What is the purpose of a business? Recent years have seen growing social, political and market pressures on business leaders to go beyond simply creating short-term value for shareholders. Concepts such as ‘responsible capitalism’, ‘stakeholderism’ and ‘sustainable business models’ have become increasingly prevalent. The drivers of this change in mindset are diverse—from a recognition of the need to protect the environment, mistrust in big corporations following the financial crisis, concerns around equality and fair treatment of consumers and workers.
International commitments to addressing the climate crisis have also focused minds, including the 2015 Paris Agreement, the United Nations Sustainable Development Goals (SDGs) and the European Green Deal.
Utilitalia—the federation of Italian water, energy and municipal waste companies—commissioned Oxera to explore how a wider purpose can be embedded within an organisation, and how performance might be monitored. Utilities are a special case: they provide an essential service, contain a naturally monopolistic element, and some form of economic regulation is needed. While providing a service to society is in the DNA of utility companies, consumers cannot monitor firm behaviour perfectly and cannot switch. However, there are a variety of mechanisms that can assist in embedding sustainability within the firm.
We spoke to a range of Utilitalia members about their initiatives to date (including governance and reporting), what were the opportunities for the future, and the barriers to progress. While inroads have been made, there is further opportunity for Italian utilities to focus on their public purposes.