Last month, a lobby group of America's top executives released a statement about the purpose of the corporation, declaring that the traditional focus on shareholder returns should be replaced with a commitment to all stakeholders, including customers, employees, suppliers, and the environment.

Some are calling this new way of thinking "stakeholder capitalism", and it seems to imply that shareholder value and a positive impact on society are mutually exclusive, or at least at odds. True enough, social impact has long been seen as separate to real commercial strategy – at best, well-meaning corporate social responsibility (CSR), and at worst, a public relations cost. Even the Business Roundtable's statement itself has drawn ire from those who see it as a flagrant exercise in PR.

But the key to sustainable prosperity is to recognise that a commitment to society is not just the right thing to do; it's an opportunity for businesses to realise their long-term commercial goals and actually maximise value for shareholders.

Inclusive Growth

Benefit corporations (or "B-Corps") have had a role to play in this space for some time, particularly given the legal limitations across the U.S. on companies who deprioritise shareholder returns. In fact, a group of B-Corps responded to the Business Roundtable's statement with an invitation to join them, since registering as a B-Corp is one way for companies to legally accept the principle that shareholder value is not their only focus.

But it's not the only way companies can expand their purpose.

An inclusive growth strategy links social and environmental impact directly to business results by reimagining the company's core strategy and examining the entire "ecosystem" in which it operates – from supply chains to hiring practices and beyond.

According to Harvard's Dr. George Serafeim, professor of the popular course "Reimagining Capitalism", this is exactly as challenging as it sounds. "Changing culture, changing incentives, changing institutions; they're very, very difficult tasks," he says. As a result, many companies find it difficult to implement scalable and profitable strategies for growth that are inclusive and beneficial to all involved.

What's required are bold, big-picture systemic strategies that incorporate the perspectives of different stakeholders from across the business ecosystem, unlocking economic, social, and environmental value of benefit to all.

Catalysing Inclusive Strategies

The challenge is how to solve what The Economist positions as a problem of accountability within "stakeholder capitalism" overall, saying: "It is not clear how CEOs should know what 'society’ wants from their companies. The chances are that politicians, campaigning groups, and the CEOs themselves will decide – and that ordinary people will not have a voice."

This is where the role of a convener or "catalyst" – a third party – can be useful, bringing everyone to the table and then onto the same page. The role of the catalyst is not only to understand the system and the stakeholders within it, but to provide the connective tissue that brings these constituencies together around strategies with shared objectives and measurable outcomes.

Thinking Big

Investment in inclusive growth allows companies to profitably improve skills, productivity, and commitment of employees and suppliers, while also finding new and differentiated market opportunities in communities currently being left behind. Greater transparency in reporting around shared objectives builds trust and reduces risks.

Ultimately, engaging and adding value for all stakeholders is not just about doing good – it's about creating value. Social impact can't be pursued simply for PR and it can't be a cost centre. Research by consultancy Bain tells us that only 2% of sustainability programs succeed, and we know that poor integration with the company's core business, difficulty engaging with key stakeholders, and a lack of ambition are to blame. Social impact and shareholder value have to be linked or risk joining the 98% that fail. That's the choice CEOs have to make. 

Contact info@thepalladiumgroup.com to learn more.