Can stakeholder capitalism be a force for good? More and more business leaders are adding value … [+]
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By Maha Eltobgy, CEO shaping investment future; Governing Body Member, World Economic Forum and Jonathan Walter, freelance writer, World Economic Forum
Covid-19 pandemic, climate change and biodiversity destruction need our attention in 2021. Do businesses have a role to play in tackling these global challenges and if so, how can they intervene? make a difference? Perhaps so importantly, in a time of marketing and too much information, how can we trust them when they tell us they are making a difference?
In the last two or three years, a tectonic shift has been seen in the way companies see their purpose. The notion that a company’s sole responsibility is to deliver financial returns to its shareholders has begun to expand into the more inclusive notion of “stakeholder capitalism”, which seeks to to align physical purpose with the values of society at large. And society’s values are based on not profit but inclusion, equality and a healthy planet.
The reasons are not hard to see. The reality of climate change is hitting home, as ice caps melt and wildfires ravage forests, deserts and real buildings from California to Australia to the Amazon. COVID-19 has highlighted and expanded the existing fault lines of economic exclusion. The Gilets Jaunes and Black Lives Matter movements have been spreading widespread anger about social and racial inequality.
Data support these trends. The percentage of U.S. adults who say tackling climate change is a priority rose from 30% to 52% between 2009 and 2020, while the percentage who said it was a priority rose. protect the environment from 41% to 64% in the same period, according to the Pew Research Center.
These trends are gaining traction in consumers making more sustainable choices, with employees prefer companies that embrace social purpose and investors asking weird questions to corporate boards.
Companies need to adapt quickly in this changing environment. In the past year, for example, the number of businesses, cities, states and regions announcing pledges to cut their carbon emissions to zero has doubled. This is not just about “doing the right thing” – it is driven by a clear evaluation of the risks and opportunities facing global businesses now. As Larry Fink, CEO of BlackRock – an investment company with nearly $ 7 trillion in assets under management – said, “Companies that target all stakeholders are the companies that can deliver sustainable, long-term profits. aca. ”
In its Global Outlook 2021 report, BlackRock announced a “new investment order” in which sustainability will be a key component of portfolio distribution for decades to come. “It is a common perception that sustainable investment requires a product sacrifice – we agree,” the company said. They argue that high carbon emitters could face “regulatory penalties, higher taxes and financing costs”, forcing investors to move towards sustainable assets.
Brian Moynihan, Chairman and CEO of Bank of America, shares this view. “In the long run, what matters to society is important to investors,” he says. Moynihan has led a new venture: the Metrics Capitalism initiative, developed within the World Economic Forum (IBC) International Business Council, of which he chairs.
In September 2020, the campaign published its report summarizing more than a year of work to define a common set of meters for sustainable value creation. In 2017, the World Economic Forum issued the Compact for Appropriate and Responsible Management with 140 Leaders pledging to contribute their corporate values and strategies to the UN Sustainable Development Goals. But realizing that it offers more than just fine words and photo opportunities to improve the state of the world, Moynihan and the IBC sought a way to lock in this new spirit of physical commitment to society.
The response at which they first arrived appears rather dry: metrics and publications. But motivated by the knowledge that “what is measured is regulated”, the IBC and the Forum worked with the four Big accounting firms – Deloitte, EY, KPMG and PwC – to create a universal set of meters. developed to allow companies to measure and publish how they are creating sustainable value.
Why is publishing so important? As it builds trust and credibility, both are essential for giving a company a social “operating permit”. Fink puts it this way: “Companies move faster through publishing – publicity shows the good and bad parts of everyone. Better financial management will increase the focus of regulators and the board on these issues. “
However, as the popularity of sustainable investment has spread, so has the number of organizations, standards and acronyms surrounding “environmental, social and regulatory” (ESG) reporting. This has led to a heavier burden of corporate reporting while breaking the picture of business performance for investors.
The Metrics Capitalism initiative Metrics seeks to address this issue by churning out – out of the hundreds of standards available in the market – a basic set of just 21 universal meters, with which all reporting companies (and in some cases already). More importantly the campaign shows, as Janine Guillot, Head of the SASB Foundation, said, ‘sustainability has been climbing the corporate ladder’.
The key metrics address issues across four pillars: Governance Principles, Planet, People and Prosperity. The last column is important, as it reinforces the idea of sustainability at the heart of what it takes to create value now and in the future. In addition, the World Economic Forum encourages companies to feature these metrics where possible in their mainstream reports, shifting sustainability from corporate window decoration to board-level priority. .
On January 26, 2021, 61 CEOs of some of the world’s largest companies publicly supported Stakeholder Capitalism Metrics, marking the next step in implementing this initiative. The project sees itself as contributing to the world of sustainability standards in three unique ways:
1. Concentration: In brewing a set of key metrics and publications that are considered essential for long-term value creation, the World Economic Forum and the IBC aim to catalyze the collection of consumers. routine situation, investors and other interested parties around a globally accepted international standard for sustainability reporting.
2. Business voice: Demonstrating that key leaders see sustainability as critical to the long-term success and viability of their businesses, this project gives the private sector a strong, united voice in the negotiations that take place. there is a debate about a global solution for sustainability reporting.
3. Guidance in action: In adopting the metrics, the IBC seeks to turn graceful words into meaningful actions. The question could be the realization of an internationally recognized system of complete corporate reporting that covers both financial and non-financial information for several years – but the world can’t wait , and so the IBC subset of the existing measurements provides a starting point on the path to that universe. system.
The main goal of the IBC campaign is to show that the private sector is mindful of sustainability and that it is a willing and willing party in the dialogue that leads to a set of global standards for sustainability reporting.
Overall, the aim of the World Economic Forum is to encourage all businesses, large and small, to adopt these metrics to show investors, regulators and society at large. that stakeholder capitalism can be a force for good, both for people and for the planet. .