A strategy for transition to a Future Guardian economy

The article excerpted from my book that Pioneers Post published has gone behind their paywall, so I am republishing it here. It was first published by Pioneers Post on 18 April 2023, here’s the link.

And here’s the article:

We must think and act strategically to cause systemic transformation. A good strategy for transforming the business sector is to foster widespread take-up of the Future Guardian model, says Paddy Le Flufy in his new book Building Tomorrow: Averting Environmental Crisis With a New Economic System.

Millions of people now realise we need to change the economic system to avert the intensifying environmental crisis, and many organisations are working to create a better world. But it still seems as if actually changing the system can only be done by politicians – who display very little interest in doing it.

I believe that those of us who passionately want to create a better world can, and must, change the system ourselves, without waiting for political leaders to do it for us. To do so, we must think and act strategically. This article describes a strategy for transforming the business sector by fostering widespread take-up of the Future Guardian model of governance.

The Future Guardian model is a new way of constituting a business being pioneered by Riversimple, a hydrogen fuel cell car company based in Wales. The model overcomes the primacy of the profit motive and can be applied to any business. It fits within British law under the Companies Act 2006, so no legal changes are needed for British companies to take on the Future Guardian model.

In the model, the articles of association of the company are rewritten so that the company has an overall purpose and, subordinate to the purpose, a group of six aims, one for each of six stakeholder groups: the customers, the employees, the investors, the commercial partners, the community, and the environment. There is a system of Custodians and Stewards to ensure the aims of the model are manifested in the functioning of the company.

The articles state that the company should pursue its purpose while ‘balancing and protecting’ the benefit streams – effectively mini statements of purpose – that relate to, and in fact define, each of the stakeholder groups. The purpose itself can be explicitly social impact-based, but it doesn’t need to be – for example, a low-cost furniture company could make its purpose ‘to provide durable and desirable furniture that is affordable to at least 95% of adults in each of our markets’.

As one of the stakeholder groups is the investors, the Future Guardian model does not require companies to do away with the profit motive completely – it just says it must be balanced with the aims of each of the other stakeholder groups. The company’s profits must be no more important to it than its environmental impact, its contribution to the local community, and its effects on each of the other stakeholder groups.

Creating a Future Guardian economy

There have been many innovations in governance in recent years – Faith In Nature has appointed a director to represent nature on its board, Patagonia’s ownership has been divided between a trust and a non-profit, and benefit corporations have a legally constituted purpose of creating a public benefit, for example. But the Future Guardian model is unique because it combines two important attributes: firstly, it overcomes the primacy of the profit motive without doing away with the profit motive completely; and secondly, it is just as widely applicable as the current default model of profit maximisation. This means that it could become a new default alongside, or even in replacement of, profit maximisation. As such, the Future Guardian model has the potential to improve the entire business world.

But it is currently only being used by a single company that is still a small start-up. We need to transform the economy as soon as possible, and if we wait for Riversimple to grow and set an example as a large Future Guardian company before the model spreads across society, it will be too late. We need to spread the model rapidly, and to do that, we need to think strategically.

A successful strategy for spreading the model will involve organisations that are both already invested in trying to create systemic improvements in the business sector, and are in suitable positions in society. Firstly, we need a large, well-known company to become a Future Guardian, to make the model famous and demonstrate its power and potential. Secondly, we need an organisation that encourages and enables more companies to become Future Guardians and helps them increase their positive impact.

There are many organisations that could perform these roles. I will use Patagonia and B Lab as specific examples.

Patagonia is a successful and respected company that maximises its own positive impact and has changed its governance structure, but hasn’t yet had a system-wide effect. Patagonia’s voting shares are held by a Purpose Trust, overseen by the Chouinard family, so they could change to the Future Guardian model without needing to persuade other shareholders. As such it is in an ideal position to be the first established company to become a Future Guardian.

Patagonia becoming a Future Guardian would encourage other companies that are similarly committed to positive impact to consider becoming Future Guardians. But to change the system, we need to persuade many companies to be Future Guardians – including businesses that do not currently think beyond their bottom line.

This is where B Lab comes in. B Lab runs the B Corporation Certification and has a range of initiatives aimed at an overall goal of ‘redefining success in business so that one day all companies will compete not just to be the best in the world but also to be the best for the world’. B Lab was founded as a non-profit in 2006 and has grown rapidly: there are currently over 6,000 certified B Corps in 89 countries.

To become a B Corp, a company must pass the B Impact Assessment, which measures the company’s entire social and environmental performance across the stakeholder groups of workers, customers, suppliers, community, and the environment. The company must also amend their legal governing documents to require their directors to consider the impacts of their decisions on all of their stakeholders. This requirement isn’t as strong as the Future Guardian model – whereas the Future Guardian model explicitly gives each of the six stakeholder groups equal importance and subordinates them to the purpose, the B Corp requirement ensures that stakeholders are considered but allows profit to remain the main, but not sole, concern of the company.

B Lab has a large network of socially conscious companies. It runs various initiatives to foster the B Corp community and increase B Corps’ positive impact, and it has experience advocating for legal changes to enable stakeholder models to be used around the world.

This means it is in an ideal position to generate widespread take-up of the Future Guardian model. B Lab could begin this by helping interested B Corps become Future Guardians. It could then set up initiatives to foster a Future Guardian community, and advocate for legal changes to enable take-up of the model around the world. This would be as well as, rather than instead of, their current work related to the B Corp certification. The two aspects would go hand in hand: the B Corp certification would be the initial level of improvement, with the Future Guardian model being the best practice and ultimate goal.

B Lab has already successfully advocated for legislation to allow benefit corporations. The next steps towards a Future Guardian economy would be legislation to allow Future Guardian companies where current legal systems don’t allow them, and a basic level of mandatory stakeholder governance for all companies, which B Lab is already advocating for in various jurisdictions.  Once the Future Guardian model has become more widespread, it would be time to work on legal changes so that it became the default model, with profit-maximisation being relegated to history.

I have used the examples of Patagonia and B Lab because they are in such good positions to help popularise the Future Guardian model, but there are many others who might perform equivalent roles. Many companies are in a position to be the first established company to become a Future Guardian, and many people have the expertise to set up a new network organisation dedicated to spreading the Future Guardian model. There will also be other routes to creating a Future Guardian economy. But it is essential that we think and act strategically in order to turn individual examples of better business into systemic transformation.

Adapted from excerpts of Building Tomorrow: Averting Environmental Crisis With a New Economic System by Paddy Le Flufy