Principles don’t pull against profitMay 2013
Paul Ellis, chief executive of Ecology Building Society, believes that a long-term approach is essential for the future of the UK’s financial sector and that finance can be ‘sustainable, principled and profitable’
Who thinks long-term these days? Not the politicians, who need to curry favour within a five-year time frame. Not the high street, with its fast fashion and planned obsolescence. Certainly not the world of finance, with share prices shifting by the minute and transactions by the millisecond.
For many, long-term is a byword for a lack of ambition or slow growth. But thinking long-term doesn’t have to mean this. Ecology is living proof: in 2012 we reported record profits, strong asset growth and savings balances passing the £100m milestone for the first time. This wasn’t luck – we’ve seen consistent growth throughout the financial crisis and subsequent recession, at a time when the big banks have struggled.
Our long-term approach is a consequence of our mission to build a more sustainable society. Focusing on our environmental and social impact means thinking about the impact of our business decisions over decades, not months, and considering the effects of our products throughout their life – and beyond.
We’ve been successful because of our principles, not in spite of them. We’re committed to treating all of our members equally, eschewing eye-catching introductory rates in favour of a minimum rate for all of our savers. Our mortgages offer long-term value, not short-term gain, and we price them according to climate risk, not just financial risk.
We do these things because they’re the right thing to do: because we believe that everyone is of equal worth and because our environment has intrinsic value. But these principles also make financial sense. We build long-term relationships with our members, who trust us, and our borrowers find their energy efficient homes are more affordable to maintain. In the end, our prosperity depends on ensuring our planet can sustain those who live on it.
The dichotomy between financial success and sustainability is entirely false if we look beyond a short time frame. What company can prosper if it doesn’t seek efficiency? In a world of dwindling resources, the smart company is the one that plans for a lean future. When we exceed the limits of our environment to the extent that the planet can no longer support us, who cares about the FTSE100?
But we don’t have to look that far ahead. What business can survive for long if it consistently exploits its customers? It took just four years from the start of the financial crisis for the greed and malpractice of the big banks to turn into business failure. Last year the UK’s major banks would have seen a rise in profits of 45%, but this was wiped out by the cost of past mistakes.
Financial institutions are, at their core, intermediators between individuals, organisations and communities. They facilitate the smooth running of our economies. When they become extractors, they suck the life out of that economy. And at that point, the business value of moral purpose becomes clear: financial institutions cannot survive without the society and the economy that they exist to serve.
So principles don’t pull against profit, unless you have severe myopia. Principles mean long-term relationships with your customers that bring benefits for you both. Principles mean growing in a sustainable way. Principles mean valuing profits for what they enable you to do not for what they enable you to pay.
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