in a time of recession.”

I’d suggest that it’s slowly becoming obvious that for large firms, ESG (environmental, social and governance) limitations will become so important that the limits to growth in a given period, (palm oil sourcing, for example), will simply become overwhelmingly obvious.

Whether that will happen quickly enough, of course, remains to be seen.

Unilever will be the test of this theory. I admire their ambition.

The below, also available here, may be of interest if you have read this far:

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