- COVID-19 makes the principles of stakeholder capitalism even more important.
- Businesses and investors have made substantial and relevant changes to how they finance and fund new initiatives and report on sustainability initiatives.
- The Great Reset provides an opportunity for businesses to build on progress on sustainability and inclusion.
At the World Economic Forum's Annual Meeting in Davos in January, the Forum launched a new “Davos Manifesto” in support of stakeholder capitalism, which says companies should "pay their fair share of taxes, show zero tolerance for corruption, uphold human rights throughout their global supply chains and advocate for a competitive level playing field,” as Founder and Executive Chairman Klaus Schwab explained.
Little could we have known just how relevant this new manifesto would be for the year ahead.
In the midst of a global pandemic, a global economic crisis, a global climate crisis and a global movement to end systemic racism, stakeholder capitalism is more important than ever – and business needs to play a role in building a more inclusive and sustainable world.
There are a lot of challenges to getting there. Rising emissions and use of the world’s natural resources. The gender pay gap, which the World Economic Forum predicted would take 257 years to close – and that was before the pandemic-induced economic crisis, which has shown to have a greater impact on women. Systemic racism, which is not only unjust, but also hurts productivity, creativity, employee health and the bottom line. Ensuring data is used safely and ethically, and ensuring new technologies don't displace workers.
Without a doubt, COVID-19 makes these goals more difficult to reach – but it also makes them more urgent, given all that we know about the links between the environment and the pandemic, and climate change and human health.
As we embark on the Great Reset after the pandemic, we have a chance to “build entirely new foundations for our economic and social systems,” said Schwab.
“The COVID-19 crisis is affecting every facet of people’s lives in every corner of the world. But tragedy need not be its only legacy,” he continued. “On the contrary, the pandemic represents a rare but narrow window of opportunity to reflect, reimagine, and reset our world to create a healthier, more equitable, and more prosperous future.”
Sustainable Development Goals to make business better
While corporations committed to stakeholder capitalism should pay attention to all 17 SDGs, meeting the targets of two in particular will help make business better:
SDG 9: Industry, Innovation and Infrastructure. Targets related to stakeholder capitalism include promoting inclusive and sustainable industrialization and, by 2030, significantly raising industry’s share of employment and GDP and doubling its share in LDCs. Other targets include increasing access to financial services for small enterprises, upgrading infrastructure and retrofitting industries to make them sustainable.
SDG 12: Responsible Consumption and Production. Targets include achieving sustainable management and efficient use of natural resources and reducing waste generation (especially in food supply chains), and by 2020, achieving environmentally sound management of chemicals and reducing their release. The goal also encourages companies (especially large ones) to adopt sustainable practices and integrate sustainability information into reporting cycles.
How much progress has been made?
“Capitalism as we have known it is dead,” said Marc Benioff, Chairman and CEO of Salesforce, in Davos in January 2020. “This obsession we have with maximizing profits for shareholders alone has led to incredible inequality and a planetary emergency.”
So, how far have we come? Is the business community becoming more inclusive and sustainable?
It's hard to say exactly how much impact has been achieved, but businesses and investors have made substantial and relevant changes to how they finance and fund new initiatives.
“Environmental, social and governance (ESG) considerations are at the forefront of financial decisions, supported by the Sustainable Development Goals (SDGs) and increased awareness of the climate emergency,” wrote Cécile André Leruste, Managing Director of Banking, Europe, at Accenture, a Forum Strategic Partner.
At Davos 2020, 140 CEOs expressed support for a set of core ESG metrics and disclosures for companies, Toward Common Metrics and Consistent Reporting of Sustainable Value Creation. Developed by the Forum's International Business Council (IBC) in collaboration with Deloitte, EY, KPMG and PwC, the proposal intends for the metrics to be reflected in the mainstream annual reports of companies on a consistent basis across industry sectors and countries.
More companies are reporting their sustainability activities and demonstrating their commitment to the SDGs, says the UN SDG Progress Report 2020. “Since 2017, the overall quality of sustainability reports has improved around the world. The share of reporting in the environmental, social, and institutional and governance dimensions that is aligned with the minimum requirements outlined in SDG indicator 12.6.1 (the number of companies publishing sustainability reports) has almost doubled."
And many companies are taking tangible action on environmental and social issues, like systemic racism, carbon emissions and climate change, while giving back to stakeholders in their local communities, to name just a few.
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“Clearly, the will to build a better society does exist,” he continued. “We must use it to secure the Great Reset that we so badly need. That will require stronger and more effective governments, though this does not imply an ideological push for bigger ones. And it will demand private-sector engagement every step of the way.”
What are the World Economic Forum and its partners doing to create better business?
- Developed by the Forum's International Business Council (IBC) in collaboration with Deloitte, EY, KPMG and PwC and supported by 140 CEOs, Toward Common Metrics and Consistent Reporting of Sustainable Value Creation is a proposal recommending a set of core ESG metrics and disclosures for companies. The consultation process closed in June 2020, and technical teams are currently synthesizing and refining the final set of recommendations.
- Financing the Transition to a Net-Zero Future coordinates businesses and the financial sector to support carbon-neutral financing opportunities. Phase I commenced in April and will conclude 30 June 2021.
- Forum initiatives like the Global Water Initiative and Alliance for Clean Air are bringing together stakeholders to share best practices and forge public-private partnerships to drive cleaner water and cleaner air.
- The Forum’s Closing the Gender Gap Accelerators are public-private platforms to develop national-level action plans and share knowledge and tools to increase workforce opportunities and work towards gender parity. The goal is to have accelerators in 15 countries by the end of 2020.
- The Forum’s COVID Action Platform – the first platform of its kind – to galvanize the global business community to take collective action, protect livelihoods and facilitate business continuity, and mobilize cooperation and business support for the COVID-19 response.
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.
What can I do to make business better?
- Encourage companies (including my own) to adhere to the principles of stakeholder capitalism – and support and recognize companies making progress on the issues I care about.
- Encourage recycling and environmental stewardship in the workplace – from paper, plastic and e-waste in the office, to larger initiatives to eliminate emissions or harmful chemicals in the supply chain.
- Work to close gender and diversity gaps in my company by hiring, promoting or mentoring women and minority colleagues.
- Encourage my company to engage in public-private partnerships to achieve the Sustainable Development Goals (SDGs) and fulfill a vision for a more sustainable and inclusive world.