- In the model of stakeholder capitalism, companies align their goals to society's long-term goals, the SDGs, and work towards better outcomes for society, the economy and the planet;
- For many corporations committed to stakeholder capitalism, measuring and reporting on Environmental, Social and Governance commitments and integrating them into corporate decision-making is challenging;
- Some members of the New Champions Community are transforming corporate governance, offering a new model for businesses worldwide.
The world is faced with challenging societal and environmental issues. The Global Risks Report 2021 suggests inequalities have widened with social disparities in health outcomes, digital access and work opportunities. We are also faced with long-standing environmental risks, such as climate change, overuse of land and water and loss of biodiversity.
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According to the report, although global CO2 emissions fell in 2020 due to an economic slowdown, emissions are predicted to return to pre-COVID-19 levels after the pandemic. It needs a global effort to limit global warming to 1.5 °C to avoid the worst scenarios of climate change.
As Founder and Executive Chairman of the World Economic Forum Professor Klaus Schwab writes in his new book, Stakeholder Capitalism, the sudden and all-encompassing impact of COVID-19 made us understand that an economic system driven by selfish and short-term interests is not sustainable. As the report Measuring Stakeholder Capitalism points out: “[T]hose corporations that align their goals to the long-term goals of society, as articulated in the SDGs, are the most likely to create long-term sustainable value, while driving positive outcomes for business, the economy, society and the planet. This is the true definition of stakeholder capitalism."
Many corporate leaders have committed to stakeholder capitalism. Two challenges face such a commitment: incorporating common ESG (Environmental, Social and Governance) metrics and consistent reporting and embedding stakeholder governance into corporate decision-making. The white paper The Future of the Corporation: Moving from Balance Sheet to Value Sheet recommends that corporate boards transform into an ESG operating model using this framework:
- Culture and values;
Here's how some members of the New Champions Community are transforming corporate governance, offering a new model for businesses worldwide:
Using sunlight for mining in Indonesia
The total energy consumption of global mining activities is estimated to be 6.2% of total global energy consumption. Moreover, its energy use usually comes from burning fossil fuels rather than renewable energy, making mining one of the largest sources of CO2 emissions. In 2020, Indika Energy started preparing to replace diesel generators with solar photovoltaic systems to supply electrical power. This transition in energy source is estimated to save 39,700 litres of diesel consumption per year, reducing diesel consumption by 45% in the long run. This would reduce greenhouse gas emissions, serving as a blueprint for similar projects on how to use clean energy.
Indika Energy sees ESG commitments as more than just boxes on a checklist; it views them as an integral part of business practice and core decision-making. The set of values defines the character of a company as well as how it serves the community. This belief has inspired the company to diversify its portfolio to non-coal sectors and it aims to increase its non-coal revenue to 50% by 2025 and achieve net-zero carbon emissions by 2050.
Food subscription and organic meal kits reduce food waste in Japan
Food waste has become a social issue that requires public attention in Japan. According to the Japanese Ministry of Agriculture, Forestry and Fisheries, there is 6 million tonnes of food waste annually. Oisix ra daichi uses a food subscription model and organic meal kits to reduce food loss across its supply chain from upstream (farmlands) to downstream (customer table). A meal kit includes a variety of raw food ingredients in the quantities precisely needed for one meal. According to a user survey, the meal kits reduce household food loss by two-thirds. The company also works on its supply chain to reduce food waste by balancing supply and demand at farmlands, which gets incorporated into the kit menu.
To realize a future of sustainable food, Oisix ra daichi is committed to building a system across its supply chain from procurement to delivery to address food-related issues. According to the company, ESG means appropriately identifying opportunities and risks related to environmental and social issues, and incorporating them into management strategies.
Cleaner textile production to save water in Bangladesh
The International Finance Corporation (IFC) reports that the textile industry in Bangladesh consumes 1,500 billion litres of water annually, depleting groundwater by 1-2 metres every year and affecting more than 12 million of Dhaka’s inhabitants.
To protect its homeland of Bangladesh, DBL Group participated in the IFC’s Cleaner Production programme to save water. On the facility side, it used machinery that consumed up to 50% less water than average, replaced water taps with aerator water taps and single-flush cisterns with dual flush alternatives. It also reused hot water from boilers.
On the materials side, it used chemicals that require less water and converted hydrophobic fabrics (which resist water penetration) to hydrophilic (fabrics that attract and hold water) to optimize water use. As a result, water consumption for producing one kilogramme of fabric reduced from 120 litres to 55 litres; dyes and chemicals used went down from 540 grammes to 417 grammes. As DBL Group says, ESG takes corporate social responsibility a step further as it includes governance, allowing strategy, structure and systems to cohere to the shared values of environmental protection and empowering the dwelling communities.
ESG GPS orients corporate governance in South Africa
ESG GPS is a tool invented by Risk Insights that uses machine learning and big data to independently rate companies on the Johannesburg Stock Exchanges (JSE) in terms of ESG. The algorithms collect publicly available reporting and news feeds and turn the data collected into structured information. The tool is a first of its kind in South Africa. It helps organizations to address material issues and mitigate risks.
A Risk Insights report compares all industry sectors listed on the JSE. The company has identified four corporate focus areas for 2021: diversity and inclusivity, cybersecurity, climate change and ESG integration and disclosure. Risk Insights thinks that the rise of stakeholder capitalism has changed how businesses operate and that ESG provides comparable metrics that hold organizations accountable to stakeholders. Risk Insights also thinks that being a part of the New Champions Community at World Economic Forum, aligned in the missions for sustainability and social inclusivity, has contributed to its endeavour of introducing ESG to companies in Africa.
Faced with environmental and societal challenges, stakeholder capitalism points to a new direction for economic development. New Champions' companies across industries and continents are gathering in response forming a digital business community to pioneer corporate governance, become responsible business leaders and make a positive impact in the world.