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What Does It Really Mean to Call ‘Society’ Your Stakeholder?

For Sweden and its business leaders, an inclusive society and economy is both a matter of principle, and a source of resiliency and success over the long term. Of course, we’re not all Swedish — so how can others adopt the same mindset?

The concept of stakeholder capitalism — the idea that companies should be focused on meeting the needs of all its stakeholders, not just shareholders — is getting a lot of attention lately. When in 2019, the Business Roundtable — endorsed by almost 200 CEOs of the largest corporations — redefined the purpose of a corporation to benefit all stakeholders, it signaled a sea change even among those who had long adhered to the idea that maximizing shareholder value was a company’s primary duty.

But what does it really mean to speak broadly about different parts of society as being key stakeholders for your company? The idea of society as a primary stakeholder is rooted in centuries-old tradition in Sweden. That the shareholder-centric view was only recently knocked off its pedestal comes as a surprise to many of the country’s corporate leaders. Their approach to putting society at the center is one aspect of Sweden’s “secret sauce” that we explore in our new book, Sustainability Leadership: A Swedish Approach to Transforming Your Company, Your Industry and the World (Palgrave Macmillan, 2020). For Sweden and its business leaders, an inclusive society and economy is both a matter of principle and a source of resiliency and success over the long term.

For our book, we interviewed more than a dozen of Sweden’s top CEOs and business leaders to understand their individual sustainability leadership journeys — including Jacob Wallenberg, chair of Investor AB, Sweden’s largest investment company and the fifth generation of Sweden’s leading business family. As he told us, a basic principle has driven Investor’s investment philosophy, going back 160 years:

“We are long-term, engaged owners; and that means we develop companies with a focus on long-term competitiveness and their relationship with society at large. That includes of course employees, shareholders, and customers. The better you deal with all the different stakeholders, the better a company will perform.”

A leadership model that puts society at the center

But today, acknowledging society is not enough. The view that we put forward in the book is that sustainability leadership is no longer about how society perceives your brand. Rather, it is about understanding your company’s impacts on society — and actively seeking to mitigate the negative impacts while enhancing the positive ones. This is a core element of our three-step Sustainability Leadership Model — which captures what we think needs to be at the core of any business leader’s quest to move the needle on their sustainability ambitions. It consists of the following elements:

  • The Foundation: This is about knowing your footprint and building trust through responsible business practices. It is also about discovering your company’s purpose and tying that to culture and values.

  • The Core: Embed sustainability in your core business. This includes product and portfolio integration, but also entails broader cross-functional integration. The way to make it real is by linking sustainability to customer value creation, which is ultimately reflected in your sales figures.

  • The Leap: Once you have your house in order, and have fulfilled steps one and two; now you are ready to transform and be part of changing the world. Your own leadership and influencing platform are key, but so too is the idea of society as a stakeholder — which emerges when you adopt a societal and planetary lens, and seek unconventional partnerships.

There are different ways that companies can embrace society as a stakeholder — the main thing is to better understand the impacts of business activities on people and the planet. The UN Sustainable Development Goals (SDGs) are a guiding framework for understanding impacts and the science behind those impacts. This is the very core of having society as your stakeholder, where the aim is to maximize positive impacts and minimize negative ones — and ideally, to do so at scale.

Business as part of the societal ecosystem

Critical to making the leap is understanding that business is part of a societal ecosystem. We define this as a business ecosystem that applies a planetary lens and a societal lens, to understand the science and impacts of business activities on people and the planet, while engaging with other actors in the system and finding new value chains and solutions.

The societal lens goes beyond traditional stakeholder engagement and is a way to view and understand a company’s impact on people, communities and society. It is rooted in the idea of respecting human rights that comes from the UN Guiding Principles for Business and Human Rights, which means that companies have an obligation to respect the rights of individuals.

The planetary lens, on the other hand, is a way to view and understand a company’s impact on the environment and the planet. It is about understanding the impacts caused by business on natural resources without which the world, including business, could not survive. These resources include sufficient water, energy and land; mineral and other resources, clean air and oceans, a stable climate and a commitment to biodiversity.

Companies do not exist in a vacuum. In our view, business leaders will increasingly need to view their role — indeed, their future survival — through these planetary and societal lenses. This has become obvious after nearly six decades of corporate development, predicated in large part on natural resource exploitation — where, as the planetary boundaries teach us, we are nearing many tipping points. These are nine global planetary boundaries, beyond which we face catastrophic threshold effects in the environment and climate — including climate change, ocean acidification, land-system change and other boundaries that affect a stable and resilient Earth system.

In other words, if you dare to declare society as a stakeholder; you need to put that commitment into action, be prepared to find new partners, solutions and ecosystems in order to do things differently.

Society as a stakeholder at Scania

As part of the commitment to drive the shift toward sustainable transport at Swedish commercial vehicle giant Scania, a broader perspective was taken on the world of mobility, and applied both planetary and societal lenses. That meant thinking beyond Scania’s own industry vertical and to recognize the company’s role as much broader — part of an ecosystem of mobility, rather than a vehicle manufacturer.

That thinking impacted how Scania viewed its stakeholders; and to look beyond traditional competitors, suppliers and customers to include customers’ customers, policymakers and academia. To fulfill the company purpose — “To Drive the Shift” in sustainable transport — Scania had to work together with other actors that play a key role in mobility: from renewable fuel production to electric vehicle charging to electrification infrastructure. It also meant getting deep into the science, to understand societal and planetary impacts of different pathways.

Taking that societal perspective led to two important things:

  • The Pathways Study, which showed that achieving fossil-free commercial transport by 2050 is not only possible within the timeframe of the Paris Agreement but financially attractive from a societal perspective.

  • The Pathways Coalition — a partnership aimed at working towards that transition to a fossil-free transport system. In addition to Scania, it includes the world’s second-largest retailer, H&M Group; electricity producer E.ON Nordic and electrification systems provider Siemens; and ICT leader Ericsson.

For Scania, the societal ecosystem approach provided a new way of seeing the world — and in particular, for contextualizing its impacts on society and the planet.

Bringing society into focus requires more than lip service

For reasons deeply rooted in their culture and values, Swedish companies seem particularly accustomed to thinking in terms of their impact on society. Of course, we’re not all Swedish — so how can others adopt the same mindset?

We think the answer is to adjust your lens to bring society and planet into focus. With that new perspective, you are able to challenge your business model, rethink your value proposition, and marshal the necessary partners to realize your vision and build trust with your stakeholders along the way.

Because it is so deeply rooted, this approach goes beyond brand building and stakeholders’ brand perceptions. The societal and planetary lenses illuminate a broader worldview, and the ability to interact with society in new ways. That perspective is only possible when companies pay more than lip service to the idea that society is their stakeholder.

So far, the Business Roundtable shift that garnered so much attention remains an aspirational statement, rather than a plan of action. In order to create actual system change, sustainability leadership must be as much about creating societal value as it is business value. Achieving both aims, in the end, is the only value creation that counts if both business and society are to remain resilient.