New Deal for Business Group: progress report and recommendations

6. Subgroup Four: Wellbeing Economy

Overview

The Wellbeing Economy subgroup was tasked with considering how business and government can better work together towards a Wellbeing Economy.

Meeting three times, the subgroup was able to draw on the expertise of a wide range of businesses, from the largest multi-national corporations to family farms and everything in between. This report captures the themes that emerged during discussions and the resulting recommendations.

Issues considered

What is a Wellbeing Economy?

The members of the subgroup looked at several definitions of a Wellbeing Economy aligned with the Scottish Government's vision for an economy that is fair, green and growing, and good environmental, social and governance (ESG) practice in business. The group did not see value in agreeing a definition in the time available and this is addressed further in the recommendations.

The most successful economies with sustainable growth are those in which there are high social standards, fair work and a high-quality natural environment. These are not coincidences; the success of business and of society are intrinsically connected. A society with citizens that have incomes high enough for a good standard of living, good health, nurturing and accessible childcare, a rewarding natural and built environment and fairness and meaning in their work will be one with productive employees and a growing customer base who can afford their products and services. And wellbeing in the long term depends on our growth being sustainable.

Just as business owners need to prioritise the wellbeing of their staff, the Scottish Government needs to prioritise the wellbeing of those who are essential to delivering its objectives. This means treating them with respect, giving them the opportunity to grow their business and be profitable, only adding to their workload where essential and giving them the ability to be truly heard.

"So what?": Communicating a Wellbeing Economy

In its National Strategy for Economic Transformation the Scottish Government said; "Our vision is to create a wellbeing economy: a society that is thriving across economic, social and environmental dimensions, and that delivers prosperity for all Scotland's people and places. We aim to achieve this while respecting environmental limits, embodied by our climate and nature targets."

The subgroup felt that in order to engage, businesses would ask "so what?" and need to know three things:

1. The what: the constituent parts of a Wellbeing Economy;

2. The why: the reasons a Wellbeing Economy is good for their business specifically, and for business in general; and,

3. The how: the actions businesses can take to contribute to a Wellbeing Economy, such as: improving diversity, equality and inclusion in their recruitment and in their workplaces, which increases their potential pool of employees, improves employee retention and supports an engaged, productive, innovative and agile workforce invested in the business success; or taking steps to manage their environmental footprint and energy use, mitigating against future costs and risks.

The overarching lesson we learned is to use the right language to communicate with businesses. Only a minority would understand what is meant by a 'Wellbeing Economy' and the language used around it can turn business owners off where it is perceived as being governmental and academic.

At a practical level, businesses can learn from each other by sharing examples of the tangible actions they are taking that contribute to a Wellbeing Economy, both in Scotland and further afield, which in many cases are immediately beneficial to them.

The subgroup considered that the greatest effect could be had in encouraging and supporting previously unengaged businesses to take their first steps in this space, rather than focussing on those already well advanced in their journey. It will likely not be possible to reach every business, but shifting the culture generally to one that has greater purpose will deliver benefits over time.

Business with a Purpose – answering the why

A Wellbeing Economy is best for all businesses. Reflecting the findings of the world-leading Business Purpose Commission's Business Purpose Commission's final report in 2022, a greener, fairer, growing economy is one in which businesses who make a contribution can:

• Be profitable, innovative and productive;
• Lower their costs and use resources and materials most efficiently;
• Recruit, retain and get the best out of the right people;
• Create a loyal and growing customer base;
• Make a positive impact on the communities in which they operate;
• Attract investment; and,
• Ensure that they will be around for the long term.

Actions that lead to a Wellbeing Economy should not be thought of as something ancillary to a business' purpose, like corporate social responsibility often is. They should be at the heart of what the business is for. Many business leaders in Scotland are consciously moving their businesses towards Wellbeing Economy objectives, while others are taking actions that support Wellbeing Economy outcomes, recognising their contribution to a more successful business without any awareness of the concept.

Scotland is not standing at the bottom of the mountain; good businesses recognise the positive contribution they can and do make to society, and new economic thinking is moving towards profit by delivery of societal and environmental outcomes. They know that they benefit from the success of their sector, supply chain and local economies too. This is a strong basis from which to work.

Overcoming the Barriers to Create a Wellbeing Economy

Business viability

In order to deliver on wider societal and environmental challenges businesses must be viable first and foremost. The Covid-19 pandemic, energy costs, rising inflation, war in Ukraine and the UK's exit from the EU have had a significant impact on profitability. The number of challenges facing businesses can make it difficult to find the thinking space or resources to devote to the medium or longer term strategic decision making even while recognising the benefits of doing so.

Nevertheless, many businesses have shown themselves to be adept at pivoting, for example finding new ways to reduce energy costs, building more resilient supply chains and changing working practices and non-salary benefits to attract and retain talent, which are also ingredients of a Wellbeing Economy. Business of different sizes, in different parts of the country and in different sectors have very different capacity to manage change. In this context, responding to additional policy-driven change comes at a cost, particularly if not aligned with business pressures.

Partnership working

The opportunities for partnership working between government and business towards a Wellbeing Economy are considerable and imperative. The experiences shared in this subgroup – heavily truncated here – are also relevant in the context of future collaboration in tackling broader societal and environmental challenges:

• It will allow government a greater understanding of the needs and interests of businesses and the potential barriers to the success of a Wellbeing Economy;
• Policies will be more successful where businesses have the opportunity to prepare for implementation;
• It will give policymakers access to the skills of those in business, who by definition are creative, innovative and practical;
• It is simply a matter of fairness to include in decision making those who will be most impacted by those decisions; and,
• Longer term societal and environmental challenges are best tackled by government, business and civil society working together.

All of this is about much more than communication. It is about a genuine partnership, one which recognises, welcomes and appreciates the role of business, co-designing government interventions at every step in the process. Businesses are looking for dialogue, for no surprises and for lead-in times appropriate to the scale of the change being required of them.

Many of Scotland's large employers are not headquartered in Scotland, or in the UK. Working across multiple jurisdictions causes great complexity in their work and compliance across markets and comes with costs.

Government action

While the focus in the New Deal for Business Group is on the relationship between the Scottish Government and business, the concepts apply equally to the UK Government and local government. And there are strong dependencies on partnership working on adjacent fronts, such as Community Wealth Building.

While powers and levers may be shared by different levels of government, one over which the Scottish Government has significant control is procurement. We have seen a move towards more conditionality, especially around fair work, climate action and community benefits, and reduced weighting on price. Businesses will take their lead from what their customers want, and for large parts of the economy, the Scottish Government and its agencies are among the most significant customers. We recognise that procurement is seen as a tool to advance a very wide range of policy objectives and that it is not easy to accommodate all of these and to avoid increasing the burden on bidders. So, the need for clear guidance and proportionate demands will always exist.

To benefit from government procurement, businesses first need to be registered on the Public Contracts Scotland website, where all larger public sector contracts are advertised so they can take advantage of support provided to bidders, such as the Supplier Journey tool, free training for SMEs and 'Meet the Buyer' roadshows. These give businesses a better understanding of how their contribution to a Wellbeing Economy can support their bids for public contracts.

The right investment and finance

Inward investment is of huge importance to any successful economy, not least that of a relatively small country. In the past we have seen short term grants employed to attract investment that has led to external companies exporting the value from their activities in Scotland and then leave as soon as they could find better profitability elsewhere, so it needs to be the right investment. The finance sector is already aligned behind this objective and has a clear role to support a Wellbeing Economy. Both government and business need investment that is long-term, sustainable, beneficial to the Scottish economy and furthers our vision for a Wellbeing Economy.

Skills

Underpinning all of this is the need to have the right skills and support. This manifests in several ways. For those out of work or in a job that they find unfulfilling, a widely identified barrier to their own wellbeing is lacking the life and work skills needed to benefit from society's opportunities, including everything from work experience to nutrition. Additionally, business owners and their employees need the skills and support to help them make the transformations that we all want to see.

Building on solid foundations

The Business Purpose Commission's final report in 2022 presented the business case for Purpose, and sets out the practical actions all businesses can take. It also provides examples of Scottish businesses leading the way in making Scotland known for nurturing purposeful businesses which make a positive impact on economic prosperity, social wellbeing and environmental sustainability.

As well as the opportunity to learn from and share experiences of companies large and small there are several pathways, standards and certifications that companies can pursue. These will both help them on their journey and demonstrate that they are contributing to a Wellbeing Economy through high standards of social and environmental performance, transparency, and accountability.

Examples highly regarded by the subgroup include B Corp certification, British Standards Guidance on purpose driven organisations and the journey approach of BITC. Encouraging more businesses to participate in such initiatives and engage with them meaningfully is a clear way to increase their contribution to a Wellbeing Economy. The Scottish Business Pledge is currently under review, drawing on recommendations from the Business Purpose Commission. However, participating in a scheme is not a pre-requisite for being a purposeful business. Some business models too contribute to a Wellbeing Economy by their nature including employee ownership and share awards.

Whose Wellbeing?

One of the most significant ways in which many businesses support Scotland's transition to a Wellbeing Economy is through implementing fair and inclusive work. At present, the fair work and just transition aspects of the Wellbeing Economy are orientated towards employees.

However, the wellbeing of business owners is as much a part of a Wellbeing Economy as the wellbeing of staff. Hundreds of thousands of people in Scotland are self-employed, and hundreds of thousands manage businesses with fewer than 10 employees. Many of these business owners are very low paid and under significant pressures; for example, farming has one of the highest suicide rates of any industry and around 40% of farm businesses can't afford to pay the Minimum Agricultural Wage to unpaid labour – the farmers who run the businesses.

Measuring a Wellbeing Economy

We have tried to answer the questions, as have others before us; "What does a Wellbeing Economy look like? And how will we know when we get there?" Regardless of the answers to these questions, good data is required to know where we are in our journey, whether we are moving in the right direction and how fast we are moving.

The Scottish Government collects and publishes an array of relevant data, notably as part of the National Performance Framework and the Wellbeing Economy Monitor and many trade organisations, academics and others also produce robust data. However, this is generally at an economy-wide level and it is difficult to discern from them the impact of individual policy interventions or the individual and cumulative effect of actions taken by business.

We will need more finely detailed metrics that help demonstrate the impact of government and business actions in the shorter term, and in doing so not overly burden businesses with surveys.

Recommendations

The Business Purpose Commission report, echoed in the Scottish Government's response, made a set of recommendations for businesses and Government, which they are encouraged to consider taking forward as far as possible in their own individual contexts. The recommendations below build upon that work to focus on creating the conditions in which further transformative change can be achieved through partnership working towards a Wellbeing Economy.

1. Building on the new approach to partnership working being developed in the New Deal for Business Group's Business Partnership subgroup, and recognising the existence of a number of government and business-led policy fora relevant to the Wellbeing Economy, including the Wellbeing Economy Expert Advisory Group, as potential vehicles to drive the change, the subgroup agreed that policy topics offering considerable opportunity for early engagement soon, to start over coming weeks, should include:

a) Labour market participation, with a focus on supporting parents and carers into work​.

b) Skills and support businesses need to transition to Net Zero and environmental sustainability.

Engagement will start in coming weeks, led by the respective policy teams in line with new ways of working.

2. The Scottish Government, businesses and others should work together to create a simple description of what the Wellbeing Economy is and how business can contribute. This includes identifying metrics to measure the impact of business actions contributing towards a Wellbeing Economy, evaluate the impact of interventions, demonstrate the positive steps taken and assess the maturity of businesses' approach to purpose. This should build upon existing sources and reporting frameworks and look to provide guidance for businesses to monitor their own impact. The New Deal for Business Group's Sharing Key Metrics subgroup can support this work.

3. Business and government interests in a Wellbeing Economy are closely related, but only a minority of businesses are engaged in the work. Reaching beyond 'the usual suspects' is essential to the success of the shared aspirations. The Scottish Government, trade bodies and businesses should work together to better establish the business case for supporting a Wellbeing Economy and find ways to showcase the benefits and share good practice to all parts of the business community in Scotland. This should be led by business, building on the work of the Business Purpose Commission, through their networks, because they are best placed to understand how to craft the message. A first step will be for businesses involved to agree the approach.

4. Businesses that want to begin or further their contribution to a Wellbeing Economy often do not know where to look for advice and resources. As well as the important business-to-business support above, the assistance required to encourage and help business pivot to Wellbeing Economy objectives should be considered as part of the review of business support announced in NSET, and in the meantime as opportunities arise.

5. Public sector bodies should promote opportunities for purposeful businesses to advance sustainability, fair work and community benefits through public procurement. This has two purposes: awarding contracts to such companies provides better overall value for money and moves us towards a Wellbeing Economy and incentivises other businesses to follow that route. As well as registering as suppliers to see the impact they can have, purposeful businesses can look out for planned roadshows and the forthcoming SME procurement action plan that builds on the public procurement strategy for Scotland.

Subgroup membership

Many organisations were invited to participate either in meetings where possible or to contribute via New Deal for Business Group members or Wellbeing Economy subgroup participants. Below is a list of the organisations that were represented at one meeting or more. The Group was co-chaired by Nathalie Agnew, Sara Thiam, Louisa Macdonell and Lewis Hedge.

• Nathalie Agnew, Managing Director, Muckle Media
• Lewis Hedge, Deputy Director of Fair Work and Labour Market Strategy, Scottish Government
• Louisa Macdonell, Director Scotland, Business in the Community
• Sara Thiam, Chief Executive, Scottish Council for Development and Industry.
• Aberdeen International Airport
• Bella & Duke
• BP
• Colleges Scotland
• Connect Three
• COSLA
• DWF
• Edinburgh International Festival
• Jerba Campervans
• Homes for Good
• PG Paper
• Prickly Thistle
• Pure
• Scottish Agritourism
• Scottish Hospitality Group
• Scottish Land & Estates
• Scottish Retail Consortium
• Sodexo
• Springboard
• TBCo
• The Circle
• Weir Group