89. The business decision you'll thank yourself for in 5 years | James Perry

28:42Yeah. So that was a key. The P &L was quite persuasive the other way. Yeah, that might put you off. But that was a key moment for you, wasn't it? Yeah, it was. So going forward, you obviously grew this business, but you became increasingly interested in the sort of wider purpose of business. And you, I believe, were one of the pioneers of the B Corp movement in the UK. James, tell me about that. Well, what happened was we didn't want to sell more equity than we had to, like any good entrepreneur. And the credit environment of the early 2000s was very helpful to businesses that wanted to borrow money that possibly was unwise to borrow, which was us.

29:29uh and so we ended up taking a very large loan from hbos uh in 2007 which no bank should have made well they caught up with them didn't it well it was famously in 2008 indeed it did but it also rather caught up with us did it because we had well we got when the credit crunch happened in the financial global financial collapse happened in 2008 our sales went down by 20 overnight night and all of our cash generation projections were for the birds and we breached all of our banking covenants and we were very close to bankrupt. I mean, we had to do an extraordinary number of things in order not to go under, in order to make payroll every month.

30:16And that's a long and sad list of things we had to do, but we survived. But when we came out of that financial crash. And I saw the quantitative easing, which government printing money essentially to keep the financial system afloat. But when I realised that actually that that was the effect of quantitative easing was as a massive wealth transfer from the taxpayer to the wealthy, because it inflated asset prices, and the bankers seemed to get away with it scot-free. And I'd had this disquiet previous around the externalities of this idea. I just couldn't, I just had this compulsion to explore and understand more deeply what was going on because I had this strong sense that it was going to lead to calamity from both a planetary point of view, but also from a human point of view in terms of our well-being.

31:13And what I learned, well, I learned a lot of things, But one of the things I learned was that it wasn't the fault of the people who were, you know, there's great people. These large corporations are extraordinary things. They do incredible things. They bring us our food in the most amazing way so cheaply. You know, our technology is extraordinary. So it's not the fault of the people running the thing, but there's a glitch somewhere. So I just wanted to understand it. So I found myself in 2010 in San Francisco because there was a conference. I was told the best place to go is this conference called SOCAP, which stood for Social Capital Markets.

31:48How can capital markets serve society rather than society serving capital markets? And so I found myself in San Francisco and it was a bit kind of, it was like the early days. And it was run by this crazy sort of veteran from the 1960s with his wild eyes and his crazy hair from California called Kevin Jones, who was a wonderful guy. And so it was all quite glamorous, you know, food trucks. We were in Fort Mason, these wonderful wharves that went out into San Francisco Harbor overlooking Alcatraz. It was all quite exciting. and in a theatre at this conference where there was only a few hundred people and it was all quite chaotic there was this chap called J.

32:24Cohen Gilbert and he got up in this theatre with about 80 or 100 of us in it and he told us about this idea he'd had called a B Corporation and they just started in the US and they had about 200 companies and they were all sort of small social enterprises mostly in California or the East Coast and it was a eureka moment Why was it called B Corporation? Well, Jay, a lot of people think it's for benefit corporation because they passed a lot of laws. In the US, it's illegal if you don't maximise profits for shareholders. Company directors can be sued. So they have to pass a law to protect company directors if they want to do anything other than maximise profits, which is called a benefit corporation.

33:05So they wrote a statute, they called it the benefit corporation, and they went round state legislatures passing it. Oh, so at a state level that had to be passed before people could... So it had to be passed state by state by state. And that wasn't a constraint in this country? No. So we have the 2006 Companies Act, which has something called Section 172, where there is more wiggle room. We won't necessarily go down that rabbit hole, but there's a lot of debate around the wording in Section 172 of the Companies Act and what it actually means. No, I'm interested in that. What does it mean? What's your issue here?

33:39So New Labour, Tony Blair and Gordon Brown had a concern about this neoliberal kind of mindset that had taken over business. And they had this idea of stakeholder capitalism. And so they wanted to make the company something that had to operate for all of the stakeholders, workers, communities, the environment as well as shareholders. And Will Hutton helped them with it, who's a sort of academic and was then a journalist. and they ended up landing on a form of words that says company directors must run the company in the interest of its members which is its shareholders and in doing so they must give regard to other stakeholders.

34:23So the words which bear the weight there are give regard to and there was I understand a tussle behind the scenes at the time between Gordon Brown and Tony Blair as to how far they would go and they landed on give regard to which is very weak because there is a concern that if you elevate the interests of other stakeholders and you require all companies to do that, they could become uncompetitive in a global capital market context. So effectively UK PLC might have burdens which other companies don't have which could be to the detriment of UK economic success. Right. But I mean give regard to to me means pay attention to.

35:04Right. You think that's weak? Well, what it doesn't, because we can all pay attention to it and then we can move on. Yeah, I suppose then it's up to you, isn't it? I mean, you're not being forced by the law to do things. Right. So what the Benefit Corporation statute does and what B Corps do... It puts you into a tighter... Is they say that the purpose of the company is to create value for everyone, and therefore the director's duties are to balance the interests rather than give regard to, which is a completely different idea. So that's a much higher level of commitment. Yeah. And that's what you're committed to.

35:37Yeah. So you brought this idea to the UK. Yeah. How did it land? How did it, how was it received? Well, so I met Jay in 2010 and I was terribly excited. And I came back to Ed and Rosie at Cook and said, we've got to become a B Corp. And they said, what's a B Corp? And then they thought basically, and they, with some possible. So you told them that you had to do these things. I said, we have to do this. And what did they say? Were they unimpressed? And they just thought I'd been drinking. I mean, they were very committed to the principles. We like the idea. We were all doing, Cook was always going to be this.

36:12We've been doing it on our own. And one of the reasons I'd struck out and gone so far overseas was to find others who agreed because there was this kind of gaslighting going on. Everybody's saying, well, you don't understand. That's not what the purpose of the business is. And I just was like, this is completely crazy. And I was so excited to find a group of people who are creating a movement around this different idea that we were already doing. The reason was, I mean, I think it was partly because I was a bit too overenthusiastic, too much Kool-Aid in San Francisco. Yeah, he's been in the sun too long.

36:41But that's an interesting thing when you're trying to sell an idea, not to go too over the top, is it perhaps, with your enthusiasms. But you obviously won because you are a B Corp and you set the whole thing up. So then what happened was, they did listen and they ended up going to a B Corp retreat, which was the thing that really landed it for them. It was, oh, wow, these companies are really doing things differently. But most importantly, they're doing it together and they're learning from one another. And it's this fantastic learning community. So they came back from that inspired and then very quickly certified as a B Corp.

37:10But it wasn't easy. You know, the way that it's assessed has changed. But back in the day, we had to score a score of 80. And when we first did the assessment, we scored 50. So what were the hardest things for you to change? Oh, we had to change everything. I mean, that was... Really? Even as a sort of good employee? We thought we were good. With good intentions. and we were doing our best. But actually what it gave us was a framework to look at ourselves through, which led us to understand that there was a lot more we could be doing. And the spreadsheet that we created had 200 rows on it and each of those was a substantial action we had to take in order to get ourselves to 80.

37:46And we went through that. We were like, that's 200 bits of change. Do we really want to do that? And we looked at it and we just thought, well, all of those things in their different ways are going to make us better and stronger. And yeah, we leaned in And the whole business was committed. It was a change program. And in 2013, we certified as a B Corp and we were one of the first sort of handful in the UK. And then we thought, well, the whole point of B Corps is doing it together. We can't do it on our own. So we need a community. And I was I'd actually been doing some work on my explorations into kind of the spirit behind the invisible hand.

38:20And, you know, there's this kind of idea of how do we fix this glitch in capitalism, which could end up killing us all. I'd ended up doing some work in what's now called impact investing, which is investing for good outcomes for everybody, not just for shareholder value. And I'd got to know the B Corp founders through that work. There was a G8 task force I was part of, and so were they. And we ended up becoming friends. And so I was then helping them to figure out how to launch in the UK. and they've just said to me, why don't you do it, James? And I thought, well, that's a nightmare job. I mean, you've got to go to companies, say, become a B Corp.

38:57They don't know what that even is and they've got to change their legal. Well, you had some practice with your own family. Right, exactly. They've got to change their legal constitution. They've got to do this painful assessment. It's a big thing to ask people to do. And we just found a crowd of people who really got it and went with it. Right. So this improved your business in your view. Yeah. and your journey suggests that that's the case um where are we at now with b corp you know is it still performing as well as it was for you is it still because i hear some pushback now it's a bit of a straight jacket or yeah i mean you might have heard that anyway all the time but yeah it's i mean look there's different altitudes to answer that question it's it's on one level it's magnificently successful.

39:42It's, uh, there's over 3000 B Corps in the UK. Now it's 1 % of the UK economy, uh, which is an astonishing achievement in 10 years. Um, it's now a charity, which has B lab who runs a B Corp movement in the UK as a charity that we set up. And I involved a friend of mine called B lab. It's called B lab. I involved a friend of Michael Sharmi and love to help me set it up. So the two of us co-founded it. And, um, and, uh, it's now like this 10 million revenue, 12 million revenue charity with like fantastic numbers of employees really campaigning to change the purpose of business in the UK. So on that level, it's wonderful.

40:17On the other level, look at what's going on in the world, you know, and have we changed anything? Does it mean anything? So it depends sort of slightly which lens you look at it through. And obviously there are difficulties, complexities around how do you assess these companies? What sort of, how big do you want the community to be? Is this for a small group of, is this for the tip of the spear, the very best of the best? Or do we want to broaden it and to have more companies? And those debates rage and different people take different positions and there'll always be controversy. So if anyone listening wants to do this or support their business in doing this, where do they go?

40:53How do they find B Lab? eCorporation.uk will give you everything you need. Right. And they're supported in that journey. Yeah. Yeah. No, it's a good question, is it? Has it changed anything? I mean, that's a fair question. But you have also a very interesting program in your business called Raw. And I think that really has changed things without question. Tell me about Raw. So as we were thinking about the purpose of the business, we wanted to nourish people and planet. And that takes you down a lot of different, into a lot of different places. but one of them was into obviously the people. And the background of that program to some extent comes from my mother, whose best friend, and Diana, her best friend, who insisted on employing recovering heroin addicts.

41:48So that idea landed quite deeply. And then Dale, the chef who Ed co-founded the business originally with, is a very big-hearted man. and he would look at his ingredients at the end of the day that might not be needed and think, well, we need to do something with these. So the chefs used to go down to this homeless shelter locally and cook the ingredients for the people or help them. The ones that hadn't been used. Yeah, unused ingredients. And what the guy running that charity said to them was, look, this is lovely and thank you and I'm very grateful, but what these people really need is a job.

42:28Can you give them a job? And Dale said, sure, as Dale does. And so it started in a very organic and not structured way. But what really happened then was my sister took over leadership in Cook and became co-CEO with Ed in the early 2010s. And she really grabbed that. We were doing this in a sort of chaotic and not organized way. And she took that and turned it into a highly organized program with a very intentional goal of 5 % of our workforce to be raw talents. And we started partnering with prisons, other charities, and it's become the most phenomenal thing in our business. So how do you make that work?

43:16Because I think it's a really good thing for businesses to do. What's important to get right for that to work? for you and for the people joining you from those marginalized backgrounds? Well, Rosie would be a better place to answer that question than I would because she's the one who's actually done it. But I've watched it pretty closely. And what the most important factor was the culture. So, you know, we're asking people who have, you know, mostly blue-collar workers who have hard jobs and hard lives to accept people, very complicated people, into the workplace to work with them. And that's a big ask.

43:57And it can't be taken lightly. And it has to be consensual. So there's a lot of work where the consent of the people, of our people, your existing team, our existing team was sought. But you had to get their agreement, really. I mean, we have one case where, you know, and as a result of that, we had a bar on people with a murder conviction or people with sexual offenses because people felt they wouldn't be... They didn't want to work with them. ...feel unsafe. And we had an instance where the prison came and said, look, we have someone with a murder conviction. It was a long time ago. They've changed.

44:32We think that this is a really good candidate. And the team... And the question was put to the team whether that would be something they'd accept, which they decided to give the person a trial. And after the trial, they decided to take them on. So that cultural piece is... But they were the decision makers post-trial whether he was taken on. It has to be done with consent and with the culture. The culture has to welcome it. Otherwise, you're just going to give these vulnerable people who've had a terrible experience of rejection and exclusion another bad experience. Yes. But that is so important to stress that the team needs to embrace it and it takes time to talk that through and get their support.

45:15yeah so you said five percent of your workforce yeah and and i think the second learning has been that um once that starts to work it become people and it's you know the team working in it and i don't experience this directly but i can see that it's difficult work you know it's it's the the path to these recoveries is not uh straight and sometimes things go wrong and people fall off the rails or whatever. So it can be difficult and challenging and upsetting. But what happens is that the wins are profound. And once the culture buys into that, what then happens is you start getting graduates from the raw talent program who are in positions of leadership in the company.

45:59And they are really passionate about that program because they want other people to have the same opportunity that they had. So you sort of create a flywheel within the business of helping those people with a hand up. We have a raw talent graduation thing where they come in for a week, where they have a sort of getting ready for work trial and some trial shifts and so on. And at the end, they have to do a presentation and they tell their story. And it's the best meeting you can have in business. I've never heard anyone on that raw talent program tell a story about their childhood, which didn't involve a horrific set of experiences.

46:40I can see the emotion in your face. You're obviously thinking about the stories you've heard. Yeah. And so the idea that we wouldn't give these people a hand up, you know, they've made bad decisions. We understand that. We all make bad decisions. But they've had a terribly... I've never met one who hasn't had an incredible set of trauma in their background. So why wouldn't we give them a hand up? Yeah, no, I completely agree. And we have a business called Reading Partnership, which supports people who have been out of work for long periods of time, often at prison or other experiences like that.

47:14And we've found that when those people move into successful employment, they stay much longer. They become great contributors to the business. And it sounds like, from what you're saying, that's been your experience. So the raw talents are a value driver in our business. They enrich us and they've made us a much better place. yes and people wouldn't necessarily think that from the when you start hiring people from prison or her form of drug addicts and things like that so that's so good to hear um so what would what advice would you give to young entrepreneurs who who are thinking of building a business with purpose you know not just to maximize shareholder value but what's your is is is there a sort of approach that you would advocate a way to start i suppose i think there's a few things i think being clear about that purpose and to the extent you can you know expressing it in writing um in your strategy how does your strategy relate to that purpose you know cook's cook's strategy is revolves around our purpose you know our purpose is at the very heart of our strategy um so so i think that the first thing is the centrality of purpose and the expression of it.

48:31I think the second thing is then writing it into your foundational documents. So things like articles are not exactly the first thing an entrepreneur jumps out of bed to get excited about. They're legal documents. But actually, embedding your purpose in your legal documents is important because it's a statement of intent. And it means that when you come to talk to investors or talk to other parties, you've got something to grab hold of, otherwise it can become quite kind of airy. And the third thing, I think, is making sure that whoever owns the business is aligned, because these things tend to go wrong when people who don't share that purpose become owners of it, and then that can lead to difficult conversations.

49:20hmm so i mean so taking that sort of big picture you've also argued that business can help solve societal problems but i sense that you you don't feel we're doing as well as we could be i don't think business is set out to solve societal problems i think business is set out to make money yeah and i don't think those two are the same things no so i do you think they could become the same thing well i think i think it's i think that's the question that we should be addressing ourselves to with some urgency because i'm i believe in business you know i love business i love markets because they keep you honest and i love business because it is actually what is business i think in some ways it's um a venue to organize the ingenuity and brilliance and talent of humans.

50:10I think that, and with capital available to put behind whatever they want to do. It solves countless problems. Business solves problems. Business is a problem solving machine. And what problem is it looking to solve? It's looking to solve the problem of how to make as much money as it can. Institutional businesses. I recognize that a lot of SMEs, you know, there's hundreds of thousands of SMEs in this country, which are owner operated, that they reflect the character of their owners uh there's family business communities there's b corps so i'm not talking about you know you need to be careful but i'm talking about institutional business institutionally owned capital markets business institutional investment and and businesses owned by institutional investors whether that's private equity or public markets they're they're there to make money and and i i just think it's the wrong thing to ask them to do I think we've created the most powerful engine of progress and we've asked it to do the wrong thing, which is why we now have planetary collapse.

51:09We have geopolitical collapse. You know, governments are now so indebted that they need to ask the bond markets before they can basically make a decision. We have a lot of human collapse, you know, whether that be through the mental health that's happening through our phones or whether it be through what's happening to our health, our physical health as a result of the diet that we have or what's happening to land systems and food systems as a result of the health. So it's a systemic problem. It's a systemic problem that comes from this instruction that we've given business to maximize profits.

51:45But it doesn't sound like, from what you were saying, that the B Corp movement is going to fix it. I think the B Corp movement is a really important intervention because it's saying it doesn't have to be this way. you know, before the B Corp movement existed, the reason why I was so excited when I went to San Francisco in 2010 is because I finally found someone who wasn't telling me I was mad. That's always reassuring. It's really reassuring. You've got an idea. Yeah. And it's, it's, it's kind of, it's a very uncomfortable place to be where you're, everybody's saying, look, what, what, why are you getting so excited?

52:14There's not a problem. Relax and enjoy it. And I, and I couldn't do that. It's very, it's, and when you're on your own feeling like that, it's kind of, it's makes you think possibly you are mad. And so finding those people in San Francisco in 2010, for me personally, was like a massive moment. And, and what I think the B Corp movement has done more broadly now that it's become a thing and it's global is that that idea, there's, there's now a choice. If you're an entrepreneur, what kind of business do I want to be? Do I want to be a profit maximizer or do I want to be a purpose maximizer? That's a choice.

52:45Both of them are businesses, which means that they've got to service the needs of capital. They have to make profit. You know, this isn't, this isn't like that. A purpose maximizer. I haven't heard that expression. Yeah. So I think the B Corp has been terribly, terribly important for that. And I think it's not going to solve the problem on its own. Right. So what, well, I, I'm promoting a slightly different variant called philanthropy companies with, uh, shareholding owned by foundations or charities because that's a way of recycling profits um and we've got a a group of businesses that are aligned on that um so i'm going to be pushing that agenda as well uh i hope more businesses will become philanthropy companies but again it's a big ask because shareholders have to give shares to a foundation or a charity and that's like that's an act of great generosity that often founders will consider or families will consider, but institutions aren't really in a position to consider.

53:46Right, and it's not their fault. They just can't. No, no. So we are in a bit of a bind here, aren't we, James? We are. I think we're in a very serious situation, actually. I think that you only have to read the National Emergency Briefing, which is the best academics that this country has and some of the things they're saying. You even only need to... So what are they saying? Well, they're talking about the, unless we change course, we're going to start suffering profound food security, water security, national security issues. You look at, for example, this extraordinary technology that is coming or has come and is increasingly coming at us.

54:31And it's essentially interested in making money out of us. and the way it makes money out of us is by grabbing and retaining our eyeballs. And the way it grabs and retains our eyeballs is to service addictive content. And actually, late-stage capitalism generally has figured out that the way to make maximized profits for shareholders, which is its job and its duty, is to create addictive products, which is why increasingly we're addicted. I mean, I don't think that the... It's not the food industry's fault, right? As I say, magnificent people working in the food industry. I am a massive admirer of businesses like Tesco's and Sainsbury's and waitrose and and little and asda and all the rest of them they are absolutely brilliant at what they do and i have no criticism at all of them for that and the what you're saying is people are making addictive products because that makes well so that sounds to me that we're right back in that gin shop we're right back in that gin shop so how do we get out of the gym shop so i remember that I was drunk for a penny, dead drunk for two.

55:34Because I remember studying it at school and being horrified. So the Cadbury family had a way out of the gin shop. We need to find another one, don't we? So we need to find a way out. And that leads us into a much more profound and important conversation about, you said at the beginning, actually, we talked about measurement. How do you measure success? For example, our system of accountancy was invented by the Victorians before there was any notion of any externalities. Now that we know that certain practices create substantial social costs, how is it that we're just able to pretend they don't exist and they're not on our profit and loss statements?

56:14And what happens to those costs? Well, the state has to pick up the tab. So the state is a bit of a mug for writing a blank check to business to create as many problems as it likes. Well, that's all of us in the end because we have to pay tax. That's right. So we are a mug because we're picking up the tab for this. And so the problem is the idea. So the idea doesn't work. The idea says, the reason why the idea works in theory is because of two things. The first one is that government will regulate to protect society from the excesses of business. And the second one is that the wealth will trickle down.

56:51Now, we know that government can't regulate business to regulate the excesses of business because it's miles off the pace. It doesn't know what's going on. The people that know what's going on are in the businesses. They're brilliant. Yeah, well, that's clearly the case with AI. Clearly the case everywhere. And business only really knows what is told by business. So business can't regulate and the wealth doesn't trickle down. That's why we have this phenomenon of extreme wealth. So what do you do about that? I think the only way out of that is to internalise the responsibility for these externalities back into business.

57:27You are responsible for your own stuff. If you break it, you own it. How you do that is the subject of a very difficult and complex set of conversations, but there's lots of brilliant people working. Well, I'm pleased you said that because I think that's a good place for us to finish because it sounds to me like you agree with me that we should back humans and tax robots. Back humans, tax robots. Tax robots. That's a good place to finish. You're there. We're on the same page. I think that's the way ahead.

58:00So thank you so much for coming in and telling me about your journey and also your wider thoughts on the big subject of capitalism and where we're headed. Fascinating. Thanks so much, James. Well, thank you for having me. I've really enjoyed it. It's a real pleasure. I always ask two questions at the end of my conversation. The first one is because we at Read Love Mondays is what is it that gets you up on a Monday morning? I go to the gym at 8am on a Monday morning and it's the best way to start the week. I have what I call a beasting and I come out and I can barely walk and it takes me until about 10 o 'clock before I can start my week but I start it in the right frame of mind.

58:39Well, it's a pretty good recovery time. Thank you very much. It gets longer every year, I tell you. My last question from my interview book, Why You, is where do you see yourself in five years' time? I would imagine that I will still be doing what I do now, which is meeting people and trying to figure out how we can change the trajectory we're on. And the key to changing the trajectory is business. But it means we need to change what business thinks its role is. Well, I wish you every success with that because I think that's a huge challenge, a huge question. and there's plenty of work that we need to be done, not just over the next five years, but beyond that.

59:24I wish you every success. Thanks for coming to talk to me, James. Thank you, James, for joining me on All About Business. I'm your host, James Reid, chairman and CEO of Reid, a family-run recruitment and philanthropy company. If you'd like to find out more about Cook, B-Lab UK or Reid, you'll find all the links in the show notes. Thank you for listening and see you next time.