The market economy is one of the most important drivers of economic wellbeing, yet in many societies there is a distrust of capitalism and the role of business.
Last January’s Edelman Trust Barometer, published before the pandemic struck, surveyed 34,000 people worldwide, of whom 56% believed that capitalism was doing more harm than good.
Business cannot ignore this. In the same study, 92% said that companies should be taking a stance on social issues. This mix of low trust and high expectation suggests that business leaders should see their mission as serving not only shareholders but also customers, suppliers, workers and communities, that is ‘stakeholder capitalism’ – and its time has come.
Those who resist will find themselves not only on the wrong side of history, but also, as the leading consultancy McKinsey suggests, at a competitive disadvantage. The COVID-19 crisis has, though, seen many companies rise to the challenge, and the business and financial press are reporting an acceleration in ‘responsible’ capitalism. See the FT’s Moral Money series to follow this trend.
There is growing evidence that companies taking a long-term view, as required by stakeholder capitalism, perform better. In ‘The Case for Stakeholder Capitalism’ (Nov 2020) McKinsey report that ‘companies with strong environmental, social and governance (ESG) norms recorded higher performance and credit ratings through five factors: top-line growth, lower costs, fewer regulatory interventions, higher productivity, and optimized investment and asset utilisation’.
The purpose of business
The Lord-Lieutenant’s Leaders’ Forum brings together business, charity, civic and academic leaders to discuss responsible capitalism. Its third Forum was held on October 27. Building on previous themes of ‘conscious’ and ‘inclusive’ capitalism, this latest event addressed the future of the corporation and the concept of ‘purposeful’ business.
It attracted nearly 300 attendees, with over 20 countries represented. Keynote speaker Prof. Colin Mayer CBE, of Oxford University’s Said Business School, explained how corporate purpose promotes not only better social outcomes but also the enhanced functioning of markets and firms.
Colin’s speech hit home. Before he spoke, just 38% of the attendees rated purpose and corporate social responsibility (CSR) as important or very important. Afterwards, this had risen to 65%. This was echoed by business leaders at the launch of Northamptonshire Ltd – Grant Thornton’s annual report on the County’s Top 100 companies – where the result was 70%.
And this in the middle of a pandemic and recession, with all the uncertainty surrounding Brexit!
More data: at a Leaders’ Forum workshop last year, a group of more than 20 local business leaders ranked themselves as being just four out of 10 in terms of their potential for social impact. Local business leaders have, therefore, recognised the gap, and have a strong desire to address it.
How should companies go about this?
Key success factors include the commitment of all the senior management team, setting and tracking environmental and social goals, working collaboratively with suppliers to build new capabilities that address customers’ long-term needs – and treating employees with respect while investing in their futures.
If you need help, the University’s Centre for Sustainable Business Practices (CSBP) supports business leaders through the following stages of good corporate citizenship:
- Motives & Purpose: planning
- Means & Methods: implementation
- Metrics & Measurement: tracking
- Monitoring & Reporting: recognition
Like climate change, some companies deny the need for CSR. Others pay lip service – simply ‘green-washing’. But many take CSR seriously, experimenting and with some great results already. If you are one of these, you may well be ready for third party recognition through schemes such as the Good Business Charter or B-Corp Certification.
CSBP combines the perspectives and resources of the Lord-Lieutenancy and the University in support of local businesses. We are particularly keen to hear from firms:
- Seeking to engage more strategically with local charities
- Interested in third party accreditation such as B-Corp Certification
- Planning to produce a CSR/sustainability impact report
The business environment is changing. Companies are expected to have a CSR strategy. Those who resist will find themselves at a competitive disadvantage.
Has your organisation risen to the stakeholder capitalism challenge, or better said, its opportunity?
To discuss the above, contact Adrian at adrian.pryce@northampton.ac.uk or call 01604 892033
