THE BLOG

Ed's Google Speech and What It Means for Responsible Capitalism

22/05/2013 17:43 BST | Updated 22/07/2013 10:12 BST

On Wednesday, Ed Miliband made a speech at Google - a business that has been making headlines recently for all the wrong reasons. To the outsider, the profitability of its business model looks plain to see. Yet of £3billion of revenue earned in the UK, it has paid only £3million in tax. Google are not alone in this seeming imbalance. The UK tax bill paid by companies from Amazon to Apple to Starbucks has raised deep concerns among businesses and families who pay their fair share.

These are all prominent examples of a more general conundrum: the struggles for national governments framing tax rules for global companies.

For Google, the irony could not be more acute. Its founders - bright eyed and fiercely intelligent maths PhDs - were inspired by the force for good their algorithm could become. And so it has. Perhaps more than any other company, Google has changed the way that that humanity engages with information. To the curious, Google is the ultimate phone-a-friend. To businesses large and small, it is the gateway to the great wide world. Like Hoover before it, it has become part of the lexicon of modern life.

With the surpluses their algorithm has generated, Google has turned its attentions to more and more of life's problems: from the mundane like email on the move; to the magic of driverless cars; to attempts at the miraculous - those intractable problems, or 'moon shots', that require focus and imagination, dedication and daring to push back at the very frontiers of possibility. Never mind the company motto, "don't be evil," Google has sought to be on the side of right.

But with great power has come responsibility and all the challenges - on tax, access to information and markets - of navigating a global economy.

Eric Schmidt saying that he will obey the law is not enough. His company has a responsibility that goes beyond that. Clearly, it is not living up to its founding principles when it goes to such extraordinary lengths to avoid paying taxes in this country.

Google is not the only company finding itself in the spotlight as it struggles with these kinds of dilemmas. For too long, a focus on shareholder value has narrowed the sense of broader obligation that business owes to society, to its workforce, to its supply chains, to the environment and to the communities in which it operates.

There is a growing movement of business leaders who sense that this must change. Not only for the good of the community, the workforce, or the environment - although it will surely do this kind of good - but for the good of business itself. Rather than seeing these kinds of obligations only as things that add cost, many are discovering that if they are built into the business model: they save costs.

Executives from a host of blue chip firms - from BT to Babcock to GKN - are part of the Engage for Success Taskforce, working together to understand how better employee engagement can improve company performance and productivity, while making work more fulfilling.

There is plenty that governments can do to set the rules so that the most socially valuable and sustainable business strategies are the most profitable too. And it should. But this is also a business-led conversation about the practices, models and behaviours that can help to build and sustain market leading companies.

It is what Harvard Professors Michael Porter and Mark Kramer have described as 'shared value': "creating economic value in a way that also creates value to society by addressing its needs and challenges". With examples drawn for some of capitalism's most hard-nosed exponents - from GE to Unilever to Walmart, and including Google - they view it as the next thing in business strategy: "reinvent[ing] capitalism [to] unleash a wave of innovation and growth".

Google's story shows us the power of business to transform our world. But is also shows us the challenges that success brings, to global companies like Google as well as to national governments. Governments have a duty to do better in setting the rules of corporate citizenship, working together across national boundaries. But it is encouraging to see others in business beginning to demonstrate that the pursuit of profit need not just be about the avoidance of evil, but can contribute positively to advancing the common good.

Chuka Umunna is Shadow Secretary of State for Business, Innovation and Skills and MP for Streatham