Profit Through Ethics on Reducing inequality

Is your business committed to reducing inequality?

Yes

Profit Through Ethics Ltd (PTE) references inequality as a responsible business issue in the following answer.

Our view is that it is the business of every business is to:

  1. Deliver the goods and services people need at the right price, time, place and quality

  2. Reduce any negative impacts on society and the environment it is responsible for

  3. Increase any such positive impacts it has

We believe that it is impossible to avoid the conclusion, with the breadth and depth of evidence now at our disposal, that inequality has a significant negative impact on society. We believe that increased inequality is unjust and unfair, and moreover, economically unsustainable. We further believe that all businesses face both moral and financial imperatives to act. We will endeavour to identify and adopt policies and practices which will enable our business to alleviate the problems of inequality, and reduce inequality. We will also seek to encourage and enable other businesses to do the same.

In maintaining and developing the Responsible 100 initiative, a key aim is to enable businesses - and civil society organisations such as charities and public bodies - to better understand the social and environmental challenges they face, to identify better and best practices which they can adopt, and to empower and reward them to be as responsible as possible.

PTE seeks to practice what we preach, by making sure that as a responsible business, we give back to society at large and make the world a fairer and more equal place.

The information we publish in respect of low, medium and high pay within own business is as follows. All PTE interns are paid the London Living Wage.

New members of staff are now being sought to fill longer term positions – albeit junior roles – at higher rates of remuneration (i.e. at a minimum of £11 per hour).

The director of the company is paid less than anyone. While we have not yet set out details of our approach to executive pay beyond this at present, we are delivering a roundtable meeting in 2017 focusing on executive pay. In this meeting, participants, including PTE, will reveal any pay ratios which may serve to aid comparison with peer businesses and / or across business sectors. More information about our roundtable on executive pay can be found here: https://goo.gl/forms/huKIsbaktriDwVuH2

PTE are firmly against zero hours contracts. If zero hours arrangements are not offered as an option but are effectively forced upon of vulnerable employees in need of secure and certain income as a ‘take it or leave it’, this is in our view exploitative and unethical. Again, low pay is the focus of another roundtable meeting to be delivered in 2017, and thus one where PTE will disclose more on in due course.

PTE will always seek to be tax responsible. We actively seek out challenges and suggestions as to how best to do that as a small business, limited by shares, based in London. We will always open up on the issues that will help determine and demonstrate how tax responsible we are. We have published further information outlining our commitment to a responsible tax policy on the R100 website: http://responsible100.com/participants/view/profit-through-ethics/tax-transparency/

Despite our business being a small one and our resources being limited, we support the Peabody housing association estate, on which our office space is rented, through volunteering. The estate is home to over 300 families, almost all of which are dealing with the challenges presented by low income and poverty.

Our offices are Small Works Kings Cross, a low rent workspace designed to support non-profits, charities, social entrepreneurs and businesses. In return for low cost desk rental, PTE (along with fellow Small Works member businesses) contribute to the local community through regular, ongoing giving projects called “Give Backs”. These Give Backs consist of a series of community based projects designed to understand and address local community challenges and build on existing assets.

Through our Give Backs, PTE staff give their time and lend their expertise to local entrepreneurs and aspiring micro-businesses and start-ups. We also support a London charity whose mission is to improve the lives of young people from underprivileged backgrounds through the performing arts.

PTE currently:

  • Partners with the award winning Anna Fiorentini Theatre & Film School to help provide local, affordable, accessible - and at the same time high-quality - performing arts classes to the community. As well as providing a platform for local talent to flourish, these classes also provide valuable life skills such as communication, personal development, teamwork, confidence, discipline and cohesion.

  • Allocates a set number of hours for our employees (this time to date has been partly donated by the employee and partly funded by PTE, or entirely funded by PTE) to provide business development and other skills based training to local micro businesses and charities, supporting them in:

  • Pitching and funding applications

  • Identifying opportunities for growing their support network, making introductions where possible

  • Business and strategy model appraisals- helping them to streamline their operations and further explore opportunities for growth

Rising income inequality and the polarisation of societies pose a risk to the global economy in 2017 and could result in the rolling back of globalisation unless urgent action is taken, according to the World Economic Forum .

Geographically, inequality is a global, national and local issue. Outliers in mature economies include the US and the UK - which have some of the highest GINI coefficients and accompanying manifestations of socio economic disparity. Similar patterns can be seen in the share of income distribution.

The share of the global population defined as “poor” — those making less than $2/day — has fallen since 2001 by nearly half, to 15 percent. Notably, those in the middle-income bracket making between $10 and $20/day have nearly doubled their global presence, from 7 to 13 percent. However, after falling for much of the 20th century, inequality is worsening in rich countries today. The top one percent is not only capturing larger shares of national income, but tax rates on the highest incomes have also dropped.

The OECD notes that high inequality makes for a less efficient and less productive economy, and it has used this fundamental starting point for a variety of its studies. The IMF also finds that countries with greater inequality tend to be “marked by lower growth and greater instability”.

Business policies and practices can impact inequality in society. More and more businesses are realising they have a role to play and are reviewing their practices and strategies accordingly. There are a wide range of common practices through which businesses can exacerbate or reduce inequality from executive pay, to average and low pay, to tax, the emergence of the ‘gig economy’, to the types of goods and services sold, to terms of payment for suppliers, and more.

Payment terms provide a good example of both how business practices have changed in recent years, and how increased inequality can often be a result - and be an unintended consequence - of such changes. Only a decade or so ago, payment terms between businesses in the UK were almost always 30 days. However, in recent years, larger firms have begun to force much longer payment terms on smaller firms, in some cases 100 days or more. While cash flow and operating margins are improved for larger businesses, this comes at the expense of small suppliers, which are often SME and family owned and run businesses. Such firms are frequently relied upon for income from employees and other dependants from lower income groups and geographies. As a result of larger firms extending payment terms, SMEs and family firms are more financially vulnerable, less able to invest and grow, and in some cases their very existence is thrown into jeopardy.

Income inequality

'Income inequality' is the extent to which income is distributed unevenly in a group of people.

Gini coefficient

The 'Gini coefficient' is a measure of statistical dispersion intended to represent the income or wealth distribution of a nation's residents, and is the most commonly used measure of inequality.

Pay inequality

'Pay inequality' describes the difference between people’s pay and this may be within one company or across all pay received in the UK.

Wealth inequality

'Wealth inequality' refers to the unequal distribution of assets in a group of people

Gender inequality

'Gender inequality' refers to unequal treatment or perceptions of individuals based on their gender. It arises from differences in socially constructed gender roles.

Answering YES

All Businesses MUST

Describe how and where they reference inequality as a responsible business issue

Describe the policies and practices they have adopted in an effort to reduce inequality

Describe what information they publish in respect of low, medium and high pay within their business and explain whether or not they reveal any pay ratios which may serve to aid comparison with peer businesses and/or across business sectors

All Businesses MAY

Explain whether they have calculated their gender pay ratio, if and how they will be reporting on it, and any actions they are taking to reduce it

Explain whether they have Living Wage accreditation and whether those terms are also enjoyed by all contractors

Outline their commitments to a responsible tax policy, where public available details can be found including the details of the outcomes of these policies, or explain why this is not done

Provide complete and clear details as to dividends paid as a percentage of turnover and profit over time, and wages paid to employees as a percentage of turnover and profit over time, ideally over several years, or explain why this is not done

Explain their supplier payment terms and whether they have signed up to the Prompt Payment Code

Explain if and how employees are represented on the board

Describe whether all employees are able to earn performance related bonuses

Explain whether they, or they contractors, use zero-hours contracts

Explain whether they voluntarily recognise any unions

Answering NO

All Businesses MUST

Explain why they do not or cannot answer YES to this question

All Businesses MAY

Make disclosures against any of the answering requirements for a YES answer even though all such requirements are not met

Mention any future intentions regarding this issue

Provide any other relevant information

DON'T KNOW is not a permissible answer to this question

NOT APPLICABLE is not a permissible answer to this question

Version 1

To receive a score of 'Excellent'

Reducing inequality is a clearly stated business aim and success in doing so can be evidenced

Examples of policy and practice which may support the EXCELLENT statement:

  1. Explains how business aims, values or mission relate to inequality
  2. Makes clear its determination to contribute to development of better business practices vis a vis inequality
  3. Provides detailed explanation of relevant policies and practices
  4. Fully describes governance and oversight procedures
  5. Invites trusted third parties such as NGOs and/or other ‘critical friends’ to feedback on and help improve policies and practices
  6. Discloses which organisations (e.g. other companies, government, regulators) it has sought to influence towards supporting efforts to reduce inequality
  7. Describes how it adopts a leadership position on reducing inequality
  8. Clear, bold business statement regarding inequality, its impact on society and the role of business in reducing it
  9. Lobbies government on relevant inequality issues (e.g. raising the national minimum wage, curb excessive exec pay, progressive taxation)
  10. Pays living wage at a minimum and ensures this extends to all tier one suppliers
  11. Company specific program to create gender equality
  12. Supports relevant campaigns and petitions (e.g. The Robin Hood Tax campaign)
  13. Reports on top/median and top/bottom pay ratios
  14. Pay ratios are explained and justified, plans for their reduction are set out
  15. Voluntarily sets an internal maximum ratio
  16. Is Living Wage accredited
  17. Ensures living wage extends to all contractors as well as employees
  18. Employee representation on the board
  19. Uses blind application forms and/or pursues positive discrimination in recruiting employees
  20. Does not unnecessarily restrict job opportunities to graduates
  21. Pays interns and apprentices a Living Wage
  22. Ensures all internships and apprenticeships are genuine training roles
  23. Invests significantly in skills and training
  24. All employees are able to earn bonuses for high performance
  25. Does not use zero-hours contracts
  26. Demonstrates tax transparency
  27. Offers employees childcare vouchers and crèche facilities
  28. Offers flexible working arrangements
  29. Recognises and supports unions and co-operatives
  30. Invests in new areas and skilling local workers to alleviate economically impoverished areas
  31. Details net impact on inequality by disclosing its positive and negative impacts
To receive a score of 'Good'

The business is committed to reducing inequality and pursues various relevant, useful policies and practices

Examples of policy and practice which may support the GOOD statement:

  1. Publishes aims, values or mission statements relating to reducing inequality
  2. Provides good explanation of policies and practices
  3. Provides detailed description of governance and oversight procedures
  4. Clear indication that it recognises inequality as a responsibility issue
  5. Consults with independent third parties re inequality
  6. Adopts a leadership position on inequality
  7. Committed to paying the living wage
  8. Supports government initiatives on promoting equality and fairness in the workplace
  9. Gender parity program in place
  10. Ensures equal opportunities for all applicants and/or employees regardless of gender or economic background
  11. Considers investing in new areas and skilling local workers to alleviate economically impoverished areas
To receive a score of 'Okay'

Inequality is an issue the business recognises and it adopts relevant policies and practices on an ad hoc basis OR the business explains how and why inequality is not a material issue to its operations

Examples of policy and practice which may support the OKAY statement:

  1. Provides some explanation of policies
  2. Provides some explanation of governance and oversight procedures
  3. Recognises inequality as a responsibility issue
  4. Supports appropriate pay for all employees based on living wage recommendations
  5. Makes an effort to hire employees from disadvantaged backgrounds
To receive a score of 'Poor'

The business makes no statement in regards inequality, it appears that the business could adopt some relevant and useful policies or practices to reduce inequality but chooses not to

Examples of policy and practice which may support the POOR statement:

  1. Lack of meaningful disclosure
  2. No explanation of lack of disclosure
  3. No statement of future intent
  4. No measures in place to support the reduction of inequality
  5. Does not pay the living wage
  6. Does not support initiatives to combat gender inequality
  7. Exacerbates inequality
  8. Targets low income and vulnerable consumers with exploitative products and services

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