Employee ownership – the solution to higher standards of ESG

Graeme Nuttall OBE, a partner at European law firm Fieldfisher, has today called for employee ownership to reach new heights and fulfil environmental, social and governance (ESG) obligations.

Leading employee ownership organisations have backed his proposal, agreeing that employee-owned companies should be an exemplar for reducing inequality, tackling climate change and sustainability especially as we face the ongoing challenges of COVID-19.

The UK Employee Ownership Association, Wales Co-operative Centre, Scotland for Employee Ownership, Irish ProShare Association and Employee Ownership Australia have today jointly announced they encourage every employee-owned company to make an overall positive contribution to society and the environment, as part of promoting the success of the business, and to make this commitment in the strongest possible terms. Co-Operative Development Scotland also sees employee ownership as key to a stronger, more resilient, productive and fair economy.

Mr Nuttall, a leading expert on the employee ownership business model and author of the influential Nuttall Review of Employee Ownership, presented his thoughts for the Gandhi Foundation’s annual lecture, at which past speakers include Archbishop Desmond Tutu, His Holiness the Dalai Lama and former Archbishop of Canterbury Dr Rowan Williams. The Gandhi Foundation welcomes this practical application of M K Gandhi’s ideas.

“The time is right for employee ownership with added Gandhian purpose. What M K Gandhi encourages us to consider is a new definition of employee ownership, a bolder definition that defines EO with enhanced corporate purpose, so that employee-owned companies are synonymous with good corporate citizenship,” said Mr Nuttall.

“We need to see positive changes in society and our relationship with the environment. What better dynamic is there to make these essential changes than to channel the energies of employee owners towards finding and implementing solutions?

“The employee ownership sector can lead the way in good corporate citizenship by embracing wider corporate purposes as part of what it means to be employee-owned.”

Mr Nuttall added that the COVID-19 pandemic has changed the fundamental dynamics of the way we work. He cited the ‘Build Back Better UK’ campaign’s statement of what it wants, as a beacon for how society can change for the better and protect public services, tackle inequality in our communities, provide secure well-paid jobs and create a shockproof economy that can fight the climate crisis.

Mr Nuttall explained this is not a radical suggestion for the employee ownership sector in that there are employee-owned companies, such as Riverford Organics and Paradigm Norton, which are Certified B Corporations. There are also employee-led public service mutuals and worker co-operatives that already combine employee ownership with wider corporate purpose.

Deb Oxley, Chief Executive, Employee Ownership Association said: “Evidence in the report the Ownership Dividend showed that employee owned businesses tend have an approach that supports them to do well while doing good. This is why it feels natural to make a call out to every employee-owned company to have a focus of making an overall positive contribution to society and the environment, as part of promoting the success of the company, and to make this commitment in the strongest terms appropriate to their business.”

Derek Walker, Chief Executive, Wales Co-Operative Centre said: “We are pleased to support Graeme Nuttall’s call for employee owned companies to lead the way in the business community as enterprises that commit to improving society and the environment as well as pursuing economic success. This responsible approach is needed now more than ever. We will continue to support the growing number of employee owned businesses in Wales to be good corporate citizens.”

John Housego, Scotland for Employee Ownership board member, said: “Scotland for Employee Ownership (SfEO) fully supports the proposition that employee ownership can be a driver for a better, fairer and more equal society. SforEO is very proud of the many excellent examples of good corporate citizenship demonstrated by Scotland’s employee-owned community.”

Darah Zahran, Co-operative Development Scotland said: “Co-operative Development Scotland is fully committed to supporting and growing employee ownership in Scotland as the key to a stronger, more resilient, productive and fairer economy. We believe Scotland’s employee-owned businesses deliver wider benefits to the communities in which they operate and society as a whole. The pandemic has highlighted what’s important; safeguarding the long-term future of their companies, keeping them rooted in its local community and retaining jobs, skills and investment.”

Seán Quill of the Irish ProShare Association said: “In these uncertain times we see employee ownership as a significant tool to assist companies in providing stronger, more resilient, productive employment.  We also believe that where there is true employee engagement, Employee Ownership can and will make a positive contribution to their local environment and society by the influence of employees.”

Andrew Clements, Deputy Chair of Employee Ownership Australia said: “We welcome Graeme Nuttall’s call to redefine employee ownership so it is synonymous with good corporate citizenship. We will encourage all Australian employee owned companies to make positive contributions to society and the environment as part and parcel of running a successful business that provides good work.”

Mark Hoda, Chair of the trustees of the Gandhi Foundation said: “All companies need added Gandhian purpose. The effects of COVID-19 have amplified interest in companies serving a public purpose. Employee owned companies are especially well placed to do this, because of the joint responsibilities on employers and employees to help the economy Build Back Better.”

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With the original founders moving on, the ownership of the business will be transferred to Orchard’s staff from October 1st this year, when an employee owned trust will own and manage the company.