- Companies face greater scrutiny on attitudes toward sustainability, diversity and climate change.
- 'Shared value' is now a common business benchmark.
- Executives can lead this search for purpose.
Purpose. Every business has one, and for many years, purpose has been about scale, profit, returns.
That kind of ambition is healthy – it’s how economies and communities grow, careers develop, people prosper. But what is changing now is a growing interest in how companies get to that place, and what they stand for along the way.
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The message is loud and clear from all sides, be it employees, consumers, suppliers, governments, industry bodies or activists. What defines a successful company is more complex today, with greater scrutiny around attitudes to climate change and sustainability, commitments to local communities, investments in future generations and company culture, and appetite to instigate change.
People have always cared about these things, but collectively their shift into mainstream consciousness represents a notable change for businesses. In a day’s worth of conversations at IHG, a shareholder cares as much about our carbon reduction progress as they do our business model; a hotel owner may challenge us on whether a new-build property could be more sustainable; and job candidates may decide whether to start a career with us based on how we as a company recognize and respect diverse communities.
It makes business sense to strive for better. Whether through innovation born out of a diverse and inclusive culture, a talented workforce attracted by responsible business credentials, or a richer reputation that satisfies consumers making ever more informed purchases, companies with a broader purpose are often more successful.
There has been a genuine shift among many corporate companies toward shared value – a term coined back in 2011 by Michael E. Porter and Mark Kramer, who wrote in a Harvard Business Review article, “We believe shared value is the most powerful practice companies can leverage to fulfil their purpose aspirations because it uses the core business to drive societal change. It can also be one of the most authentic because it relies on core business practices and know-how”.
Though the phrase has now been around for some time, it is arguably more front of mind than ever before. Just last year, Business Roundtable, an association of the CEOs of almost 200 of America’s most prominent companies, swapped its purpose of profit for a new statement that emphasizes things like investing in employees, fostering diversity and inclusion, protecting the environment, and dealing fairly and ethically with suppliers.
Delivering on what you stand for will always be a unique challenge, dependent on the shape of an organization, its model and culture. We have received lots of advice and expertise on our own journey in this regard, and there are four themes that always stick in my mind:
1. Be authentic
A purpose is not a well-crafted sentence. It’s got to be meaningful, believable and most importantly relevant to your business, as that’s the only way to ensure it can properly be reflected in your company’s strategy and applied to your operations.
IHG’s purpose of true hospitality for everyone is broad, but at its heart is to care for others, which we know starts with the culture we create. Our chair wrote a great perspective piece on the importance of diversity and inclusion in the 2019 Hampton-Alexander Report, in which IHG was recognised in the top 10 FTSE 100 companies for female representation within our executive committee and their direct reports.
2. Don’t reinvent the wheel
The UN’s Sustainable Development Goals for 2030 are there to guide all companies on how they can align their operations and resources to help tackle some of the world’s biggest challenges. Seek inspiration from companies already finding innovative ways to embrace the kind of behaviours or logistical solutions needed to make a change.
Research has shown that delivering these UN Goals could raise $12 trillion in new market opportunities for a number of industries, and as we enter the final decade of the SDGs, all companies need to get involved. It’s great to see best practice being shared, and organizations like the World Benchmarking Alliance measuring, incentivizing and reporting on performance, all with the aim of inspiring companies, governments and civil society to innovate, improve and encourage others to do the same.
Sometimes you need more resources, more minds, more potential to go big on your idea and create the impact you desire. In many different sectors, industry peers will face any number of common challenges and issues that if fixed can help provide a wider positive impact. Try and fix them together.
One example is the Sustainable Apparel Coalition, which has created an alliance around sustainable production among apparel, footwear and textile companies, focusing on a set of values and tools that can lead to systemic change. Having started out as an invitation to the industry from Walmart and Patagonia, the SAC now has over 200 members with combined revenues of more than $500 billion – all committed to measuring and improving their environmental and social labour impacts.
4. Make sure your people are rooting for you
According to Edelman’s Trust Barometer, 76% of employees say CEOs should take the lead on change with regards to topics ranging from pay equity and jobs training, to prejudice and discrimination. They aren’t interested in waiting for government to take action. More people (73% in 2019 vs 64% in 2018) also agree that companies can operate in ways that both increase profits and improve the economic and social conditions in their local communities – shared value.
Financing Sustainable Development
The world’s economies are already absorbing the costs of climate change and a “business as usual” approach that is obsolete. Both scientific evidence and the dislocation of people are highlighting the urgent need to create a sustainable, inclusive and climate-resilient future.
This will require no less than a transformation of our current economic model into one that generates long-term value by balancing natural, social, human and financial conditions. Cooperation between different stakeholders will be vital to developing the innovative strategies, partnerships and markets that will drive this transformation and allow us to raise the trillions of dollars in investments that are needed.
To tackle these challenges, Financing Sustainable Development is one of the four focus areas at the World Economic Forum's 2019 Sustainable Development Impact summit. A range of sessions will spotlight the innovative financial models, pioneering solutions and scalable best practices that can mobilize capital for the the world's sustainable development goals. It will focus on the conditions that both public and private institutions should create to enable large-scale financing of sustainable development. It will also explore the role that governments, corporations, investors, philanthropists and consumers could play to deliver new ways of financing sustainable development.
This year’s focus on “stakeholder capitalism” at Davos provides a unique platform for exploring how business can bring about positive change against the most important themes of our time. As companies assess their own role in this, keeping these four themes in mind may prove a useful way to ensure actions are both meaningful and can be delivered for the long term.