By Louise Gatenby, CEO of The Good Board
The Good Board is a pioneering executive search and leadership development firm who believe in business as a force for good and are part of the rapidly expanding global B. Corporation movement balancing profit and purpose.
The profit-only model of capitalism is being rejected more and more by today’s workforce and by tomorrow’s leaders who want to work for organisations who share their values and have a positive impact. There is a global movement of people using business as a force for good and now is the time to jump onboard.
The concept of sustainable capitalism is not new; the idea that doing good is good business makes good commercial and moral sense, whether you are a lockdown start-up or a multi-national entity. The challenges facing the planet today are extraordinary and we need to sit up and take note.
Gone are the days of placing shareholder value as the sole measure of success, the pressure it has put on communities and the environment and the inequality that it has created. Businesses need to adapt to a new reality.
And they are. In 2019, the Business Roundtable in America, a group of 200 top US companies which include Amazon and General Motors, redefined its antiquated definition of the purpose of a corporation, to include responsibility to consider the impact on all its stakeholders, not just their shareholders.
The concept we have had of capitalism for the last 50 years is being rejected from all angles and while change is never without its challenges, there are strong signs we are at reaching a positive tipping point.
Environmentally, we cannot continue to use up our planets resources at the current rate and almost every day there is new evidence or a new crisis which demands that we make significant change. Investors are increasingly focussed on the Environmental, Social and Corporate Governance (ESG) agenda and those publicly traded businesses who cannot demonstrate increasingly positive progress in this field are rapidly falling out of favour. And finally, consumers increasingly want to buy from companies who share positive ethos.
The rise of ethical business.
Inextricably linked to this now mainstream conversation we are seeing huge global activism movements, from single-use plastic to fast-fashion, as well as an exponential rise of B Corporation and other ethical business models balancing purpose and profit.
Certified B Corps are a new kind of business committed to meeting ‘the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose’. An ever-growing community of over 3,500 companies, across 64 countries, they include names you will recognise like Toms, Alessi, and Bodyshop and many that you won’t.
By harnessing the power of business, B Corps accredited businesses use their profits as a means for good, a positive impact for their employees, communities, and the environment. It is one of the most rigorous independent assessments of a company’s entire social and environmental performance, accountability and transparency, evaluating operations and business model impact on your workers, community, environment and customers.
There are similar movements across the world and many other businesses that are not B Corps, yet have committed to actively impacting social and environmental aspects, not only because they think that it is the correct thing to do but also because there is a strong commercial case to do so; they are re-shaping capitalism for today’s world.
Purpose increases performance.
The argument against the concept of responsible sustainable capitalism has been that it reduces competitive advantage and profit. This is the same argument that used to be voiced around diversity. In both cases it is increasingly evident that the premise is false.
In fact, a more inclusive and responsible approach embracing both diversity and sustainability is a strong driver of commercial performance. It is an area of great examination but ultimately, the research identifies that companies with a strong ESG performance significantly outstrip the performance of those with a weak approach.
To pull out just one body of research: Raj Sisodia first published Firms of Endearment in 2003 and now has an additional 15 years of data which demonstrates that those companies who adopt a positive, purpose led approach outperform the S&P Index by 14 times over a 15-year period!
Closer to home, we know that people want to work for and work with companies that integrate ESG aspects into the heart of their business model. The economic case clearly supports the longer-term creation of value and sustainable capitalism can help attract the best talent, new customers and investors, serving as a source of commercial and competitive advantage.
Right now, there is a paradigm shift which is growing in momentum every day, and an opportunity to create a differentiated talent agenda based on purpose, values and positive change which provides you with a competitive employer brand advantage.
The changes facing the world today are unprecedented and we are going to see incomparable change in the way that we live, work, and interact over the next five to ten years. It represents a huge opportunity for businesses to create positive change and for leaders to work towards an ethical and sustainable future.
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