- Stakeholder capitalism and its ‘triple bottom line’ mentality has gained prominence in the past 50 years.
- To maintain momentum, leaders must consider new collaborations and accountability measures.
The global community is facing many crises, including an on-going pandemic, the tragic consequences of centuries of racial inequality, and a climate emergency. But this year will also bring continued opportunities for corporations to work with governments and individuals to rebuild and create a fairer, more sustainable future for all.
The challenge ahead? To keep momentum going toward a ‘triple bottom line’‘ mentality and maintain accountability as adoption grows.
What's the World Economic Forum doing about diversity, equity and inclusion?
The COVID-19 pandemic and recent social and political unrest have created a profound sense of urgency for companies to actively work to tackle inequity.
The Forum's work on Diversity, Equality, Inclusion and Social Justice is driven by the New Economy and Society Platform, which is focused on building prosperous, inclusive and just economies and societies. In addition to its work on economic growth, revival and transformation, work, wages and job creation, and education, skills and learning, the Platform takes an integrated and holistic approach to diversity, equity, inclusion and social justice, and aims to tackle exclusion, bias and discrimination related to race, gender, ability, sexual orientation and all other forms of human diversity.
The Platform produces data, standards and insights, such as the Global Gender Gap Report and the Diversity, Equity and Inclusion 4.0 Toolkit, and drives or supports action initiatives, such as Partnering for Racial Justice in Business, The Valuable 500 – Closing the Disability Inclusion Gap, Hardwiring Gender Parity in the Future of Work, Closing the Gender Gap Country Accelerators, the Partnership for Global LGBTI Equality, the Community of Chief Diversity and Inclusion Officers and the Global Future Council on Equity and Social Justice.
Meeting new expectations
Stakeholder capitalism, a business model that sees business leaders as trustees for society, has evolved. It is more than just a term first proposed by Professor Klaus Schwab in the founding of the World Economic Forum 50 years ago. According to one recent survey, nearly 90 percent of customers expect corporations to meet a higher set of standards than just shareholder return.
Doing good is good for business and corporate decision makers have seen how impact strategies create positive flywheel effects, fuelling growth, building positive brand reputation, boosting customer engagement and forging trust with stakeholders. It is even a smart tool for employee recruitment and retention, with 70% of employees wanting to work for purpose-driven companies.
As a result, leaders in corporate and political contexts around the globe are weaving environmental, social and governance (ESG) impact deep into their cultures, strategies and missions. Today, 90% of the S&P 500 produce ESG reports, and Morgan Stanley declared that ESG will define the next decade of investing.
Political leaders have also made the shift. In fact, the United Kingdom has passed mandatory private-sector climate disclosure rules, while Japan has led a wave of nations striving to reach net zero emissions by 2050. In the EU, the Non-Financial Reporting Directive is driving additional corporate ESG transparency.
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As ESG gains prominence, leaders must find ways to ensure impact measures continue to grow and evolve with changing needs. Considering these factors can help leaders continue to drive impact:
● Intersectionality. ESG-committed leaders must develop their impact strategies with intersectionality in mind. The success of each of the UN’s 17 Sustainable Development Goals (SDGs) – goals such as eradicating poverty or creating fairer economies – are linked. Poverty can’t be tackled without combating hunger; gender equality is part and parcel of education reform. Companies cannot silo their concerns and will not fulfil their responsibilities if they address issues in a vacuum.
● Partnership. Such growth and change is only possible through collaboration and cooperation. As the U.N. Foundation states, “When we act together, change happens.”
Take the 1t.org initiative -- a multi-stakeholder project with the goal to grow, restore and conserve one trillion trees around the world by 2030. Only a public-private partnership comprising scores of organizations with overlapping and complementary resources and skill sets could hope to accomplish such an ambitious target. Collaborations like this one are the sort that are urgently needed across all sectors to meet the SDGs.
● Accountability. Ultimately, these efforts will not create sustainability without meaningful transparency. Leaders must remain committed to accountability and standardized metrics. Only standardization and transparency can prevent ESG from becoming a hollow tool for marketing or greenwashing.
For too long, impact has lacked accessible measurements for stakeholder value. Many voluntary frameworks exist, and although major certifying bodies are now coming together to harmonize metrics, no single, accepted global ESG standard for corporate disclosure is yet in place. As such, investors, consumers, and prospective employees lack an effective way to compare and contrast corporate action and impact. An ESG reporting framework convergence will give all stakeholders visibility into the actual impact of a company.
Opportunities for change
Tackling these factors is all in the design and strategy of any initiative. It starts with an accounting of every asset a company can bring to bear to create impact. Such a assessment could result in a range of transformations, from adapting the themes and goals of company events to greening financial instruments like bonds and reimagining philanthropic efforts.
Launching impact-focused venture funds is another clear opportunity. Corporations including Citi, JPMorgan, Amazon, and Salesforce have created funds that help advance the growth of companies driving impact across education and workforce development, sustainability, diversity, equity and inclusion.
Diversity in any portfolio can reduce risk, but in the impact context, it can optimize reward. Many investors are taking notice. In June 2020, the Global Impact Investing Network (GIIN) estimated that this sector had ballooned to $715 billion, up more than 40% from 2019.
Perhaps the most important plank of this venture platform is a commitment to investing in women and underrepresented founders, who historically lack access to capital. To confront these unprecedented challenges, “We need enlightened business leadership now more than ever,” says Donnel Baird, CEO of BlocPower, a Salesforce Ventures portfolio company.
Capitalism as it is currently designed doesn't work for everyone. We need a more equal, fair and sustainable way of doing business that values purpose alongside profit. If we remain committed to reform and innovation, impact has the opportunity to prove that the challenges we face can accelerate progress, not inhibit it. This is our promise — a promise we call on others to make alongside us.