It鈥檚 been just over a year since over 180 CEOs on to the Business Roundtable鈥檚 (BRT) statement on the purpose of a corporation, committing to lead their companies for the benefit of all stakeholders, not just shareholders.
This statement formally set a new vision for corporate action and drew a lot of attention from media, businesses, and nonprofits alike; many wondered if this was simply an empty promise, or if it would actually spark meaningful change and concrete action. Twelve months later, how has this multi-stakeholder commitment evolved?
In the wake of the global pandemic and societal outcry against racial injustice, the spotlight is now more than ever on the business community to act in-line with multi-stakeholder principles.
The call for business action on societal issues isn鈥檛 new. From the humble beginnings of Corporate Social Responsibility through the shared value movement and up to the newly embraced stakeholder capitalism, companies have been adding value and making a positive impact on their communities and society for a long time, while external and internal expectations have evolved and shaped their ongoing actions.
So what role has the BRT鈥檚 statement of purpose played, if any?
A theoretical framework put to the test: The acceleration of the multi-stakeholder movement
The multi-stakeholder commitment advocated by the BRT is a theoretical framework against which companies could guide their actions. Covid-19, combined with the recent social unrest across the country and globe, put it to the test.
While some businesses and their CEOs have been advocating for multi-stakeholder principles long before the BRT, with the forces and key drivers of the multi-stakeholder movement accelerating, they have now been pushed鈥攁lmost forced鈥攖o act according to this framework.
How has the multi-stakeholder movement evolved? Accelerating forces and trends:
Expectations from stakeholders for business have intensified and will continue to accelerate
Our recent 极乐视频 Trust Barometer Spring Update: Trust and the Covid-19 Pandemic, which surveyed more than over 13,200 respondents in 11 markets, emphasized that this is a moment of reckoning for business, which is now expected to deliver on the promise of stakeholder capitalism.
- Business is not doing enough: Only 38 percent believe business is doing well or very well at putting people before profits.
- CEOs are failing to demonstrate expected public leadership: 65 percent agree that CEOs should take the lead on addressing the pandemic rather than waiting for government to impose restrictions and demands on their businesses, but fewer than one in three respondents (29 percent) believe CEOs are doing an outstanding job responding to demands placed on them by the pandemic.
As a follow up to that study, yesterday we released a Trust Barometer Special Report: Workplace Trust and the Coronavirus, which finds that 70 percent of employees working from home say that their employer has effectively communicated how they are approaching return to the workplace.
While employers are clearly delivering on one key expectation of one incredibly important stakeholder group (their employees), the heightened expectations around societal issues are not a one-time call to action. Because Covid-19 has acted as both a crucible and an accelerant, testing the stated purpose of businesses while generating more and more authentic action, the bar for purposeful action is now being raised.
Scrutiny soars across the board to track who鈥檚 been walking the talk
As we鈥檝e witnessed, the Covid-19 pandemic spurred many companies to jump into action, proclaiming promises to prioritize the health, safety and wellbeing of all stakeholders. Proclamations of this nature were not new to the media nor the public.
What feels new is the level of scrutiny with which these companies are measured against their commitments鈥攆rom long-standing organizations like JUST Capital, already well-known for ranking America鈥檚 most just companies and its , to academic institutions like the Boston College Center for Corporate Citizenship listing member examples of , all the way to newly launched initiatives such as , whose mission is to 鈥渄ocument all of the good and bad deeds corporations and public figures have done during this period.鈥
Expectations will only continue to increase: the spotlight on business and the call to act according to multi-stakeholder principles outlined by the BRT and brought into stark relief during the current crisis will linger long after the pandemic and will continue to raise the bar for businesses.
People at the center of corporate purpose
Following unprecedented attention at this year鈥檚 World Economic Forum in Davos, climate change was anticipated to be the leading ESG issue in 2020. While climate remains a critical issue, the pandemic quickly redirected focus towards companies鈥 human capital management and treatment of employees鈥攖opics that fall under the 鈥楽鈥 category of ESG.
Employees鈥 voices are getting louder and pressing for change on issues spanning the ESG spectrum. From Amazon employees鈥 , to protesting the company鈥檚 handling of sexual assault cases鈥攖he events of the last several years have given way to the renewed focus we鈥檙e seeing on social issues today. And due to this renewed focus on people, and with the climate crisis being increasingly understood as a racial issue, topics like are drawing more attention.
While the pandemic brought intensified scrutiny to a company鈥檚 responsibility to uphold the 鈥楽鈥 factors of ESG, the horrific murder of George Floyd in May has sparked immense pressure mounting on all sides for businesses to assess their own Diversity & Inclusion (D&I) practices:
- BlackRock鈥檚 CEO Larry Fink recently in a LinkedIn article: 鈥淭his fall, as we assess the impact of companies鈥 response to Covid-19 and associated issues of racial equality, our stewardship team will be refreshing our expectations for and how companies pursue sustainable social practices more broadly.鈥
- Sustainable investor Calvert Research & Management for companies to disclose racial diversity and pay equity.
- Just last week, State Street Global Advisors sent a to the boards of its portfolio companies asking them to articulate their risks, goals and strategies related to racial and ethnic diversity.
Looking back at the , social issues like employee health and safety and workforce diversity have quickly risen to the top of investor agendas, and it鈥檚 expected investor focus on the 鈥淪鈥 of ESG will continue to grow and accelerate well into next year.
Looking ahead: Raising the bar for business and galvanizing action
If one thing has become clear over the past few months, it is that the bar for businesses to act according to multi-stakeholder principles is higher than ever before. Companies are outdoing themselves to take meaningful action鈥攆rom 鈥檚 whopping 2030 climate commitment to a long list of to fight systemic racism.
All this action is putting unprecedented scrutiny on the global business culture, especially corporate America. What鈥檚 important is that this level of scrutiny should not make business shy away from action in fear of being judged, but rather galvanize action and spur companies that have been on the sidelines into real, meaningful change to serve all stakeholders, build trust, and create shared value over the long-term.
To rebuild equitably in a post-Covid world, we鈥檙e going to need all hands on deck. More action and more authentic action is what is most needed. The issues we face are complex, the expectations are high, and now鈥檚 the time. The private sector has a critical role to play in pushing our world forward, and we can all make progress and rise together.
Alex Heath is Executive Vice President, Purpose.