Best-selling author Dan Goleman on why “stakeholder” capitalism, defying skeptics, has gained more traction during the pandemic.
Last year, IBM reported that nearly six in ten consumers are willing to change their shopping habits to reduce environmental impact. Meanwhile, 50% of Gen Z’ers (those born after 1995) report having recently called out a brand for behaving in a way they believed was unethical.
Consumers aren’t the only ones moving the needle when it comes to purpose and sustainability. Earlier this year, Sustainable Brands (SB) brought together representatives from sustainability focused organizations like Impossible Foods to discuss “a number of critical environmental, social, cultural and business trends that are defining the moment and shaping post-2020 and post-pandemic life.”
At the event, Dimitar Vlahov, SB’s Sustainable Business & Brand Transformation Expert, set the stage by commenting that the overlapping crises of the past year have led us to what he calls the “Great Restart” or the “Great Reset”: a moment of reckoning and new beginnings. Studies have pointed to a rise in empathy and nine out of ten consumers have reported that they are willing to pay more for ethical retailers.
Bea Boccalandro is the founder of VeraWorks, a global consulting firm whose mission is to help companies “offer employees the opportunity to do societal good through their everyday jobs.” Boccalandro recently reported this in the Harvard Business Review: employees whose work experience incorporated social purpose experienced 13% higher job satisfaction than those whose work didn’t. Boccalandro argues that social good is no longer just the responsibility of Chief Sustainability Officers— the purpose movement means CFOs, CMOs and other members of the executive leadership team must also be champions of CSR.
Paul Herman is the CEO of the impact investing firm HIP Investor. He cites five crises of our time: health, wealth, earth, equality and trust. Herman argues that in order to promote positive purposes across these five areas we need new metrics, innovative investing, and multi-sector solutions. This includes developing new ways to measure impact and stakeholder value creation and identify gaps between policy and impact; increasing the appetite for sustainable finance; and building bridges across sectors and industries so diverse stakeholders can collaborate on solutions that benefit society as a whole.
These assertions align with what some call stakeholder capitalism. “We have to deliver great returns for our shareholders and help drive progress on society’s most important priorities,” explains Brian Moynihan, Chairman and CEO of Bank of America. “That is stakeholder capitalism in action. Common metrics will help all stakeholders measure the progress we are making and ensure that the resources capitalism can marshal — from companies, from investors, and others — are directed to where they can make the most difference.”
At the start of the pandemic, there was a fear that corporations and investment funds would force corporations to pull back on their social-impact efforts. But actually, 2020 was the year that the environmental, social and governance (ESG) movement came of age.
Total assets in sustainable funds grew over 50% to $1.7 trillion last year and by the last quarter of 2020, we saw that ESG’s had become critical for organizations who wanted to attract new investors. At the close of the year more than three times as many CFOs of S&P 500 companies discussed ESG matters during fourth-quarter earnings calls in 2020 than they did three years ago.
Gloria Mirrione, sector leader for Asset Management and Impact Investing with Korn Ferry, said the pandemic led “investors of all types to accelerate the decision to align their personal values directly where they place investable dollars.”
So, consumers aren’t the only ones demanding organizations address more than the bottom line. They are one of many stakeholder groups putting pressure on organizations to be a part of solving the world’s most pressing problems. BMD