Encouraging long-term business growth in Scotland
Senior business leaders attended a joint ICAS – IoD Scotland Breakfast Event on 21 September to discuss how to encourage long term business growth. David Wood discusses the findings of the lively debate.
ICAS was pleased to host this breakfast event jointly with IoD Scotland, where senior business leaders from the membership of both organisations were present. Chaired by Bruce Cartwright, Executive Director at ICAS, the event started off with short presentations from Gary Gillespie, Chief Economist at the Scottish Government, and Richard Howitt, Chief Executive at the International Integrated Reporting Council.
Gary gave a short summary of the Scottish Government’s perspective on encouraging growth and business success, setting out a range of external and local factors which impacted on this, along with institutional factors and issues relating to access to finance. Although growth in Scotland has been impacted by the low oil price, industry would seem to have adjusted to this and is now starting to pick up.
The four I’s of economic strategy
The Scottish Government’s 2015 economic strategy focused on four I’s – international; innovation; investment; and inclusive growth – with the latter being supported by the Government’s “business pledge” on good practice which businesses are encouraged to sign up to. A key message is that a sustainable economy is simply an aggregation of sustainable businesses, and the Government’s role is to create the environment to support this. Both businesses and Government need to play their part to ensure collective success.
Richard highlighted the need for company boards to think more broadly and consider their wider stakeholders, to ensure their sustainability over the longer term. This involves addressing the risks and opportunities for the business across a broader range of issues. We don’t want regulation to force this but instead are working in markets to bring about a change of mindset across the business sector.
A journey of exploration
Integrated reporting (“<IR>”) provides a model for concise reporting on this, and encourages the embedding of broader thinking right across business decision making. Richard highlighted RBS, SSE and the University of Edinburgh as big local champions. This is a journey of exploration and experimentation and it was accepted that <IR> will evolve over time.
A lively discussion followed and the following points were raised.
Three key issues for company boards were the introduction of the General Data Protection Regulation next May, Brexit, and source of the next generation of talent (especially on technology) that businesses will need. The first two could be managed by the companies themselves, but it was felt that the Government needed to help on the third to facilitate productivity growth.
There was a general concern about sourcing both skilled and unskilled workers – the latter mainly due to losing access to EU migrants as Brexit looms. Government does need to ensure the education system produces the necessary skills, but businesses also need to play their part in developing and retaining staff. In any event, the working population in Scotland needs an additional 15,000 people per year to cope with demographic changes.
The consideration of broader stakeholders and the related risks and opportunities is viewed favourably by investors. They see this as companies sensibly thinking ahead and planning for the longer term.
The value of a diverse workforce
As an example of broader thinking, it was noted that SSE has sought to value its human capital as a basis for benchmarking and measuring the impact of training and development, and to aid business decisions. Clearly this value is not “owned” by SSE – it belongs to the employees as individuals - but it does generate benefits for the company and helps in identifying where value can be derived from investing in a diverse workforce, which leads to higher retention and greater inclusivity. It also underpins the importance of the people in the company’s business strategy.
The business pledge was felt to be somewhat politicised, and companies seemed reluctant to let politicians take the credit for actions they were already taking.
Integrated reporting – and integrated thinking – is not just for large companies. It needs to be for smaller companies too.