I often talk about what running a good business means now. Operating ethically and sustainably is the minimum baseline and increasingly the expectation is that businesses include a clear social and environmental purpose – and ideally embed impact in their business model. Why?
- Customers want to buy from companies doing good
- Talented people want to do meaningful work for meaningful companies
- Investors know it’s lower risk and more sustainable
- Great opportunity to use the power of business to create a positive impact
The B Corp movement is a key leader in this transition – harnessing the power of business to “use profits and growth as a means to a greater end: positive impact for their employees, communities, and the environment.”
The Next Generation of Business Leaders
The following is something I share with my Social Entrepreneurship Practicum (COMM5030) students – this is a capstone project in a Master of Commerce at the Centre for Social Impact (CSI)/UNSW Business School and a Work Integrated Learning (WIL) course…
I spoke a bit about a couple of key market signals that I point to that I see as encouraging signs that things are swinging to big business doing things more ethically and sustainably. This is definitely not mainstream yet but I feel confident the shift is happening.
Given this is an academic course, I thought I should cite some sources. The two examples I mentioned were BlackRock (the world’s largest asset manager with US$6.5 trillion in assets under management as of April 2019) and APRA (Australia’s financial services regulator). You’ll notice from the links below that this shift isn’t happening because a bunch of CEOs have suddenly become hippies… they’re doing it for the cold hard business reasons of financial, operational, and reputational risk… and it’s what customers, employees, and investors increasingly expect.
BlackRock
This is Larry Fink’s (BlackRock chairman) letter to the CEOs of the companies that make up their portfolio – from early last year. It’s fair to say this caused shockwaves! It was taken as BlackRock putting everyone on notice that companies that aren’t operating ethically and sustainably will not be part of BlackRock’s portfolio.
Just in case you think this was a one-time statement and the focus might shift to something else… here’s his 2019 letter to CEOs reiterating the same points and providing more reasons for the focus. You’ll notice the title of both letters includes the word “purpose”.
“Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them.”
Larry Fink
BlackRock Chairman & CEO
This Forbes article Decoding BlackRock Chairman Larry Fink’s Letter to CEOs on the Importance of Purpose analyses the 2019 letter and lays out the positive relationship between purpose and profits.
Note: You can always see the most current letter here.
APRA
APRA has also been sending increasingly clearer signals as the regulator of Australia’s financial service sector. This media release outlines their latest statements on the economic risks of climate change and their expectations when it comes to their regulatory role.
“The world is rapidly transitioning to a low carbon economy, driven principally by the decisions of governments, business leaders, investors and consumers. Companies that fail to respond to these forces risk being left behind.”
Geoff Summerhayes
APRA Executive Board Member
The follows on from statements APRA made in early 2017 which was also seen as a major signal by many.
There’s still a lot of work to be done but I feel optimistic about where these trends are heading – and as current and future business leaders we need to make decisions that align with this direction and measure success in outcomes for people and our planet – not just profit.
