Viewpoint: Should there be a business covenant?

Group of business people talking Could a business covenant repair trust in big business?

Related Stories

Is it about time we put a new mission statement in place setting out where the obligations for business lie, asks Lord Digby Jones.

The relationship between business creating wealth, government and society - all of us - is broken.

That hurts everyone and it's something I'm worried about.

Over the years I've developed my own belief in "socially inclusive wealth creation" - basically letting businesses get on with making profits so they can create employment and pay the taxes which fund our public services and also play a supportive role in society.

It sounds straightforward, but as we come out of one of the worst financial crises this country has ever experienced, trust in business is pretty much at rock bottom.

Find out more

Lord Digby Jones
  • Lord Digby Jones is a former director general of the CBI and was a trade minister in the last government
  • He sits on a number of boards and acts as an adviser to several companies
  • He presents The Business Covenant on Tuesday 5 August at 20:00 BST on BBC Radio 4

It's not trust in your corner shop, or the small business down the road employing a handful of people and accepted as very much part of the local community, but big business.

It's not surprising given the behaviour of some of the big banks which led to government bailouts, as well as the high energy bills we've seen and excessive bonuses and executive pay.

But is that breakdown in trust repairable? I certainly hope so, but I do wonder whether we need a new deal for business - a covenant - setting out in simple terms where the obligations for business lie and what it can expect in return from the government.

I think a business covenant should be loosely based on the military covenant which has been around for years as an unwritten moral agreement between the armed forces, society and government.

It states that in return for sending servicemen and women into harm's way, government specifically, and society generally, will look after them and their families. This principle has, in fact, now been enshrined in law.

I don't want to burden businesses with yet more laws or regulation, so my business covenant is more of a mission statement for UK PLC. Here it is:

  • Business creates the wealth on which the nation depends. The government commits to supporting business through providing an environment in which it can flourish, including infrastructure and an educated workforce.
  • Business, in turn, commits to society through investment, job creation, fair treatment of its workforce, customers, suppliers and shareholders and through the payment of taxes.
  • Through its deeds, business will establish, enhance and promote the existence of quality social capital in the communities of our nation as well as the economic capital that only it can develop.

It sounds like common sense but sometimes the obvious needs restating.

Moral duty

The Very Reverend David Ison, Dean of St Paul's Cathedral, says that a covenant is more than a contract, it's a commitment, and he believes it could express a business's obligations to a community:

"You want to see business saying, 'Yes we are committed to the life of this locality. We have a commitment to the people here and we recognise our responsibility to them.'"

But he says this is often not the case:

"One of the things which people have found very difficult is the way that business appears to be able to uproot itself and say, 'We're not making enough profit here, we'll close our factory and move somewhere cheaper.'"

Handshake A business covenant would be a commitment, like an agreement sealed with a handshake

Clearly businesses have to take difficult decisions for commercial reasons. But while they are not charities, walking away from the social consequences of their actions goes against what the business covenant is about.

Justin King, the now former chief executive of Sainsbury's, believes businesses have a moral duty to go beyond what is expected of them.

"I believe it's the things that businesses do that they don't have to which define where they sit in society," says Mr King.

"As a citizen, we would not consider someone who says, 'I just obey the law, no more,' as a good citizen. That's a base-line level, I would suggest. I don't think corporations are any different."

A step ahead

He argues that every business should pay its fair share of tax and has no time for those that avoid doing so, even when this is within the law as it stands for some international companies.

But how many of us complain about well-known businesses which don't pay their fair share of tax while continuing to buy their products?

Girls playing at one of the schools in Bournville Village near Birmingham, a new town founded by Chocolate manufacturer and social reformer George Cadbury, July 1909 Girls play at a school in Bournville village in 1909, a town founded by social reformer George Cadbury

To restore trust in business, Mr King believes companies must also do things for society, which have no obvious short-term financial return.

All this isn't new. Sir Dominic Cadbury, late of the world-famous chocolate business whose name he bears, says his grandfather went the extra mile to care for his workforce, building houses and providing schools and better working conditions.

He says George Cadbury was always a step ahead in his thinking: "You could argue that the vision of the man was so remarkable that it was unthinkable that government would ever have to come in and tell George Cadbury what to do. George Cadbury was telling the government what to do and leading society."

Now isn't that a good lesson for businesses who complain about too much regulation?

Lord Digby Jones is a former director general of the CBI and was a trade minister in the last government. The Business Covenant will be broadcast on Tuesday 5 August at 20:00 BST on BBC Radio 4 and repeated at 17:00 BST on Sunday 10 August.

More on This Story

Related Stories

More Business stories


BBC Business Live

    TESCO PROFITS Via Twitter

    Richard Hunter from stockbrokers Hargreaves Lansdown tweets: "Profit warning on a profit warning for #Tesco likely to put further pressure on a share price already down 39% over the last year"


    Other news from the stock market this morning: British bank Aldermore says it will float on the London Stock Exchange in October, aiming to raise £75m. Aldermore focuses on lending to small and medium-sized businesses and homeowners.

    TESCO PROFITS Via Twitter Adam Parsons Business Correspondent

    tweets: "Dave Lewis initiated inquiry over weekend. Am told Philip Clarke has officially left Tesco, but remains available to talk to investigation."

    PHONES 4U RESCUE 07:36:
    The Phones 4U shop sign.

    Phone network EE is to buy 58 Phones 4U stores - safeguarding 359 jobs - in a deal with administrator PricewaterhouseCoopers. The phone network was known to have entered negotiations over the weekend. On Friday Vodafone agreed to take over 140 Phones 4U shops.

    TESCO PROFITS Via Twitter Adam Parsons Business Correspondent

    tweets: "Tesco were due to report Interims next week. That has now been cancelled."

    LABOUR CONFERENCE 07:26: BBC Radio 4

    Labour shadow business secretary Chuka Umanna tells Today Labour is pro-business, but says: "What we have been clear about is we can't go back to business as usual and the kind of fast buck culture we saw in some parts of the economy that helped contribute to the 2008/09 crash."

    TESCO PROFITS Via Twitter

    City grandee David Buik tweets: "It never rains but it pours dear old Tesco. It appears profits have been over-stated by £250 mn - shares could be down 5% at the opening."

    TESCO PROFITS 07:15:
    A group of Tesco shopping trolleys

    "We have uncovered a serious issue and have responded accordingly," said Dave Lewis, who took over as the boss of Tesco last month. "The chairman and I have acted quickly to establish a comprehensive independent investigation. The board, my colleagues, our customers and I expect Tesco to operate with integrity and transparency and we will take decisive action as the results of the investigation become clear."

    TESCO PROFITS 07:11: Breaking News

    Tesco has released a statement saying it over-stated its expected profit for the six months to 23 August. In a trading statement on 29 August it said it expected half-year profits to be £1.1bn. It has now revised this down by £250m.

    LISTEN AGAIN Via Twitter Adam Parsons Business Correspondent

    tweets: The #WUTM podcast. All yours:…

    AIR FRANCE 07:03:
    Air France planes

    Pilots at Air France are looking ahead to a second week on strike this morning. France's transport minister Alain Vidalies says the fate of Air France is at stake in the dispute. Pilots are angry that the airline is expanding its budget carrier, which pays pilots less.

    LABOUR ANTI-BUSINESS? 06:55: BBC Radio 4

    Lord Jones tells Today that Labour has not given business the credit it deserves. "Without the wealth that business creates you have no public sector, you have no taxation, you don't have one job in the country. That's how important business is," he says.

    LABOUR ANTI-BUSINESS? 06:51: BBC Radio 4
    Digby Jones

    Lord Digby Jones, former head of the CBI and member of the last Labour government tells Today that Labour is casting doubt on its support for the UK business community. "Whatever the current shadow cabinet say - let's nationalise the banks, let's have a social market in energy, lets increase business taxes, whatever it may be - they are showing by their actions that they actually don't get it," he says.

    DEVOLUTION 06:42: Radio 5 live

    Wake Up to Money has been discussing the prospects for more devolution across the UK in the wake of the "No" vote in Scotland. Tony Travers from the London School of Economics says the UK is one of the most centralised democracies in the world - 95% of tax revenues go straight to the exchequer.

    MINIMUM WAGE 06:35: BBC Radio 4

    Is Labour leader Ed Miliband's pledge to raise the minimum wage to £8 per hour by 2020 anti-business?Simon Walker, head of the Institute of Directors, tells the Today programme he shares many of the Labour party's concerns - on energy prices, zero-hours contracts and wages. "But... we don't agree with Labour's instinct to legislate or regulate on these matters," he says.

    MARKETS 06:29: BBC Breakfast

    Breakfast's Steph McGovern is in the City in London before dawn this morning, talking to analysts and market traders about what's moving the markets after the "No" vote in Scotland last week. She'll be talking to a currency trader later to find out what's going to happen to the pound.

    MINIMUM WAGE 06:18:

    Labour's leader Ed Miliband says Labour will put the minimum wage up to £8 an hour if they win the election next year - up from the £6.50 is due to rise to this October. The unions say that's not enough, and want £10 an hour, while the CBI warns any rise will "put jobs at risk".

    Labour shadow  chancellor Ed Balls

    Ed Balls is expected to say that Labour will reinstate the 50 top rate of tax in his speech to the party conference later today. That's not necessarily news. But Labour haven't been completely clear on whether they would reinstate the 50p tax band until now. The inclusion of the proposal essentially amounts to an election promise eight months out from the general election.

    Phones 4U 06:02: Radio 5 live

    EE has confirmed it's looking into buy a few of those Phones 4 U shops now on the market. Judy Palmer from Begbies Traynor defends EE and Vodafone, the operators accused of helping to put the mobile retailer out of business, on Wake Up to Money calling their actions "commercial hardball".

    06:01: Edwin Lane Business reporter, BBC News

    Hello all. We're also getting the latest on the fate of Phones 4U, after it went into administration last week. Get in touch with us on or tweet us @BBCBusiness.

    0600: Matthew West Business Reporter

    Morning folks. We start the day with news that luxury shoe brand Jimmy Choo is looking at a stock market float in London, there are also half year results from Moss Bros. The Labour party conference goes into its second full day with a speech from shadow chancellor Ed Balls. It's his last conference speech before the election so we'll bring you any nuggets from that too. Stay with us.



BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.