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How to make your business thrive by doing good

Alternative Energy

Professor Klaus Schwab, the founder of the World Economic Forum, has called for the abandonment of both “shareholder capitalism” and “state capitalism”, which have proven to be incapable of meeting the world’s challenges. He suggests that a “stakeholder capitalism” – a term he coined in the early 1970s – would enable a “Great Reset” of the global economy.

In recent decades, a series of approaches that adhere to the model of stakeholder capitalism have been proposed for companies, such as the Triple Bottom Line (TBL), B-Corp, Benefit Corporation, and most recently, the Business RoundTable declaration on the purpose of the corporation or McKinsey’s 5Ps. This is a sign that society’s expectations towards business are rising and that companies are increasingly aware of them. The bad news is that the number of different approaches is confusing. For a leader who sincerely wants to adopt stakeholder capitalism, the transformational path to making it actually work is not clear.

For the last five years, we have been studying several dozen exceptional companies on three continents, of all types, sizes, and industries, which have managed to make it work. Conceptualizing their collective experience has brought to light three key pitfalls, which they avoided and which prevent other companies from implementing stakeholder capitalism.

In 2018, TBL inventor John Elkington recognized that over the last 25 years businesses had failed to serve all their stakeholders equally, instead putting the shareholder first. He asked for a recall of the TBL concept. More recently, during the 2020 pandemic, the New York Times reported that Business RoundTable companies have not served their non-financial stakeholders well. Other versions of stakeholder capitalism have also come in for criticism.

Aside from some companies more interested in their reputation than in making stakeholder capitalism actually work, most sincerely want to adopt it but can’t. They can’t because they have not been able to avoid the following three pitfalls.

1) Doing good indiscriminately

Doing good indiscriminately is a pitfall, because it’s not effective enough for others. Corporate philanthropy and CSR are surely positive and without them many projects would not see the light of day. Yet, they don’t leverage the company’s core competences and they don’t turn it into what Salesforce CEO Marc Benioff calls the “greatest platform for change”.

What we found through our research is that only when companies transform their core business processes to generate social value will radical benefits to society be generated; and only then will these companies fully align with their “better world” purposes. Put differently, they will steadily walk the walk, instead of tiptoeing and sometimes stumbling.

2) Chasing more than one rabbit

The second pitfall current approaches are suffering from is what we call “chasing more than one rabbit”. Indeed, it is impossible to maximize several distinct and separate variables at the same time. We know this from the linear programming discipline and we also know it out of common sense. A company cannot maximize its profits and minimize its environmental damage at the same time.

Paradoxically, in his famous 1970 article, Milton Friedman got it right when he said that businesses have to chase only one rabbit. The problem is that Friedman suggested the wrong one: profit maximization.

3) Calculating how to do well by doing good

Even if a company decides to focus on social value and expects profit to follow, it may encounter the third pitfall: calculating how the former leads to the latter. The problem is that such a calculation will make social value a means, instead of an end. This pitfall is perhaps the hardest to overcome because it arises from the deeply ingrained mindset of business leaders, which views companies mechanistically.

The road map to the altruistic enterprise

The companies we have been studying avoided these three pitfalls. They decided to take care of all of their ecosystem members – their customers, their suppliers and their local communities – through all of their core business processes and to do so unconditionally. We call them “altruistic enterprises” – a word from the Latin alter, “the other”.

Amazingly – as a consequence, not as a goal – they have enjoyed great economic success. Instead of calculating, they bet that unconditional care for their ecosystem members would organically lead to fair profits and it has worked for these altruistic companies for decades, including during the COVID pandemic.

Here’s just one example among the many we studied. Uno-X is the petrol stations division of the Norwegian retailer Reitan Group. Although it is not required to do so by any regulation, it decided to invest in – as-yet unprofitable – hydrogen stations and biofuels, and to ban palm-oil derivatives from them.

And what about profits? Uno-X’s Finance Director told us: “In our meetings, we hardly ever talk about Ebitda or [key performance indicators]. In the executive team, we are more interested in leadership issues.” By this he means the issues of building a culture of trust and responsibility, where each employee is free to act in order to create social value unconditionally. And Uno-X has a track record to prove that such a culture has indeed resulted in great economic performance.

All these companies followed the virtuous spiral of the transformed leader, one whose single-minded purpose of social value creation for the company’s ecosystem attracts employees to share it; who then invites them to transform their business activities to attain this purpose; and who finally enjoys – together with employees – the results of the ecosystem taking care of them.

To sum up, the road to the altruistic enterprise avoids three pitfalls and offers companies engaged in diverse stakeholder capitalism approaches a way for the Great Reset to work.

While COVID-19 made the Great Reset even more urgent, it demands that we transform the very model that has been driving businesses for decades. This is not easy but one fact may help.

Every business was created in the first place to serve society, to provide it with a useful product or service. Evidence shows that profit is not a driver for most entrepreneurs, but rather the consequence of their creation of a service for others via their start-up. So, in a way, the road to the altruistic enterprise is a return to businesses’ DNA, to what they should never have ceased to be: a means to build prosperous and harmonious societies, all the while enjoying the profits needed to sustain themselves.
Source: World Economic Forum

11 Comments on "How to make your business thrive by doing good"

  1. Abraham van Helsing on Thu, 10th Dec 2020 2:41 am 

    While Davos jerk Klaus Schwab is dreaming of a 2nd western century, directed from western globalist institutions (not going to happen), facts are being created in China, that has long recovered from Covid and has picked up growing relentlessly again, as if nothing happened.

    “Covid-19: How everyday life has changed in Wuhan”

    While I absolutely do not want to copy the Chinese authoritarian model, equipped with face recognition software in trains and attributing social points according to your behavior, it needs to be said that China (and other Asian countries) are much better prepared to deal with a pandemic than the freedom-loving western world of Covidiots. Asians have more discipline and a collectivist mindset and more feeling for “greater common good”, than westerners and their painfully egoistic and childish individualism, that “doesn’t give a f*ck”.

    Regarding capitalism… Schwab is right, it needs to be tamed. But I’m not so sure that the impulse for change should come from corporations themselves. Not so sure what to think of “nice companies”. Companies should concentrate on producing high-quality goods and services, the public, government and other companies want. It is politics that should do the guidance, not the corporate world.

    A good example is the renewable energy policy of the European Union. The EU says what needs to happen (“full decarbonization by 2050”), pushes for the Paris Accords and the corporate world picks up the signals and changes behavior accordingly, while picking up an encouraging subsidy or two to drive home the point. That works.

    Other urgent points in taming capitalism would be to apply rigorous anti-trust measures in order to restore the primacy of politics over corporatism, apply divide and conquer and split up de facto corporate monopolists. The measures announced against Facebook yesterday are encouraging. Far more important would be to split up Amazon. It cannot be that Amazon is usurping the entire European retail sector, without having to face a European competitor. Measures are not to be expected from the US government, the EU should intervene here. The rule should be that any market must have at least a hand full of competitors, in the interest of the general public and that as soon as a company achieves monopoly it has signed its own death warrant and will be split up. A good example of a functioning market is the international car market, with many brands. Furthermore, oligarchs should not exist. A successful entrepreneur who employs thousands of workers, should be rewarded with many millions, not many billions. He should be able to buy a 2nd home in the Bahamas and a nice yacht, he should not be able to buy up democracy. Yeah I mean you, George Soros!

  2. FamousDrScanlon on Thu, 10th Dec 2020 12:38 pm 

    The Great Overshoot

    Did you really think we could paper over declining net energy forever?

    John Gray:

    The year of the Great Humbling

    Covid-19 has pricked the bubble of human supremacy and revealed our fragility. And the economic destruction means we cannot return to the free-market capitalism that made the pandemic inevitable.

    “Many would like to believe that, in the months ahead, we shall be returning to a time of accelerating progress in society, or at least of relative safety.

    Underlying these responses is a belief that humankind has reasserted control. With the pandemic soon to be contained, we can look forward to resuming the expansion of human power that seemed to be under way before it struck. In fact, the lesson of this year is that we must learn to live in a world we cannot fully know or control.”

    “The pandemic is not a once-in-a-century traumatic event, but a revelation of the fragility that lies at the bottom of our way of life. When the true human situation is suddenly exposed, the result is cognitive chaos. Paranoid mass movements – in which human misfortunes are represented as resulting from the machinations of hidden elites – are emerging as powerful forces, not for the first time in modern history. The present danger is that they could divide society and undo the struggle to contain the pandemic.”

    Those who won’t humble themselves will be humiliated by reality/nature/Limits to Growth.

    For y’all angry denier conspiracists, try asking God to grant you the serenity to accept the things you cannot change.

  3. zero juan on Thu, 10th Dec 2020 12:54 pm 

    Ppeee juan everyone thinks your dumbfuckDR is stupid. Ppeee nobody cares if you use the Davy handle. He is gone but if you want to use his handle go right ahead, lunatic.

    FamousDrScanlon said The Great Overshoot Did you really think we could…

    FamousDrScanlon said My mob? clog do you mean team winners? Your hymie…

    JuanP said I see Davy used his real name. What happened there…

    Davy said Reptiles don’t normally squirm zero juan. Reptiles…

    pat said The cheap conventional, high grade oil world enjoy…

  4. FamousDrScanlon on Thu, 10th Dec 2020 1:37 pm 

    clog stfu about decarbonizing & Pairs accords or any talk of ‘fighting climate change’.

    No such fight exists nor will it ever.

    FamousDrScanlon said:

    “For over 30 years it’s been nothing but talk & empty promises/policy.

    What’s to admit? The humans are Maximum Power Principle puppets. Blame the universe because the humans are not in control of anything.

    Below, Robert Hunziker makes a compelling case that totalling ignoring climate change, no conferences or books, etc would have resulted in less emissions today.

    November 20, 2020

    Expert IPCC Reviewer Speaks Out

    “The upcoming 26th COP (Conference of the Parties) to be held November 2021 in Glasgow is on the docket for scientists and bureaucrats, as well as big moneyed interests, to knock heads in a formal setting to discuss the state of the planet. If all goes according to plan, like past COPs, powerful economic interests will sabotage what would otherwise be a rather dim forecast of a planet in various stages of collapse, some terminal.

    We’ve seen this act (COP) repeat over and over, ever since COP1 in Berlin in 1995, as each successive COP-ending-ceremony finds the Parties congratulating each other, slaps on the back, for one more successful climate conference of 20,000-30,000 able-bodied professionals wiped-out from overconsumption of Beluga caviar and Domaine de la Romanee-Conti, but subsequently carbon emissions increase the following year, and every following year thereafter. What’s to congratulate?

    More to the point, the annualized CO2 emissions rate is +60% since COP1, not decreasing, not going down, not once. After 25 years of the same identical pattern, it doesn’t take a genius to figure out that the take-home-work from all 25 COPs mysteriously turns into the antithesis of the mission statement of the Intergovernmental Panel on Climate Change.”

    That’s just the COP-out conferences. What about all the other conferences & conventions & big enviro NGO’s & Government paperwork & employees jetting the planet to tell each other lies about how were going to adhere to our climate policies this time? No really we mean it this time! Fuck off. Year after year for decades. Only a fucking child would continue to believe this bullshit. I bet half a fucking forest has been mowed down just for all their paper handouts at conferences over the decades.

    I’m well schooled in the psychology of denial & all evolutionary explanations for it, but we’re well past that & I don’t need Garrett to tell me what I knew over a decade ago.

    If it was up to me I’d de-fund all climate talks, lay-off dead weight government ‘climate policy’ bureaucrats, outlaw environmental NGO’s & cancel ‘the science’ too, because it’s not needed either.

    We’ve done nothing to curb – went the other way, Yeah Globalisation!- nor will we ever intentionally slow down.

    Hopium spewers are as full of shit as political-economic climate deniers & twice as irritating. Fuck them too.”

    “More to the point, the annualized CO2 emissions rate is +60% since COP1, not decreasing, not going down, not once. After 25 years of the same identical pattern, it doesn’t take a genius to figure out that the take-home-work from all 25 COPs mysteriously turns into the antithesis of the mission statement of the Intergovernmental Panel on Climate Change.”

    If I were an economist, I call abysmal failure ‘Negative Progress’

    BTW, contrary to dumb deniers claims, the IPCC was not formed to steal their fossil fuel freedom (all data points in the opposite direction/MOAR).

    The IPCC was created to control policy. Delay delay delay. It’s a big lumbering super conservative body & always a few years behind…by design.

    It’s worked to perfection as far as the rulers & managers are concerned – all emissions data points in the opposite direction/MOAR.

    Humans are a wonder. Decades of total failure yet the faith in a last second human awakening plus some not yet invented sky vacuums is unwavering.

    clog, perhaps you’re right to string folks along with false hope.

  5. makati1 on Thu, 10th Dec 2020 3:36 pm 

    “Many would like to believe that, in the months ahead, we shall be returning to a time of accelerating progress in society, or at least of relative safety.”

    Many believe in unicorns and heaven also, but neither are real. Growth is over for the West. Contraction is its future. Growth is still possible elsewhere, but it will be curtailed, compared to pre 2020. We are on the down slope of human existence.

    We were given the greatest opportunity in history to make a heaven on earth (FF energy) and, instead”, we made Dante’s Hell. If Westerners think it will all go back to “normal…do they consider hell normal? The road ahead is not paved with gold. It is paved with bullshit, lies and pain. More of the same for Amerikans, only worse

    The Great Reset may not succeed, but the change is permanent. Are you prepared for the future? I am.

  6. FamousDrScanlon on Thu, 10th Dec 2020 3:43 pm 

    Mak, I happen to be superstitious so I believe in miracles. Humans will succeed and we will populate the solar system. I for one believe I will live to 150 becuase of age defying pills I am taking. I know you plan on living to 100 plus. Maybe we can meet up someday diapers and all! LOL

  7. zero juan on Thu, 10th Dec 2020 4:22 pm 

    More of jaunPpeee and his DrDumbass. Fuck Pppeee and his madness

    FamousDrScanlon said Mak, I happen to be superstitious so I believe in…

    FamousDrScanlon said clog stfu about decarbonizing & Pairs accords…

  8. makati1 on Thu, 10th Dec 2020 4:22 pm 

    Insanity is growing on P.O. lol

  9. Duncan Idaho on Thu, 10th Dec 2020 4:23 pm 

    41 days of pure hell: The Fat Boy can’t handle the emotions triggered by his defeat

    While good at ripping people off, not the brightest porch light on the block

  10. Duncan Idaho on Thu, 10th Dec 2020 4:30 pm 

    “He’ll see for what will probably be the first time in his life that there’s no judge he can buy (including the one he assumed he was buying, who has at least shown herself to be above mob-style corruption; hey, we’ll take it), no fixer he can bribe, no idiot cousin he can put on the payroll to fix things.

    For the first known time in 74 years, Fat Boy morality has met normal morality, and normal morality has won.”

  11. Diaper Don on Thu, 10th Dec 2020 5:56 pm 

    The Grifter and chief will drag this out as long as he can the sucker maga heads still have some money left in there pockets to give to the fat bastard.

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