Sports Direct and Primark made a bad start to the coronavirus crisis.
The apparent opportunism of the athleisure retailer’s parent Frasers Group reinforced Sports Direct’s poor corporate image. Primark found itself in the crosshairs of activists, who accused the fast-fashion group of punishing garment workers in developing countries when it cancelled orders as economies locked down.
Growing social awareness among consumers suggests they should punish companies that seem to have put profit before purpose during a pandemic. Yet when England reopened non-essential stores, some of the biggest queues built up outside Primark and Sports Direct.
Cynics will rejoice. The rational response of cash-strapped consumers seems to be to rank products by price, low-to-high, and ignore worthy warnings about the environmental or social cost. A similar reaction fuelled the growth of discounters after the 2008 financial crisis.
At corporate level, too, survival is paramount. The best environmental, social and governance initiatives in the world will not fill seats on grounded aircraft or tickets to shuttered theatres. Most investors’ priorities look just as clear. I heard from one chief executive last week who was relieved to have secured shareholder support for a sustainability initiative just before coronavirus struck, rather than having to risk investor pushback now.
It is far too soon, though, to write off purpose in business as so much useless wokery, on the basis of the arbitrary impact of the crisis.
Satya Nadella, chief executive of Microsoft, second in the list of outperformers during the pandemic, was asked last week whether the crisis should knock purpose off the agenda. On the contrary, he told the British Academy’s Future of the Corporation summit: “If anything, it’s time for us to revisit . . . the social purpose of companies” and their role in society.
Danone, the French food multinational, has used the crisis to accelerate its transformation into an entreprise à mission, with long-term social and environmental goals. On Friday, investors overwhelmingly approved the plan to enshrine corporate purpose in its articles and set up a governance structure to oversee it. “You’ve just toppled a statue of Milton Friedman,” Emmanuel Faber, Danone’s chief executive, told them. He is convinced the commitment to wider stakeholders will make the company more resilient in a turbulent “Covid world”.
There is no doubt the pandemic is testing the values of companies. The same leaders who congratulated themselves on their strong corporate cultures in the early days of the crisis are now grappling with previously inconceivable trade-offs.
I talked to another business leader who described the bitterness felt by staff — some of whom had only joined recently, lured by the company’s purpose-driven mission — on learning they would be made redundant: “On the one hand, we’re having to embrace and reassure people; on the other, we’re having to take tough decisions.”
This is not a new dilemma. The argument that jobs need to be cut to secure the future of the whole organisation tends to ring rather hollow with those who will not be part of that future. But there are human, and humane, ways to do it, by bringing people into the decision-making process, and being honest and clear about the uncertainties and sacrifices.
Emma Marcegaglia, who heads her family’s steel business in Italy, says the crisis brought home to her company that its responsibilities to staff extended beyond the normal corporate boundaries: “People wanted to understand from us how they kept their job, but they also wanted to understand how we could help them and their family [and] their health,” she said during the British Academy summit.
These choices are not binary or simple. All companies now have to weigh possible risks to their licence to operate. Primark responded to criticism of its store closures by setting aside funds to pay workers, from Bangladesh to Vietnam, and committing to additional orders. That queue outside branches of Sports Direct was partly swelled by health workers, keen to claim a one-day discount offered to NHS staff.
A floral skirt from Sports Direct (£3, reduced from £29.99) is cheap. Talk about purpose is even cheaper. But discount retailers were not the only ones to bloom after 2008. So did a damaging lack of trust in business. The discontent contributed to wider political and social tensions. That alone is a good reason for purpose-led companies to double down on their commitment to the betterment of society as they adapt to a Covid-19 world.
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