Business purpose and the profit power shift
The death of capitalism and the renewed emphasis from shareholder to stakeholder.
Recently, around 181 US chief executives (among them Amazon founder Jeff Bezos and Apple boss, Tim Cook) signed a letter calling on corporate leaders to move beyond maximising profit for investors and consider “all stakeholders”, including employees, customers, and wider society.
Spearheaded by influential US non-profit association, The Business Roundtable, the letter represents a major corporate shift towards achieving wider customer and community targets, with JP Morgan boss, Jamie Dimon, who is chairman of the Roundtable, declaring that it “will help set a new standard for corporate leadership”.
As if we needed it, this is yet another acknowledgement among some our most influential corporations of the need to pursue a purpose as well as, or beyond, simply profits; pursuing shareholder value is no longer enough.
Historically, business could be safe in the knowledge that if it was doing well (financially), then it was doing good, subscribing to the notion that meeting shareholder expectation meant it was achieving its highest purpose.
But the growing emphasis on business to be a force for good in helping to combat some of humanity’s biggest challenges shows no sign of abating, compounded by environmental, social and governance criteria which continues to demand more from business for the allocation of financial investment for good.
It’s led to a resurgence in companies seeking to take a position and align profits with principle, courtesy of a values-led movement that doesn’t end with investors. In short, the public at large is more acutely aware of some of the world’s most daunting problems – namely climate change and economic inequality – and they want action to be taken against the backdrop of governments seemingly failing where they should be fixing. From the #Metoo movement to war on plastic, mental health & wellbeing to meat substitute products, pressure from the public is now firmly on business to deliver solutions.
Interestingly, this show of solidarity among US c-suites has not been universally embraced, with some denouncing it as the death of capitalism. But in truth, the power shift from shareholder to stakeholder is a difficult concept to argue with when you consider the dividends that come from: a more engaged workforce because they know their firm reflects their values; upskilling for workers; diversity and inclusivity targets being met; ethical transactions with suppliers; more support for communities; environmental protection commitments…the list goes on.
Aligning your business with a genuine sense of purpose, together with a mission that is aligned with what the world needs, is a powerful way to earn public trust, and being complacent about that can mean the difference between bought-in and boycott in the modern age.
Encouragingly, amidst any pessimism or backlash in this instance, the appetite from business to be a part of the solution is prevailing. Almost 3,000 companies worldwide have been certified B Corporations in the last decade, meaning their ethical, social and environmental practices have been certified to the highest standards of verified social and environmental performance, public transparency and accountability.
Furthermore, the Reputation Institute recently launched its ranking of the UK’s 50 most responsible businesses, with data to illustrate the direct correlation between the activity of businesses and those people likely to work for a company, buy its products or services or invest in it.
So, call it corporate responsibility, CSR, responsible business or business activism…just ensure it has a prominent place in your operation.