Welcome to the era of stakeholder capitalism: a system through which business is an engine for prosperity, not just profit. This moment has been heralded for over a decade—and with growing enthusiasm, the last few years—and was firmly placed in the zeitgeist at this year’s World Economic Forum gathering in Davos, Switzerland.
Celebrating its 50th anniversary, Davos took on the pressing theme, Stakeholders for a Cohesive and Sustainable World, and turned from usually polite discussions into a stage for activism and heated debate on urgent issues, especially the dire state of our climate. Combining the Davos commentaries with conversations about what the World Economic Forum calls the “Fourth Industrial Revolution,” a new era of business, and last year’s Business Roundtable declaration redefining the purpose of a business, we are at the cusp of a new business zeitgeist.
This is a defining moment, and a triumph for leaders who believe companies with purpose will outperform the rest. Yet what matters most is what we do next. The companies that succeed in transforming capitalism—and our society—will be those that take swift but thoughtful measures over the next years to constructively activate purpose within their organizations and their ecosystems. Some companies are already well on their way, especially in terms of climate: Microsoft seeks to remove all historical carbon emissions; Amazon is committing to 100% renewable energy by 2030, and Starbucks will halve carbon emissions by 2030.
Change has already started if the conversations at Davos are any indication. Here are the trends we can expect to advance and evolve over the next decade.
1. Capitalism will be rebuilt, not rebooted
Five years ago, the conversation about purpose and capitalism centered on what individual companies can do to be better corporate citizens. Today, the conversation is about the system of capitalism as a whole, on both a philosophical and actual level. In the words of former Danish PM Hellene Thorning-Schmidt: “We have to find a way to reinvent the market economy, so it works for more people.” This may involve changes to regulations, legislation, how value is measured, etc. Look at JUST Capital, a powerful emerging leader reinventing the future of capitalism through comprehensive data-driven analysis, indexes, and thought leadership.
2. ‘Business as usual’ will change
Stakeholder capitalism requires a new kind of business model. This “mission first” approach outlines how profits are used, which stakeholders are engaged and benefitted by the business, which holds economic or voting rights, how value is defined and measured. I hope that in the near future, we see more companies start with a core purpose—and a plan to achieve it.
3. Companies will be better listeners
Shareholders call for one thing (usually): profits. Stakeholders call for many things: better wages, less environmental impact, greater equality, fair taxes. Leaders will need to re-tool the way they engage with and listen to a diversity of stakeholders to ensure that needs are being addressed and met on an equitable basis. Humility and transparency go hand-in-hand with being a better listener. Companies, especially those in industries that negatively impact the environment or people, in the case of companies like Shell or ExxonMobil—must be willing to communicate about shortfalls or mistakes, as well as their plans to do better.
4. Even good corporate citizens must evolve
Starbucks often lauded as a golden child of purposeful businesses, is not exempt from the calls coming from Davos. Said CEO Kevin Johnson: “As we approach the 50th anniversary of Starbucks in 2021, we are looking ahead with a heightened sense of urgency and conviction that we must challenge ourselves, think bigger, and do much more in partnership with others to keep our planet safe.” I expect that other leaders—such as Unilever, Salesforce, 3M, and Patagonia—will continue to challenge themselves to better contribute to society.
5. Climate will be the issue of the decade
From board rooms to public marches, the state of our climate is today’s most urgent issue. In this era of stakeholder capitalism, the environment will be just that: a core stakeholder, for which businesses will be expected to generate value. This means climate will be a “C-suite issue,” with the public and government expecting corporate leaders to establish stances and policies around environmental impact. I expect to see more crossover between business purpose and sustainability in the coming years.
6. The best businesses will leverage applied innovation to be carbon “negative”
Look to Interface, the carpet tile manufacturer that didn’t just go carbon neutral, but went carbon negative. Interface now contributes more to the environment than it takes out. For a carbon footprint-heavy industry like flooring, that’s a huge task. If business is to help right our environment genuinely, we have to develop solutions that put more back into our earth than we take away. This will require radical innovation.
7. Collaboration critical to develop scaled solutions
Just as no single company can change the nature of capitalism, no company can solve a social issue. On the environment, Microsoft CEO Satya Nadella said, “No one company can solve this macro challenge alone, but as a global technology company, we have a particular responsibility to do our part.” Leading companies will be conveners, using their clout to build coalitions that address social challenges. Others will be contributors, plugging into alliances with a shared mission. Together, we all can achieve more.
The voices of Davos 2020 have proven the critical need for a new kind of capitalism, one driven by companies with a purpose beyond profits. Now it’s time to take concrete action in the short-, medium- and long-term. Do so authentically, in a manner that captures the voices and needs of all stakeholders. Tomorrow depends on it.