April 22, 2021
Early board involvement, measured KPIs and decentralization are among the most important steps in creating a structure that supports stakeholder capitalism, according to members of Protocol's Braintrust.
Good afternoon! It's Earth Day today, so we had the Braintrust dig into the concept of stakeholder capitalism this week. We asked the experts to think about it through the lens of an organizational structure and examine the changes that can have the biggest effects on a company's operations. Want to go deeper? Check out Protocol's event on measuring the impact of stakeholder capitalism here.
Chief Sustainability Officer at Hewlett Packard Enterprise
Stakeholder expectations of business are rapidly changing amidst the pandemic, waves of social activism and a global climate crisis. Edelman's 2021 Trust Barometer found that, in a time of mistrust and misinformation, business has become the most trusted institution in the world — ranking above NGOs, government and the media. The time is ripe for businesses to demonstrate their commitment to citizenship and purpose, and to gain a competitive advantage in doing so. Yet, it also poses risks for companies who fail to "walk the walk" and integrate their purpose into their business strategy.
This is why a shift to stakeholder capitalism must start from the top — starting with the board of directors. The board is responsible for setting the business strategy, which, in today's environment, must include the integration of environmental, social and governance (ESG) issues into strategies for long-term success. Companies with strong ESG strategies are outperforming their peers and delivering value for both shareholders and stakeholders. At HPE, for instance, our board is directly responsible for the oversight of ESG, which includes not only strategic direction but also the oversight of measurable targets, policies and disclosures that ensure ESG is embedded into the business.
Above all, I believe these strategies must be driven by a board with diversity of gender, ethnicity and background in order to make it more capable of representing its workforce and its stakeholders.
Partner & Head of Growth Equity at Generation Investment Management
At Generation we take a System Positive approach to investing — with a focus on companies that will not only thrive but also drive the transition to a more sustainable future. We support our portfolio companies as they embed sustainability into both the products and services they sell, and in how they operate their business. Our deep experience gives us insight into why considering all stakeholders can optimize business performance and drive higher likelihood of success.
First, a clear corporate mission and purpose grounds a company, helps it set priorities and allows it to measure progress over time. Whether it is driving waste from supply chains, improving healthcare diagnostics or broadening access to financial services for underserved groups — we see those companies who clearly articulate their purpose winning in the market, and also attracting and retaining the best talent.
Second, governance matters. Optimally, this means building diversity at the board level that reflects the diversity of your customer base and broader community. We also urge companies to attract more independent directors who may be industry operators who have seen the scale and stage of your company before. This perspective and support can go a long way.
And finally, we encourage companies to set KPIs to track broader sustainability progress over time. This should be a strategic conversation at the board level, and link the company's specific industry, business model and talent strategy. Getting stakeholder input into this process can lead to better ability to track holistic performance over time.
Chief Innovation Officer at Schneider Electric
Many companies have organized and operated their value chains to maximize efficiency and production capacity and to cut costs. But the pandemic and increasing calls for corporate accountability and steps towards sustainability have shown that not taking all stakeholders into to account can limit access to capital, erode customer loyalty and demotivate employees.
An important step in creating an organization that supports stakeholder capitalism is integrating UN Sustainable Development Goals at the heart of your corporate strategy and aligning top executive compensation with achieving these goals. This ensures commitment to initiatives that better the lives of employees and communities you operate in. For global companies, adopting a decentralized management structure that enables countries to work with their communities and adapt locally increases stakeholder engagement and agility in times of crises like a pandemic.
Finally, building a strong ecosystem of external partnerships with other businesses, academics, nonprofits, investors, startups and employee groups ensures companies look outside for new ideas, benchmarks and continually challenge the status quo.
Eric H. Loeb
Executive Vice President, Government Affairs at Salesforce
Salesforce is committed to leading with values, giving back to our communities, closing the equality gap, and helping businesses grow while protecting the environment for future generations. Together, we have a responsibility to build a better world and use our business as a platform for change by serving all stakeholders. That's the essence of Stakeholder Capitalism.
Our ability to act confidently and swiftly on the issues that matter most comes down to clear process and frameworks. Our Government Affairs team partners across the company and with external stakeholders in advance of policymaking cycles, aligning on priorities and engagement. By building frameworks — and communicating them internally and externally — we build trust, measure impact, and take action.
A powerful example is our Racial Equality and Justice Task Force, created last year to find ways to create systemic change. We created a nonpartisan policy platform, guiding our work on voting rights and civic engagement. Having a strong framework empowered us to stand as the only major corporate opposing Georgia's SB 202 prior to its passage, and we recently signed onto a letter to drive national action on voting rights.
And today, Earth Day, it's important to recognize how we define our advocacy towards a more sustainable future. In partnership with our Sustainability team, we published our Global Climate Policy Principles and take action with programs like 1 Trillion Trees.
Communities are looking to business to stand up and drive change. We're proud to have a process that empowers us to act.
Chief Social Impact Officer at Twilio
Capitalism is one of the most powerful forces in the world, but we are missing the opportunity to leverage its full power for good. The key to building an organization that supports stakeholder capitalism is to ingrain positive social impact in the value generation of the company, so that when the business succeeds, positive impact grows. One of the simplest ways to do this is to have your social impact team report into the part of the organization that generates value (e.g., sales, product or directly into the CEO).
Historically, businesses have thought of corporate social responsibility as a cost center that must be funded and operated separately from the "real" business to protect its sanctity. The result is that efforts to do good don't benefit from the growth or momentum of the company, impact is constrained and fewer stakeholders are served. When you truly embed social impact into company operations and run it like an impact-led business unit — with revenue, growth, and impact targets that the team is accountable for — it transforms from a cost center to a business driver, and impact increases.
Revenue generated gets reinvested into social impact work, which in turn drives more impact. Put simply, when doing good is embedded in the core business, it becomes a force multiplier. We are at an inflection point in how we, as businesses, view our role in society. The question is: Will we put the full force of our business behind doing good?
Vice President, Corporate Affairs and Sustainability at Mars, Incorporated
See who's who in the Protocol Braintrust and browse every previous edition by category here (Updated April 22, 2021).
Purpose without performance isn't possible, and performance without purpose isn't meaningful.
At Mars, we believe the world we want tomorrow starts with how we do business today. This is at the center of who we are as a global, family-owned business. It's why we think in generations, not quarters, and why we hold ourselves accountable for delivering across multi-dimensional measures — not just financial performance.
The Mars Family have set a clear and broad set of shareholder objectives through the Mars Compass, with our purpose at its heart. Our board and Mars Leadership Team have embedded this into our business strategy. Made up of four "quadrants," it helps us assess whether we are delivering on our purpose and creating mutual benefits. It's also embedded into our reporting and incentives.
The first quadrant is financial performance, because we cannot create the world we want tomorrow without the financial ability to resource it. Second is quality growth — how well our business is positioned for future growth. Third is positive societal impact, measuring the positive influence we have in the world. Finally, we must be a trusted partner, gauging if stakeholders view us as living up to our commitments and their expectations.
Any business wanting to be resilient and relevant today must intentionally foster a culture of long-term thinking, prioritize mutual value creation and integrate it into every aspect of the business. If you don't measure it, you cannot manage it; and if you don't manage it, any progress is simply based on luck.
Kevin McAllister ( @k__mcallister) is a Research Editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.
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