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The financial crisis of 2008 adversely affected global economies due to a focus on performance at the expense of everything else. However, we are now living in a world where the focus on the shareholder is shifting to a focus on the stakeholder because you cannot enrich the shareholder at the expense of the other stakeholders: employees, consumers, regulatory bodies and society.
Stakeholder management means that in order for a business to be sustainable and prosper, it has to produce profits over time, but that should not be its sole purpose; the focus has to shift to the whole rather than its parts.
Nobel prize-winning economists have called for measures of economic performance that go beyond GDP to include social and environmental growth by encompassing the vision of a more value-led system: ‘responsible capitalism’. This heralds a new wave of corporate social responsibility where businesses act as agents of social change.
The idea is to reinvent capitalism by doing business grounded in ethics. Even though business savvy is important, adding societal values to financial valuations has proven to be good for business, and organisations with a conscience are benefiting from the ‘do good’ principle by adopting business practices with an underlying commercial purpose, without losing sight of their values. Green initiatives, diversity, sustainability and other people-friendly plans all come under the umbrella of conscious capitalism.
The concept goes back to Adam Smith, the father of modern economics, who said that people – even when acting on self-interest – could be led towards empathy and benevolence out of a desire for peer approval.
Paul Polman, CEO, Unilever, says that a business has to learn to be successful while contributing to society and supporting ecosystems and biodiversity: “We do not have to win at the expense of others to be successful… winning alone is not enough, it is about winning with purpose.”
PepsiCo is remodelling the relationship between business and society by partnering with Waste Management Inc to build public recycling kiosks offering incentives for consumers to deposit empty bottles and cans. PepsiCo also hired an official from the World Health Organization to be chief scientist, and examine the the health implications of its products.
General Electric has reshaped around ‘eco-imagination’ which is a business strategy with a societal purpose.
Corporations with a conscience can also do well financially. In fact, empirical research suggests that this altruistic approach does, in fact, positively contribute to profit and loss figures, winning consumers and building brand loyalty.
– Fauzia Kerai Khan
The writer is Chief Consultant, i&b Consulting, Training, e-Learning.
First Published in the Careers Section of The DAWN National Weekend Advertiser on June 16, 2013.