In 2019, when the Business Roundtable redefined the purpose of business as
creating an economy that serves the needs of all
stakeholders,
it felt like a landmark moment — but since then, while there have been a growing
number of pronouncements from individual companies in the same vein, it has
mostly felt like more talk than walk from the business world (though, we can all
take a page from Sweden’s
playbook,
apparently).
But this week, the World Economic Forum (WEF) launched two major
initiatives in which over 100 global companies have committed to new standards
for doing business that are reflective of this ethos — in one, over 60 business
leaders have committed to report on a new set of Stakeholder Capitalism Metrics;
the other sees 48 companies committing to building more equitable workplaces.
And in another positive sign, BlackRock CEO Larry Fink’s annual CEO
letter expounds on the need to see both of these priorities and more from its
clients.
61 global business leaders support ESG convergence by committing to new Stakeholder Capitalism Metrics
Image credit: Josh Sorenson/Pexels
The first coalition of business leaders across industries announced on Tuesday
their commitment to new Stakeholder Capitalism
Metrics — a set of environmental,
social and governance (ESG) metrics and disclosures released by the World
Economic Forum and its International Business Council (IBC)
in September 2020, which measure the long-term enterprise value creation for all
stakeholders.
Drawn from existing voluntary standards, the Stakeholder Capitalism Metrics
offer a core set of 21 universal, comparable disclosures focused on people,
planet, prosperity; and principles of governance that are considered most
critical for business, society and the planet; and that companies can report on,
regardless of industry or region. They strengthen the ability of companies and
investors to benchmark progress on sustainability matters, thereby improving
decision-making and enhancing transparency and accountability regarding the
shared and sustainable value companies create.
The metrics include non-financial disclosures centered around the four pillars:
people, planet, prosperity and principles of governance.
Intentionally built on existing standards, the pillars include metrics such as
greenhouse gas emissions, pay equality and board diversity, among
others. The WEF — in collaboration with Bank of America, Deloitte,
EY, KPMG and PwC — curated the set of 21 core and 34 expanded
metrics over
the past two years with the support of over 140 stakeholders.
These leaders and their organizations — including Accenture, Banco
Santander, Boston Consulting Group (BCG), bp, Dell, Dow,
HEINEKEN, HP, IBM,
JLL,
Mastercard,
McKinsey & Co, Nestlé,
PayPal, Salesforce, Sony,
Unilever and dozens more — have
committed to:
-
Reflect the core metrics in their reporting to investors and other
stakeholders (e.g. annual report, sustainability report, proxy statements,
or other materials) by reporting on the metrics most relevant to their
business or briefly explaining why a different approach is more appropriate.
-
Publicly support this work and encourage their business partners to do so.
-
Promote the further convergence of existing ESG standards, frameworks and
principles to support progress towards a globally accepted solution for
non-financial reporting on common ESG metrics.
In making these commitments, business leaders are signaling that ESG factors are
increasingly critical to the success and long-term viability of all businesses.
As Brian Moynihan — Chairman and CEO of Bank of America, and Chairman of the
IBC — asserts:
“We have to deliver great returns for our shareholders and help drive progress
on society’s most important priorities. That is stakeholder capitalism in
action. Common metrics will help all stakeholders measure the progress we are
making and ensure that the resources capitalism can marshal — from companies,
from investors, and others — are directed to where they can make the most
difference.”
By adopting and reporting on these metrics and disclosures, the business
community hopes to continue to catalyze greater cooperation and alignment among
existing standards; and encourage progress on the development of a systemic,
globally accepted set of common standards for reporting on sustainability
performance.
“Today is another step forward in the growing impact of stakeholder capitalism.
It’s not just about words, but about companies setting clear metrics, measuring
our progress, and holding ourselves accountable,” says Salesforce CEO and Chair
Marc Benioff. “Only then can we provide long-term growth for our
shareholders, build trust with all stakeholders, and truly improve the state of
the world."
The Stakeholder Capitalism Metrics initiative seeks to improve the ways that
companies measure and demonstrate their performance against ESG indicators and
to enable positive contributions towards achieving the Sustainable Development
Goals. The project’s twin
objectives are to accelerate convergence among the leading private ESG
standard-setters, and to bring greater comparability and consistency to the
reporting of ESG disclosures.
Read more on the Stakeholder Capitalism Metrics and how the initiative
encourages greater convergence among sustainability standard-setters and a
global solution for non-financial reporting
here.
48 companies join WEF coalition to tackle racism in the workplace
Image credit: Fauxels/Pexels
Also this week, the WEF launched the Partnering for Racial Justice in
Business
(PRJB) initiative, in which 40 more businesses have committed to building
equitable and just workplaces for professionals with under-represented racial
and ethnic identities.
The PRJB initiative has been designed to operationalize and coordinate
commitments to eradicate racism in the workplace and set new global standards
for racial equity in business. It also provides a platform for businesses to
collectively advocate for inclusive policy change.
The initiative originates from the WEF’s New Economy and
Society Platform,
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. It
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 a range of action initiatives.
As WEF Managing Director Saadia Zahidi points out:
“With just 1% of Fortune 500 companies led by Black chief executives, the need
to tackle racial under-representation in business is urgent and obvious. To
design racially and ethnically just workplaces, companies must confront racism
at a systemic level, addressing not just the structural and social mechanics of
their own organizations, but also the role they play in their communities and
the economy at large. The Partnering for Racial Justice in Business initiative
provides an effective platform for businesses to take individual and collective
action towards racially and ethnically just workplaces.”
Ten participants in the Stakeholder Capitalism Metrics initiative — Bank of
America, BCG, EY, HP, McKinsey, Nestlé, PayPal, PwC, Salesforce and Unilever —
are joined as founding members of the Partnering for Racial Justice in Business
initiative by companies including AstraZeneca, BlackRock, Cisco Systems,
The Coca-Cola Company, Deutsche Bank, Facebook, Google, H&M
Group, Ingka Group (IKEA), Johnson &
Johnson, LinkedIn,
Mastercard,
PepsiCo, Procter &
Gamble, SAP and
UPS, among others.
Three steps are required to join the initiative:
-
Racial and ethnic equity must be placed on the board’s agenda.
-
Companies must make at least one commitment towards racial and ethnic
justice in their organizations.
-
Companies must put a long-term strategy in place towards becoming an
anti-racist organization.
“The new global standards established by Partnering for Racial Justice in
Business come at a time of heightened global focus on racial injustice —
underscored by a pandemic that has disproportionately affected Black and Latino
communities in the United States, along with other marginalized communities
worldwide,” says Rosanna Durruthy, Global Head of Diversity, Inclusion and
Belonging at LinkedIn. “We believe companies — critical enablers of wealth
creation and professional mobility — must play a leading role in building a more
equitable future for all. And as an organization that exists to create economic
opportunity for the entire global workforce, we are honoured to join this
initiative.”
Examples of business commitments towards racial and ethnic
justice
range from allocating financial and human resources to racial justice work,
setting representation goals for all seniority levels, and establishing
mentorship programs for racially and ethnically diverse employees.
“At P&G, we aspire to create a company and a world where equality and inclusion
are achievable for all people. For us, this starts with ensuring equitable and
inclusive
workplaces,
and drives the actions we take with our brands and business partners and
throughout communities around the world,” says Shelly McNamara, Chief Equality
and Inclusion Officer at Procter & Gamble. “The Partnering for Racial Justice in
Business initiative will help foster cross-sector collaboration towards this
aspiration and enable P&G and many companies to accelerate progress faster than
any of us could do alone, and we’re proud to lend our support.”
Learn more about the Partnering for Racial Justice in Business project, and the
48 founding
companies, here.
Fink’s latest CEO letter challenges BlackRock’s clients to take action in all three areas of ESG
Image credit: Cameron Casey/Pexels
With nearly $9 trillion in assets, BlackRock is the world’s largest — and
arguably, most powerful — asset manager; Fink’s annual letters have, as The New
York Times pointed
out
this week, “driven the conversation inside corporate America’s boardrooms for
years.”
While the company and its CEO have been criticized by climate
activists, investors, legislators and thought
leaders
for years for remaining the world’s largest investor in fossil
fuels
and companies driving deforestation around the world, there’s no denying Fink’s
influence in also driving the sustainability imperative home throughout the
business world: As the NYT also pointed out, Fink’s 2018 proclamation that
companies must have a purpose beyond
profit
preceded the Business Roundtable’s statement on stakeholder capitalism; and his
2020 call for corporate climate disclosures and “a fundamental reshaping of
finance”
in response to the climate crisis was followed by a raft of climate pledges by
companies.
In this year’s
letter,
released this week, Fink’s has upped the stakes even more with a mandate to
BlackRock’s clients is that they “disclose a plan for how their business model
will be compatible with a net-zero economy.” He cites multiple BlackRock studies
that support the business case for such strategies:
“Over the course of 2020, we have seen how purposeful companies — with better
environmental, social, and governance (ESG) profiles — have outperformed their
peers. During 2020, 81% of a globally representative selection of sustainable
indexes outperformed their parent benchmarks [according to a BlackRock
study]. This outperformance was even more pronounced during the first quarter
downturn, another instance of sustainable funds’
resilience
that we have seen in prior downturns. And the broader array of sustainable
investment options will continue to drive investor interest in these funds, as
we have seen in 2020.
"But … It’s not just that broad-market ESG indexes are outperforming
counterparts. It’s that within industries, we are seeing another divergence:
companies with better ESG profiles are performing better than their peers,
enjoying a “sustainability premium” [according to a BlackRock comparison between
the MSCI ACWI Focus ESG Index and the MSCI ACWI Index from January 2020 to
November 2020].”
In addition to highlighting the financial business case for definitive
strategies and actions to achieve environmental sustainability, Fink takes care
to drive home the equal importance of supporting the needs of communities and
all stakeholders:
“Questions of racial justice, economic inequality, or community engagement are
often classed as an ‘S’ issue in ESG conversations. But it is misguided to draw
such stark lines between these categories. For example, climate change is
already having a disproportionate impact on low-income communities around the
world — is that an E or an S issue? What matters is less the category we place
these questions in, but the information we have to understand them and how they
interact with each other. Improved data and disclosures will help us better
understand the deep interdependence between environmental and social issues. …
We are also at a historic crossroads on the path to racial justice — one that
cannot be solved without leadership from companies.”
Among the actions Fink wants to see from BlackRock clients going forward is a
demonstrated commitment to enhancing diversity, equity and inclusion in the
workforce — including disclosures regarding companies’ talent strategies.
Fink says that he strongly believes that the purpose of business — of capitalism
— is to “respond to human needs”; he cites the ability of companies to develop
multiple, viable COVID-19 vaccines at breakneck speed as evidence of stakeholder
capitalism in action. As he closes the letter, he says:
“As we move forward from the pandemic, facing tremendous economic pain and
inequality, we need companies to embrace a form of capitalism that recognizes
and serves all their stakeholders. … The companies that that seek to build
long-term value for their stakeholders will help deliver long-term returns to
shareholders and build a brighter and more prosperous future for the world.”
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Sustainable Brands Staff
Published Jan 27, 2021 1pm EST / 10am PST / 6pm GMT / 7pm CET