Business Purpose Commission report: Scottish Government response

Recommendations for the Scottish Government

The Report makes 12 recommendations for business, governments and other stakeholders to lead. Each recommendation has multiple action areas to consider. Recommendations 10 and 11 are directed at the Scottish Government.

Recommendation 10: The Scottish Government should mainstream and scale-up public and private sector business support for business purpose.

Action Areas for the Scottish Government

• Fund delivery of training on business purpose to groups of public and private sector business advisers, by a purposeful business network or organisation.
• Determine the effectiveness of initiatives which support business with their purpose and target funding on the one most capable of scaling and joining up their support at pace to achieve agreed targets to support far more businesses.
• Reform the values-based Scottish Business Pledge to promote and support a business purpose journey rather than be a one-off commitment. The Scottish Government should also explore whether other public sector values-based pledges, commitments, kitemarks etc could be made more consistent or consolidated with the Pledge. The Scottish Government should aim to increase the benefits to businesses of making the Pledge and connect Pledge making businesses.
• Create a Scottish Purposeful Business Maturity Index. This should measure and segment Scottish businesses into levels of purpose maturity every 3 years. It should be based on the elements of the reformed Scottish Business Pledge. The Scottish Government should at the same time survey and report on public opinion on business.
• Engage businesses with other stakeholders in the planned refresh of the National Performance Framework to inform the refresh, take advantage of the opportunity to align more businesses' Key Performance Indicators (KPIs) with its outcomes, and form collaborative partnerships between the private, public and voluntary sectors around its key missions.

Response

We acknowledge there are many potential sources of and providers of business purpose support. There may be a role for government in facilitating the provision of business support for business purpose. Further detail on this commitment and future funding would be dependent on the outcomes of NSET project 17 to transform the way in which the public sector in Scotland provides support to workers and businesses. This includes reviewing the products and services available, tailoring them to reflect the priorities of the national strategy, and targeting support to delivery of local and national aims.

The first and foundational element in better targeting of business support towards enterprises that enhance our collective wellbeing is to improve the data that we collect and use in building our business support policies and products. We will work closely with the Business Support Partnership and indeed the wider business community to ensure that as these data-led improvements emerge, they deliver the intended outcomes and create value towards a wellbeing economy.

In the short to mid- term, we will promote the Commission's Report and the business benefits of business purpose by engaging with the partners currently delivering business support, (for example, via the Business Support Partnership), and recommending that delivery partners incorporate the business purpose framework, toolkit and case studies into existing business support and advisory services where possible.

Early engagement with the Enterprise Agencies has highlighted some impactful programmes with an implicit business purpose focus. Highlands & Islands Enterprise's Business Values Ladder is a useful tool used to benchmark businesses on their journey towards net zero, improved innovation and fair work practices. Scottish Enterprise (SE) has aligned its corporate plan with business purpose by placing fair work and net zero at the heart of its support to businesses. SE provides practical support to businesses including expert advice and peer to peer support to help them on their business purpose journey. To receive financial support from Scottish Enterprise all businesses must already demonstrate or commit to adopting fair work and net zero practices. From July 2023 all organisations receiving public sector grants must pay at least the real Living Wage to all employees and provide appropriate channels for effective workers' voice, such as trade union recognition. Further effort is needed to refine the messaging and the Scottish Government will work with partners to support a strong message on the business benefits of business purpose.

We agree it could be beneficial for the separate, planned review of the Scottish Business Pledge to consider opportunities to connect with business purpose and wider accreditation schemes. There will be further communications on this in due course.

We acknowledge there may be value in a future Purposeful Maturity Index, and this might be considered pending the outcomes of existing NSET projects and the planned Scottish Business Pledge review. The capabilities of existing monitoring tools and frameworks to support and measure business purpose in Scotland should form part of any future consideration. While there may be a facilitation role for Government, it would be good to see business leadership in an index that is for and about business.

We agree with the recommendation to engage businesses along with other stakeholders in the upcoming statutory review of the National Performance Framework (NPF). Both the Commission and the Scottish Government believe businesses are key stakeholders, contributors and delivery partners for Scotland's National Outcomes and the United Nations Sustainable Development Goals (SDGs). The review will commence in the coming months.

Recommendation 11 'The Scottish Government should make business purpose a golden thread in the National Strategy for Economic Transformation Delivery Plan'

Action Areas for the Scottish Government

• The National Strategy for Economic Transformation Delivery Board should adopt the proposed definition of business purpose in its Delivery Plan and embed it in all parts of its enterprise delivery programme
• The Scottish Government and the public sector should increase the weighting for and ensure delivery of long-termsocial value in public contracts e.g., in foundational sectors, social housing commissions or large contracts and subcontracts.
• The Scottish Government should ask businesses to complete a free tool associated with business purpose, such as the Fair Work Assessment, as a mandatory part of their application process for the new Digital Productivity Fund.
• The Scottish Government should work with business and stakeholders to explore the creation of an international business purpose partnership/ alliance through which policy and practice can be shared.

Response

The Delivery Plan for NSET recognises the way business operates is critical and commits the Scottish Government to building on the findings from the Business Purpose Commission Report to delivering positive impacts on prosperity, wellbeing and environmental sustainability.

We will work to raise the profile of business purpose across government, to enable Ministers and policy officials to apply the findings in the Report to their portfolio objectives, and embed business purpose across government, where there is fit and relevance. For example, highlighting the shared objectives and strategic alignment with Just Transition and Child Poverty statutory commitments; the National Performance Framework, and Wellbeing Economy; Community Wealth Building, Fair Work, and a broad spectrum of NSET projects addressing business support, entrepreneurship, investment, business ownership models, and Artificial Intelligence Strategy.

This approach recognises the Commission's work is the first step in a longer process of behavioural, cultural and potentially legislative change with many actions requiring enduring engagement with a range of stakeholders across business, governments, tertiary education and training organisations. There are gains to be realised over the short to mid-term and much of this must start with educating and building awareness both internally in the Scottish Government, and externally with partners and the array of stakeholders in the business purpose agenda.

We agree it is useful to have a common vocabulary on business purpose in order to raise awareness with stakeholders and mainstream the business purpose narrative. We also recognise the Commission found positive levels of support from people, businesses and stakeholders in Scotland, for the description of business purpose adopted by the Commission. We agree the definition endorsed in the Commission's report ("finding profitable solutions to the problems of people and planet, and not profiting from creating problems for either") is a helpful framework for discussing business purpose. Company law is a reserved matter, and it is currently outside Scottish Ministers' competence to formally adopt the definition of business purpose.However, the third paper in the Building a New Scotland series acknowledges the findings of the Business Purpose Commission Report and that control over company law could support the evolution of a distinct Scottish system. The paper also suggested potential changes which could be implemented with full control over company law.

Community Wealth Building is a place based economic development model which focuses on addressing structural inequalities by taking practical action across five pillars: spending, inclusive ownership; land and property; workforce and finance, to ensure more Scots have a greater stake in producing and owning wealth, and improving local economic buoyancy and resilience. NSET includes a commitment to review how best to significantly increase the number of social enterprises, employee-owned businesses and cooperatives in Scotland, supporting regional regeneration and the wealth of local communities. This aligns to the action area identified in the Report to increase the number of employee-owned businesses in Scotland.

In relation to Fair Work First criteria and grants, we acknowledge the support for this action in the Report. As part of the landmark Bute House Agreement between the Scottish Government and Scottish Green Party, we are strengthening the approach to fair work through conditionality in public sector grants, subject to limits on devolved competence; and from 1st July 2023 introducing a requirement to pay at least the real Living Wage to all employees and provide appropriate channels for effective voice.

In relation to delivering social value in public contracts, we acknowledge and welcome the intent within the recommendation. Our current approach is committed to being progressive, bold and ambitious in leveraging the full power of procurement to deliver better impact and outcomes for the people living in Scotland. Procurement is bound by clear legislation and regulations. Public bodies must adhere to the principles of non-discrimination, equal treatment, transparency and proportionality. The Procurement Reform (Scotland) Act 2014, in particular the sustainable procurement duty requires public bodies to consider and act on opportunities to achieve economic, social and environmental outcomes through procurement.

The Scottish Government includes Fair Work First criteria as part of the scored evaluation process in a contract, where relevant and proportionate to do so. As part of annual reporting obligations, we require public bodies to publish progress on addressing fair work in procurement processes. Sustainable Procurement and related tools are also available to support Scottish public sector buyers to consider climate change criteria. Through the Climate and Procurement Forum, we work collaboratively across sectors to maximise the opportunity to address climate through procurement.

We take a supportive position in relation to international business purpose partnerships and would welcome a leadership role from business in this space. We agree there is benefit in sharing best practice and welcome opportunities to support Scotland's progress on business purpose through existing international networks and partnerships, for example via the Wellbeing Economy Governments (WEGo) network policy labs and Scotland's Global Affairs Framework. As business purpose matures, there is potential for future integration with Brand Scotland business policy objectives.