Modern civilization is at a crossroads, at a potential inflection point in its historical evolution. The scientific community has advised that the window for decisive collective action to stabilize greenhouse gas emissions and avoid catastrophic impacts on people and the planet will close within a decade. The COVID-19 pandemic has created one of the worst health and socio-economic crises the world has experienced in a century. Inequality is on the rise, and shifts in technology, national politics and international relations are growing in frequency and disruptive force.
No business is immune from these and other major changes. In this dynamic new operating context, no firm’s ability to create and sustain value can be taken for granted. There is simply no room for complacency or insularity in management teams and boards.
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To this end, business leaders in this new era must look more rigorously beyond their firm’s near-term operations and financial results, improving their understanding of how underlying economic, social, political, technological and environmental conditions are evolving and likely to affect their firm’s operations and prospects over time. And they must proactively translate this wider appreciation of the drivers of enterprise value into strategies and practices that simultaneously benefit shareholders and other stakeholders, out of a recognition that such synergy is a source of further firm competitiveness and resilience.
This book focuses on the practical actions that all boards of directors and business leaders can take to be better prepared to engage these risks and opportunities more diligently and effectively. It defines a systematic agenda to strengthen board and management processes so that they are better able to generate maximum synergy between business and societal value creation, illustrated by concrete examples of how leading companies are creating long-term enterprise value while contributing to a more just, inclusive and sustainable future for their economies and societies. It outlines specific ways corporate leaders can step up, speak out and act on such issues as addressing climate change, contributing to economic recovery, respecting human rights, reducing inequality, building new skills, responding to pandemics and systemic shocks and ensuring responsible data use and privacy as part of their core business strategy.
The book focuses on four essential areas of business leadership required to create sustainable enterprise value through the rigorous implementation of the principles of stakeholder capitalism and full integration of environmental, social, governance and data stewardship (ESG&D) risks and opportunities. We add a “D” to the familiar “ESG” construct to take account of the rising data intensity of business value creation and its increasingly significant implications for stakeholders and society, as these are not well addressed by current ESG theory or practice.
The specifics of the approach we outline will vary based on industry sector, jurisdiction, size and ownership structure, but these four areas of required action are relevant for every company, everywhere. With the recent resurgence of interest in stakeholder capitalism, firms at the forefront of the movement are implementing reforms in each of these areas:
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Corporate governance and oversight: Boards of directors are taking a more integrated approach to governance by strengthening their oversight of environmental, social, governance and data stewardship (ESG&D) risks and opportunities alongside financial and operational ones. They are being more explicit about their duty to stakeholders, including but not only shareholders. They are taking a more proactive role in stewarding corporate purpose, culture, capital allocation and long-term value creation in addition to oversight of short-term risks and performance. And they are adapting their board’s organization, composition and stakeholder engagement models to be fit for these purposes.
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Corporate strategy and implementation: Leading executive teams and managers are aligning their sustainability strategies with their corporate strategies and their core business targets and incentives. They are strengthening enterprise management of material and salient ESG&D risks and opportunities and investing in innovative science, technology and new business models to drive social and environmental impact. They are developing diverse talent and more inclusive corporate cultures. And they are undertaking more systematic and transparent engagement with their stakeholders—employees, customers, suppliers, investors, communities and governments.
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Corporate reporting and accountability: Leading companies and investors are driving the agenda for a transformation in corporate disclosure and reporting, alongside accountants and standard-setting bodies. They are announcing public goals and targets for their most material ESG&D risks and opportunities and starting to report on their performance against these in a more consistent, transparent and integrated manner as part of their annual reporting cycle to investors. These leaders are recognizing the need for an international sustainability reporting standard and supporting collective efforts to develop one.
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Corporate partnerships and systemic change: More companies are acknowledging the need for systems-level change to secure and sustain the vitality and even viability of their operating context. They recognize that challenges such as tackling climate change; developing a well-skilled future workforce; addressing racial and other forms of inequality; reforming tax systems; transforming economic, energy, health and food systems; and achieving the Sustainable Development Goals and the Paris Climate Agreement, all impinge upon their ability to create sustainable enterprise value. And addressing these challenges requires collective action with other actors. Even the largest corporations must build alliances with competitors, other companies, governments and civil society organizations to achieve the type of systems-level transformation that will ensure their future competitiveness and even survival. New models of partnership are essential but often difficult to build and sustain without strong business leadership.
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Transformative changes in corporate priorities, behaviours and business models remain the exception rather than the norm in each of these areas, let alone across all of them. Systematic implementation of the principles of stakeholder capitalism and integration of ESG&D risks and opportunities at a practical level by boards, management teams, accountants and investors have a long way to go.
The same can be said of governments and what they are doing to drive transformation in private enterprises and markets. A vanguard is starting to implement the necessary policy, regulatory and fiscal reforms and to shift market signals, such as reforming corporate law and taxation, putting a price on carbon and mandating corporate disclosure of climate risks, inclusion and diversity and human rights due diligence. Yet, major governance gaps and market failures remain in most countries.
The trend, however, is in the right direction. The purpose of this book is to help accelerate and scale this shift towards a more economically, socially and environmentally sustainable model of enterprise value creation by clarifying what it means in practical terms for the leadership of firms.
We begin in Part I by examining the secular forces that are transforming the business context and fuelling the resurgence of stakeholder capitalism as a directional concept. This is followed by a thematic overview of the new business leadership agenda compelled by these mega-trends.
In Part II, we break down this leadership agenda into specific actions in the areas of corporate governance, corporate strategy, corporate reporting and corporate partnerships. We outline priorities and provide examples of good practice and lessons learned in each of these four areas, drawing on the experience of companies that are pioneering change.
The concluding chapter summarizes this practical guide to creating sustainable enterprise value through the full integration of ESG&D risks and opportunities, which is to say the rigorous implementation of stakeholder capitalism. We conclude with a reflection on the mindsets and skill sets that are now required of business leaders and why they will become even more important in the future.
1.1 The Imperative for Fundamental Change in Public and Private Economic Governance
Over the past three decades, the forces of market liberalization, globalization, democratization, deregulation and technological innovation have created some of the most fundamental and rapid changes ever experienced on the planet. These changes have measurably improved the lives of several billion people around the globe. Yet, the unparalleled opportunities that have been created for many have been tempered by the persistence of deep-seated structural inequality and economic insecurity for hundreds of millions of people, challenges to social cohesion and growing environmental degradation. Even before the global financial crisis in 2008 and the global COVID-19 pandemic, there was growing awareness of the need to address systemic market failures and governance gaps with the purpose of tackling growing inequality, social unrest, political polarization and nationalism and the relentless march of climate change, alongside other threats to our ecosystem. Today, there can no longer be any doubt. Major changes in public and private governance are needed.
The COVID-19 pandemic has exacerbated these challenges. It has had far-reaching implications for peoples’ lives, livelihoods and learning in almost every country.1 Its impact has been devastating for hundreds of millions of people, both directly and indirectly, as well as for certain industry sectors and millions of small businesses and community organizations. It has widened inequalities and faultlines in our political, social and financial systems while accelerating longer-term technological, geopolitical and socio-economic shifts. Meanwhile, the systemic challenges of climate change and resource insecurity, especially biodiversity and water loss, continue largely unabated and the human and economic costs of racial, gender and other forms of injustice and inequality continue to grow.
Future generations will ask the following questions:
(i)
How did leaders in government, business and civil society respond to the global pandemic, climate change, natural disasters, protests around inequality and injustice, and related deterioration of social cohesion and international cooperation in the late 2010s and early 2020s?
(ii)
Emerging out of these synchronous crises, did leaders harness the opportunity to strengthen the resilience of essential institutions and systems and build back better towards more just, inclusive and sustainable societies and economies? Or—as happened in the wake of the global financial crisis—did they fail to seize the moment for transformational change?
Over the past few years, countless op-eds, articles and reports have been written, thousands of online meetings, panels and events convened, several major intergovernmental declarations issued, multi-stakeholder coalitions established, and numerous proposals put forward on how to “build back better” from the pandemic. For example, in June 2021, essentially all the world’s governments and its leading workers and employers organizations issued a consensus Global Call to Action for a Human-Centred Recovery That Is Inclusive, Sustainable and Resilient with a detailed roadmap of policy and other commitments to “build forward better” from the COVID-19 crisis.2 Earlier that month, G-7 leaders issued a 25-page summit communique entitled Our Shared Agenda for Global Action to Build Back Better along with a Health Declaration and Nature Compact.3 In 2020, the World Economic Forum and its multi-stakeholder leader-level communities framed the leadership challenge and opportunity as The Great Reset, with its founder and executive chairman, Professor Klaus Schwab, arguing that “we need a ‘Great Reset’ of capitalism that steers the market toward fairer outcomes, ensures that investments advance shared goals, such as equality and sustainability, and harnesses technology to support the public good.”4
In August 2021, the Intergovernmental Panel on Climate Change (IPCC) released its Working Group I contribution to IPCC’s Sixth Assessment Report,5 which UN Secretary-General, António Guterres, referred to as
a code red for humanity. The alarm bells are deafening, and the evidence is irrefutable: greenhouse-gas emissions from fossil-fuel burning and deforestation are choking our planet and putting billions of people at immediate risk. Global heating is affecting every region on Earth, with many of the changes becoming irreversible. The internationally agreed threshold of 1.5°C is perilously close. We are at imminent risk of hitting 1.5°C in the near term. … All nations, especially the G20 and other major emitters, need to join the net-zero emissions coalition and reinforce their commitments with credible, concrete and enhanced nationally determined contributions and policies before COP26 in Glasgow.6
Although the specific details of the many evolving recommendations and initiatives may vary, there is strong consensus beginning to emerge around the level of ambition and priorities that need to be addressed. Specifically, there is an increasingly unified call for individual, institutional and systemic change to deliver outcomes that are:
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Just: This calls for clear and consistent recognition of the dignity and worth of every human being. In turn this requires decision-making by public and private leaders that is morally right and fair, founded on respect for human rights and based on reliable data, analysis and reason. The pandemic has brought into sharp relief the injustice that millions of essential workers, from healthcare to logistics and retail, earn less than a living wage in most countries. And they continue to do so, despite risking their lives to serve others who have much greater economic security and face much less personal risk. The ongoing reality of racial and ethnic injustice in many countries has also become more stark to more people because of the pandemic and following high-profile incidents of intolerance and violence, including brutality against peaceful citizens from law enforcement officers in many countries. Likewise, the structural inequality and injustice of low-income households and communities, and especially women, being the most vulnerable to the risks and costs of public health, environmental and economic crises, and shocks such as the pandemic, technological disruptions, a changing climate and water insecurity. In almost every country, they are far less able to access social safety nets and other services to mitigate these risks and costs, even when such mechanisms exist. Even before the pandemic, there were growing concerns about the challenges of achieving a “just transition” in the shift towards a digital and low-carbon economy. The need to focus on justice and a “just transition” is more important than ever.
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Inclusive: This requires concerted public and private sector efforts to include as many people as possible in improved access to social benefits, political participation, economic opportunity and essential goods and services. It calls for a particular focus on those who are most vulnerable or who are currently excluded based on income, gender, race, ethnicity and other types of identity. Closely linked to inequality and injustice is the fact that many people are excluded from access to affordable healthcare and education, to economic opportunities and to having a political voice. The nature and extent of their exclusion is often based on deep-seated structural obstacles and circumstances beyond their own control. The pandemic has made this exclusion even more stark. It has also raised the obstacles that individual households and communities must overcome to achieve greater access and opportunity. Examples include smallholder farmers and micro- or small-scale entrepreneurs who lack access to basic inputs, financing and markets, and racial and ethnic minorities who find it more difficult to finish education, find affordable housing and gain access to financial services and jobs in most countries. Examples also include low-income students who are falling even further behind their contemporaries due to digital exclusion and crowded living conditions. And they include women who are bearing an even heavier burden than normal of caring for children and the elderly while also making up most of the essential workers, and all too often, facing discrimination and harassment at work. Public policies and business models that are intentionally inclusive in their design and implementation are more important than ever.
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Sustainable: This requires a public and private sector commitment to achieving development that meets the needs of the present without compromising the ability of future generations to meet their own needs.7 In particular, strong consensus has been emerging on the need to decouple economic growth from high carbon emissions, the overuse of natural resources, especially water and biodiversity, environmental degradation and pollution, and the exploitation of people. Such decoupling will be essential to tackle the inter-related challenges of poverty, climate change, natural resource scarcity and human insecurity. Despite the slowing of economic activity and growth due to the COVID-19 pandemic, the overall trajectory towards climate-driven catastrophe continues to accelerate and escalate and the number and severity of natural disasters, from wildfires and drought to hurricanes and floods continue, to grow. Many see the global impact of the pandemic as a precursor to the potentially far worse systemic impacts of climate change. Green public policies, new technologies, sustainable financing and infrastructure and more efficient, circular and regenerative business models to achieve a low-carbon or net-zero carbon economy that at the same time create decent jobs are more important than ever.
Just. Inclusive. Sustainable. Readers may ask, “[S]o what is new?” The Universal Declaration of Human Rights has been around since 1948, for example, and there has long been calls for better workers’ rights, civil rights and social and environmental justice, years before recent global social movements such as #MeToo, #BlackLivesMatter and #ExtinctionRebellion. In 2011, the UN Guiding Principles on Business and Human Rights were unanimously endorsed by the United Nations Human Rights Council. Likewise, Sustainable Development has been a globally agreed ambition since the UN Conference on Environment and Development in 1992, popularly known as the Rio Earth Summit. It has been given further impetus since 2015, when more than 190 Heads of State signed up to implement both the Sustainable Development Goals in September and the UN Paris Climate Agreement in December of that year.
Over the past two decades, numerous global, national and city-level commissions and reports have explored the types of public policies, laws, regulations and market incentives that are needed to drive towards these goals or to avoid the risks and costs of inaction. Other platforms have identified the priorities for private sector leadership and the actions that corporations, financial institutions, social entrepreneurs and different industry sectors should take to respect human rights, build more inclusive business models and achieve sustainable development.8 There have been detailed studies on the high economic and health risks of epidemics and pandemics and how to avoid them. There is widespread agreement among policymakers and business leaders in many countries on the crucial role of science, technology, data and innovation in achieving these goals, albeit with some exceptions. There are also many guidelines for actions that can be taken by universities and research groups, non-governmental organizations, women, youth, labour and indigenous peoples’ groups, and civic and community-level leaders.9
In short, we largely know what is needed and have known for some time. But despite many individual examples of progress being made, there has been a collective failure to achieve the speed, scale and systemic impact that is required. Business, political and other leaders of society have been too complacent. Most have been too comfortable with the status quo. Change has been incremental, at best. Countless projects and initiatives have been launched, but there have been too few system-level changes achieved. Companies have developed new technologies, products, services and metrics, but most of them have not done enough to fundamentally realign their core strategies and business models to achieve measurably beneficial outcomes or to avoid negative impacts on people and the planet. Governments have changed some laws, regulations and market incentives, but too few in too few places. Most of the recovery and stimulus packages after the global financial crisis, for example, failed to incorporate conditions or incentives for more inclusive and green policies and practices, although this gap has been more effectively addressed by pandemic recovery initiatives.
The extraordinary events of 2020 and 2021 have given humanity a “wake-up call” that is impossible to ignore. They have created a universal sense of urgency anchored in a greater sense of human connectedness and common cause, despite the precipitous decline in physical gatherings and travel. More than at any other time in our generation, recent events have highlighted the systemic and structural inequalities and injustices that persist in almost every country. They have made us aware of the synchronous and cascading nature of large-scale humanitarian, economic and natural shocks and crises. Above all, recent events have demonstrated the failure of many of our current institutions and systems to deliver outcomes that are just, inclusive and sustainable. For example, our health systems, food systems, energy systems, social security systems and systems for financial and digital inclusion have all been put under severe strain by the pandemic, high levels of inequality and the climate crisis. Even in the world’s wealthiest countries, these critical systems are arguably no longer fit-for-purpose.
Clearly, governments have the ultimate responsibility for enabling their societies to meet these pressing challenges through the necessary changes in public policy and governance.10 But governments face serious constraints. These range from fiscal constraints and inadequate institutional capacity to lack of political will and debilitating factionalism to corruption, repression and situations of violent conflict. Even in situations of good public governance, the challenges are often too complex and multi-dimensional, and the resources needed to tackle them too distributed and constrained, for governments to act effectively alone.
Business leaders and companies have a crucial role to play. This is especially the case for large, global corporations. Given the scale of their activities and the scope of their networks and relationships, the characteristics of their corporate governance, strategy, reporting and partnerships can impact the lives of millions of people and the planet, both in the immediate and in the long term. Indeed, they are increasingly compelled by business logic to act—the logic of sustainable value creation and stakeholder capitalism, which recognizes that many aspects of these challenges are not only social concerns but also material factors in enterprise value creation that need to be fully integrated into strategy formulation and management practice. This is the systemic improvement society requires of private sector governance and management to accompany that which is needed in public governance to secure stronger progress towards a just, inclusive and sustainable future.
1.2 The Business Imperative to Translate the Principles of Stakeholder Capitalism into Practice
To be certain, many companies have started to respond over the past two decades. They have established policies and systems to manage and report publicly on their sustainability or environmental, social and governance (ESG) performance alongside their financial and operational performance, and to strengthen mutually beneficial mechanisms for stakeholder engagement. The leaders have also started to work together collectively to agree on shared principles and goals for implementing specific aspects of stakeholder capitalism and for prioritizing ESG&D issues that need to be addressed at a systemic level. But much more work is needed by all companies, even the pioneers, to translate the principles of stakeholder capitalism into rigorous and systematic practice.
1.2.1 Firm-Level Policies and Practices
Hundreds of companies are taking actions at the firm level to embed the management of ESG risks and opportunities into their core business operations and supply chains. One of the best barometers for assessing the depth and breadth of a company’s sustainability or ESG&D performance and its engagement with and impact on stakeholders is through its public reporting on these. Research by KPMG in 2020 concluded that about 80% of the top 100 companies by revenue in each of 52 countries and jurisdictions surveyed now issue corporate responsibility or sustainability reports, up from about 25% in 2001–2002.11 KPMG also concludes that 90% or more of the world’s 250 largest companies by revenue, as defined by the Fortune 2019 ranking, produce a sustainability report and have been doing so for over a decade. Furthermore, third-party assurance of these reports and their data is also on the rise.12 In 2021, for example, the Center for Audit Quality found that 95% of S&P companies have detailed ESG information publicly available and that more than half had some form of assurance or verification over their ESG metrics.13
The ambition of corporate ESG goals and targets is also increasing. Take climate for example. Leading companies are starting to set targets not only for decreasing the absolute amount and intensity of carbon emissions in their own operations, but also along their supply chains. A growing number is setting even more ambitious science-based targets and commitments to achieve net-zero emissions by or before 2050, in alignment with the Paris Climate Agreement. Likewise, in areas such as water and biodiversity, companies are moving from operational efficiency and management goals within their own “fence” to broader watershed and landscape-wide commitments and to nature-based solutions. A small vanguard of companies is going a step further and making public commitments to environmental and socio-economic practices that deliver regenerative, restorative or net positive solutions that aim to restore and strengthen ecosystems and nature’s carrying capacity. These efforts extend beyond the mitigation of negative environmental impacts and externalities. Proactive stakeholder engagement and the achievement of mutual benefit and accountability between a company and its stakeholders are essential in advancing most of these goals.
More companies are also undertaking human rights due diligence to identify, manage, monitor and take accountability for their salient human rights risks. This includes but goes beyond adherence to core and other legally binding labour standards and setting public targets for diversity and inclusion within their own operations and employment practices. Both the COVID-19 pandemic and the climate crisis have highlighted the challenges of inequality and vulnerability within company value chains and the communities where they operate. As a result, leading companies are starting to address issues such as living wages and incomes, accelerated climate action and more holistic approaches to employee well-being. Again, stakeholder engagement and accountability are key. As Professor John Ruggie and his colleagues have noted, “the implementation of human rights due diligence by companies—properly done—brings the concerns and interests of affected stakeholders into greater prominence in corporate decision-making at both the operational and leadership levels, and … it offers a window into what one effective and viable path toward ‘stakeholder capitalism’ looks like in practice.”14
Yet, despite the progress being made, in the absence of mandatory disclosure of and accountability for ESG performance, these pioneer companies remain in the minority of the world’s estimated 63,000 publicly listed companies and the even larger number of private companies. While plans to implement mandatory disclosure requirements for corporate carbon emissions, human rights due diligence and diversity are being debated in the EU, much work remains for such reporting to become a mainstream driver of change. Equally, although substantial progress was made during 2020 and 2021 towards more commonly agreed ESG metrics, the ongoing absence of a generally accepted global reporting standard means that it is difficult for investors, regulators and other stakeholders to compare even the pioneering corporate reporters at the level of rigour and consistency that is required to drive large-scale transformation, let alone encourage the laggards to make faster progress. The agenda on sustainability target setting and public disclosure is, however, moving in the right direction.
Business innovation for social impact is also gaining momentum. A combination of incumbent companies and start-up entrepreneurs is chasing new business and market opportunities associated with developing new technologies, processes, products, services, financing and business models to meet social and environmental needs. In 2017, for example, the Business and Sustainable Development Commission concluded in its flagship report, “Our research shows achieving the Global Goals in just four economic systems [food and agriculture, cities, energy and materials, and health and wellbeing] could open 60 market ‘hot spots’ worth an estimated US$12 trillion by 2030 in business savings and revenue.”15 In 2020, the World Economic Forum’s report on the Future of Nature and Business concluded that 15 transitions in the three socio-economic systems of food, land and ocean use, infrastructure and the built environment, and energy and extractives could deliver US $10.1 trillion of annual business opportunities and 395 million jobs by 2030. The report also added a sobering warning of the severe risks and costs of inaction.16
The world’s institutional investors are also markedly increasing ESG screening, investment products and corporate engagement activities with a focus on integrating these risks and opportunities into their policies and decision-making. A July 2020 report estimates, for example, “The value of global assets applying environmental, social and governance data to drive investment decisions has almost doubled over four years, and more than tripled over eight years, to $40.5 trillion in 2020,” and, “the size of ESG teams at money managers has also grown across the top 30 money managers, by 229% compared with 2017.”17 Analysis by Bloomberg Intelligence predicts, “Global ESG assets are on track to exceed $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total assets under management. A perfect storm created by the pandemic and the green recovery in the U.S., EU and China will likely reveal how ESG can help assess a new set of financial risks and harness capital markets.”18
Many companies are also making great strides in managing the risks and leveraging the opportunities of digital technology and big data. We are just at the beginning of understanding the opportunities of harnessing digital platforms alongside material and life sciences to address challenges in global health, education, food security, energy, water and digital and financial inclusion. At the same time, we are only in the early stages of understanding and mitigating some of the risks to people and planet posed by these new technologies and the scaled impact of the platforms they enable.
Over the course of 2020 and 2021, thousands of companies have responded to address the humanitarian and economic costs of the COVID-19 pandemic, in addition to focusing on their own business continuity and financial liquidity during the crisis. They have leveraged their core business capabilities, such as occupational health and safety protocols, manufacturing and logistics capacity, marketing and media outreach, as well as their philanthropic donations and volunteering and their voices as policy advocates.19 Organizations such as the World Economic Forum, Business Fights Poverty, the World Business Council for Sustainable Development, JUST Capital and national chambers of commerce, to name only a few, have established business and COVID-19 response platforms. Their collective goal has been to convene and mobilize the business response to COVID-19, to share good practices and to track performance.
1.2.2 Collective Principles and Commitments
Recent collective business leadership has also helped to provide a more solid conceptual foundation for the simultaneous pursuit of business and societal value creation. In 2019, both the World Economic Forum and the US Business Roundtable published seminal statements calling on companies to adopt a set of specific principles in this regard. The Forum’s Davos Manifesto refreshed a statement originally published in 1973, and it is outlined in Box 1.1. These statements provide a set of principles, although the clear challenge posed by them and addressed in this book is how companies can translate them into systematic practice.
Box 1.1 The Davos Manifesto
A. The purpose of a company is to engage all its stakeholders in shared and sustained value creation. In creating such value, a company serves not only its shareholders, but all its stakeholders—employees, customers, suppliers, local communities and society at large. The best way to understand and harmonize the divergent interests of all stakeholders is through a shared commitment to policies and decisions that strengthen the long-term prosperity of a company.
(i)
A company serves its customers by providing a value proposition that best meets their needs. It accepts and supports fair competition and a level playing field. It has zero tolerance for corruption. It keeps the digital ecosystem in which it operates reliable and trustworthy. It makes customers fully aware of the functionality of its products and services, including adverse implications or negative externalities.
(ii)
A company treats its people with dignity and respect. It honours diversity and strives for continuous improvements in working conditions and employee well-being. In a world of rapid change, a company fosters continued employability through ongoing upskilling and reskilling.
(iii)
A company considers its suppliers as true partners in value creation. It provides a fair chance to new market entrants. It integrates respect for human rights into the entire supply chain.
(iv)
A company serves society at large through its activities, supports the communities in which it works, and pays its fair share of taxes. It ensures the safe, ethical and efficient use of data. It acts as a steward of the environmental and material universe for future generations. It consciously protects our biosphere and champions a circular, shared and regenerative economy. It continuously expands the frontiers of knowledge, innovation and technology to improve people’s well-being.
(v)
A company provides its shareholders with a return on investment that takes into account the incurred entrepreneurial risks and the need for continuous innovation and sustained investments. It responsibly manages near-term, medium-term and long-term value creation in pursuit of sustainable shareholder returns that do not sacrifice the future for the present.
B. A company is more than an economic unit generating wealth. It fulfils human and societal aspirations as part of the broader social system. Performance must be measured not only on the return to shareholders, but also on how it achieves its environmental, social and good governance objectives. Executive remuneration should reflect stakeholder responsibility.
C. A company that has a multinational scope of activities not only serves all those stakeholders who are directly engaged, but acts itself as a stakeholder—together with governments and civil society—of our global future. Corporate global citizenship requires a company to harness its core competencies, its entrepreneurship, skills and relevant resources in collaborative efforts with other companies and stakeholders to improve the state of the world.
Source: The World Economic Forum, December 2, 2019
During the past few years, several leading global business and investor networks have set ambitious new requirements and goals for their membership. In December 2020, for example, the World Business Council for Sustainable Development, created at the time of the 1992 Rio Earth Summit and with more than 200 of the world’s leading corporations as members, established the following five membership criteria based on sustainability performance. It called on all its members to be able to adhere to or explain their performance in each of these areas by December 2022:
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Set an ambition to reach net-zero greenhouse gas (GHG) emissions, no later than 2050 and have a science-informed plan to achieve it.
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Set ambitious, science-informed, short and mid-term environmental goals that contribute to nature/biodiversity recovery by 2050.
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Declare support for the UN Guiding Principles on Business and Human Rights by having in place a policy to respect human rights and a human rights due diligence process.
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Declare support for inclusion, equality, diversity and the elimination of any form of discrimination.
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Operate at the highest level of transparency by disclosing material sustainability information in line with the Task Force on Climate-related Financial Disclosures (TCFD) and align Enterprise Risk Management (ERM) with environmental, social and governance-related (ESG) risks.20
Institutional investors have also increased the ambition and reach of their collective action initiatives, especially on climate change. The Net-Zero Asset Managers Alliance, for example, was launched in December 2020. Governed by a group of six other investor networks, the alliance describes itself as “an international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, in line with global efforts to limit warming to 1.5 degrees Celsius; and to supporting investing aligned with net zero emissions by 2050 or sooner.”21 As of mid-2021, there were 128 signatories with US $43 trillion in assets under management. Other investor-led climate coalitions established since 2017 include the Net-Zero Asset Owner Alliance, the Paris Aligned Investment Initiative and Climate Action 100+. Investors are also starting to engage in collective action beyond addressing climate change. In 2018, the Investor Alliance on Human Rights was established, with some 170 institutional investors as members,22 and in 2020, 128 institutional investors came together to endorse a commitment to address systemic racism through their portfolios, corporate engagement and policy advocacy.23
In short, companies and investors of all sizes as well as industry sectors and their associations are starting to respond to systemic risks such as the pandemic, climate change, inequality, data privacy and other challenges. They are doing so in a way that aims to balance the interests of employees, communities and other key company stakeholders with expectations regarding financial performance, competitiveness and growth. These bottom-up shifts in behaviour point to a broader shift in corporate governance and management, which has come to be called stakeholder capitalism and framed as a counterpoint to shareholder capitalism. But, while this direction of travel has found expression in principles and a few legal frameworks, it has yet to be defined more specifically and systematically for purposes of practical implementation.
In the absence of such structured practical guidance, stakeholder capitalism remains more an aspiration around which there is growing consensus than the systemic shift in capitalism that leaders of all walks of society have been calling for.24 This book seeks to help move the stakeholder capitalism movement to this next level from the perspective of what companies themselves can do, both individually and collectively. It aims to provide companies with a practical roadmap for rigorous and widespread practice that will help to reset capitalism in line with the economic, social and political demands it faces in the twenty-first century.
1.3 What Stakeholder Capitalism Is and Is Not
Judging from the increasingly lively debate on the topic, the general notion of stakeholder capitalism—a business should be run in the interests of creating long-term value for shareholders AND other key stakeholders—is a contested and often misinterpreted concept. In its most fundamental sense, the concept has a long history and has taken different forms around the world. The contemporary formulation can be traced to US and European management theories that emerged in the 1960s and 1970s,25 were enshrined in the 1973 Davos Manifesto26 and have since been refreshed in the updated principles issued by the US Business Roundtable27 and the World Economic Forum28 in 2019. These high-profile restatements have generated a new wave of interest and resurrected an old polemic associated most famously with the economist Milton Friedman, who argued against the corporate social responsibility movement of the 1960s and 1970s by asserting in as many words that “the business of business is business.”29
The best way to improve the clarity and utility of this debate is to define more concretely what stakeholder capitalism is and is not.
1.3.1 What Stakeholder Capitalism Is Not
First, stakeholder capitalism is not state-directed capitalism. Quite a number of governments, such as Germany and Japan, have embedded the notion of shared value creation among shareholders and other stakeholders in their own way in their corporate governance statutes and cultures. But in doing so, none is aiming to supplant the role of the board as the ultimate locus of decision-making within firms. These governments are not seeking to substitute their judgements for those of directors and management teams in the strategic decisions and day-to-day running of their firms. There is no dirigiste picking of winners and losers by public bureaucrats as far as the allocation of resources and conduct of other aspects of business is concerned.
Second, in the same vein, stakeholder capitalism is not socialism through the back door. It does not hold that shareholder interests should be subordinated to those of other stakeholders, such as employees, or that businesses should do the bidding of governments in providing public goods. Rather, it posits that:
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the corporation, which is a legal construct of society that confers certain privileges such as limited liability and distinct tax treatment, is a vehicle for sustainable enterprise value creation;
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such enterprise value creation is distinguishable from the notion of near-term financial results or stock market valuation; and
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the universe of material contributors to and beneficiaries from enterprise value creation over time is certainly larger than the providers of the firm’s financial capital.
Third, just because shareholder capitalism—the view that companies should be run solely in interests of optimizing shareholder returns—is also focused on enterprise value creation does not mean that it is essentially the same thing as stakeholder capitalism. Critics making this argument30 say that companies run in the sole interests of their shareholders naturally take account of the material role of other stakeholders in creating such value because it is the job of their directors and managers to consider everything that could materially affect the firm’s financial performance and share price. If they don’t, their share price will suffer, and they will be out of a job. They argue that stakeholder capitalism anchored in sustainable business value creation is making a distinction without a meaningful difference. It is old wine in new, more socially presentable, bottles—a public relations exercise.
This argument is flawed. It should be abundantly clear from the long history of shareholders being blindsided (i.e., stock prices of individual firms abruptly crashing) as a result of unforeseen environmental, social and governance lapses that equity and bond markets are not fully efficient. Financial markets are a long way from adequately internalizing material non-financial factors, particularly risks and opportunities that typically play out within a firm over the medium to long term. They do not have perfect information, and neither do the directors and managers within a firm itself, particularly if they are operating within a governance framework that fails to systematically gather and apply actionable information about such medium-term and intangible factors. Just because the process of optimizing enterprise value creation—maximizing discounted cash flows—should in theory take account of all financially material considerations, both short and long term, doesn’t mean that companies actually do so in practice on a consistent basis. Stakeholder capitalism that is focused on sustainable enterprise value creation is a distinction with a big difference, and that difference is practice, which is the topic of this book.
1.3.2 What Stakeholder Capitalism Is: Sustainable Enterprise Value Creation
Stakeholder capitalism in conceptual terms is the notion of the firm as a social, rather than purely financial, construct, whose purpose is sustainable enterprise value creation rather than solely increased profitability and market valuation, which is to say shareholder value creation.
Sustainable enterprise value creation means generating sustained value for all of the firm’s principal stakeholders, including shareholders, employees, customers, suppliers, distributors and communities. This includes creating economic value as well as respecting people’s rights, building their human and social capital, and protecting and restoring natural capital, thereby reinforcing the strength of the social and environmental ecosystems in which the firm operates and hence its own performance over particularly the medium to long term. These three aspects—the creation of sustained and shared direct value for the firm’s stakeholders as well as wider societal value—are important in their own right, but they are also mutually reinforcing. Together they give effect to the three-dimensional meaning of sustainable in this context: value creation that is at once financially, socially and environmentally sustainable.
This definition of sustainable enterprise value creation manifests in clear objective and operational ways within firms that apply it rigorously.
Objectively, sustainable enterprise value creation includes the following core elements:
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robust, sustained profitability;
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decent work31 that includes respect for internationally recognized worker rights and protections and supports compensation that reflects productivity gains and includes an adequate “living” wage;
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respect for human rights more generally32;
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internalization of significant environmental externalities in the production (through their avoidance and abatement) and sale (through the price) of goods and services; and
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high standards of ethics and governance, including zero tolerance of bribery; avoidance of anti-competitive business practices; and fair payment of taxes in recognition of the vital role public services and administrative capacity play in maintaining a vital business enabling environment and social fabric.
Operationally, it is manifested in the systematic integration of the firm’s tangible and intangible, shareholder and other stakeholder, and pecuniary and non-pecuniary dimensions over the medium to long term in its governance processes and management systems. The material aspects of these need to be deliberately understood and consciously weighed in the firm’s governance and management. This is because a firm that takes care to steward its assets, investments, key relationships and social licence to operate in a way that produces shared and ongoing rather than narrow and transitory value, and that renews rather than depletes these elements, is more likely to optimize the value of the enterprise to all of its stakeholders, including shareholders, over time. A firm that is not producing fair value to its employees, value chain partners and communities is not likely to sustain a high level of performance over time, because it depends on these assets and relationships. This is especially true today when such intangible, non-pecuniary factors are becoming more material to value creation because of corresponding shifts in the underlying business operating context. Such shifts include changes in environmental regulation, consumer and employee attitudes about technology and the collection and application of data, social attitudes regarding discrimination and exclusion, the cost of cybersecurity breaches and insurance coverage, the state of public finances and services in many countries, the extent of precarity, unemployment and inequality in others, and so on.
The practice of stakeholder capitalism is thus the pursuit of sustainable enterprise value creation through the systematic integration of material so-called non-financial factors into the governance, management and reporting of firms. This is what ensures that related risks, opportunities and other considerations are fully internalized in decision-making. The systematic internalization of such factors through the diligent gathering of information and perspectives of the firm’s key stakeholders is what helps its board and management team make fully considered judgements about what is best for the firm’s capacity to sustain the creation of shared value over time. Simply put, stakeholder capitalism is about good governance—the application of greater rigour and wider due diligence in the running of a firm that is particularly important in today’s changing context.
The bottom line of stakeholder capitalism is that increases in shareholder value, particularly when interpreted in the extreme as the near-term stock price and earnings per share performance, may be a necessary condition, but it is certainly not a sufficient condition for fulfilment of the fundamental purpose of the firm: shared and sustained improvement in the value of the enterprise to all of its key stakeholders, including but not limited to its providers of capital.
The concept and narrative of stakeholder capitalism has gained—or more accurately re-gained—prominence in recent years, notably with the reissuance of the Davos Manifesto and Business Roundtable’s Statement of the Purpose of a Corporation as well as recent related EU initiatives, including its 2014 Non-Financial Reporting Directive,33 Action Plan for Financing Sustainable Growth34 and its recent Sustainable Corporate Governance Initiative, which received broad-based support during public consultations and appears likely to result in important changes in the near future.35 Yet, these are not novel notions. Stakeholder capitalism is not new. It has existed in various forms and business cultures for decades, even centuries, even if the term was not explicitly used.
1.3.3 Stakeholder Capitalism’s Diverse Historical and Legal Tradition
As outlined earlier, a stakeholder-oriented economic model is not new. In the UK, for example, corporations enjoying limited liability and tradable shares were originally restricted to those chartered by the Crown or an Act of Parliament, in principle to carry out a specific public interest activity like building a bridge or university.36 This practice evolved over time to extend to enterprises with a perceived quasi-public purpose such as promoting Great Britain’s economic interests abroad through the establishment of large trading companies in specific regions, early examples being the Company of Merchant Adventurers in 1553 and the East India Company, chartered in 1600. The then-private Bank of England’s 1694 charter made clear that its purpose was “to promote the public good and benefit of our people.”
Wider access by private companies to limited liability and the trading of shares was extended only in the mid-nineteenth century through passage of the Joint Stock Companies Act of 1844 and Limited Liability Act of 1855. But maximizing shareholder return was not the centrepiece of companies’ objectives or directors’ duties during the nineteenth century.37 Beginning in the early twentieth century, however, growth in the influence of investors combined with favourable jurisprudence helped to enshrine shareholder primacy as the dominant paradigm of corporate governance in the UK.38 The 2006 Company Act sought to meld these divergent traditions. It embedded a shareholder primacy reading of directors’ responsibilities into law but also indicated that they should “have regard” for the interests of other stakeholders. This ill-defined compromise formulation has come to be called enlightened shareholder value, but it has spawned endless debate about what it means in practice and in the event of litigation.
In the US, in the first half of the twentieth century, leading companies very publicly declared their commitment to weigh the interests of multiple stakeholders. Henry Ford famously declared: “There is one rule for the industrialist and that is: make the best quality goods possible at the lowest cost possible, paying the highest wages possible.” In 1929, General Electric’s chairman and president stated that they were running the company on the basis of a stakeholder theory of corporate governance without naming it as such:
If you will pardon me for being personal, it makes a great difference in my attitude toward my job as an executive officer of the General Electric Company whether I am a trustee of the institution or an attorney for the investor. If I am a trustee, who are the beneficiaries of the trust? To whom do I owe my obligations? My conception of it is this: That there are three groups of people who have an interest in that institution. One is the group of fifty-odd thousand people who have put their capital in the company, namely, its stockholders. Another is a group of well toward one hundred thousand people who are putting their labour and their lives into the business of the company. The third group is of customers and the general public. Customers have a right to demand that a concern so large shall not only do its business honestly and properly, but, further, that it shall meet its public obligations and perform its public duties—in a word, vast as it is, that it should be a good citizen.Now, I conceive my trust first to be to see to it that the capital which is put into this concern is safe, honestly and wisely used, and paid a fair rate of return. Otherwise, we cannot get capital. The worker will have no tools. Second, that the people who put their labour and lives into this concern get fair wages, continuity of employment, and a recognition of their right to their jobs where they have educated themselves to highly skilled and specialized work. Third, that the customers get a product which is as represented and that the price is such as is consistent with the obligations to the people who put their capital and labour in. Last, that the public has a concern functioning in the public interest and performing its duties as a great and good citizen should. I think what is right in business is influenced very largely by the growing sense of trusteeship which I have described. One no longer feels the obligation to take from labor for the benefit of capital, nor to take from the public for the benefit of both, but rather to administer wisely and fairly in the interest of all.39
Similarly, Johnson & Johnson’s Credo, approved in 1943, the year before the company transitioned from family to public ownership, and still in force today, states explicitly that its responsibility is to those using its products and services, employees, communities and stockholders in that order, stating at the end: “When we operate according to these principles, the stockholders should realize a fair return.”40 In the 1950s, Sears CEO Robert E. Wood argued that shareholders’ long-run profit could be enhanced by satisfying the needs and expectations of other stakeholders.41 General Motors’ 1964 annual report also reflected “a company recognizing the value being created by and for all its stakeholders.”42 This was the prevailing mindset in the American business community during the era of so-called managerial capitalism dating from the 1940s to the 1970s. These decades were a period of high growth and broadly rising prosperity in the US, suggesting at a minimum that a stakeholder capitalism corporate culture is not inconsistent with robust industrial competitiveness and economic growth, notwithstanding the counter-narrative that arose with the ascendance and continuing dominance of the shareholder primacy doctrine in the decades since.
Europe, Asia and Latin America have had a long and more durable tradition of companies being managed in the interests of long-term enterprise value creation for the benefit of all stakeholders. The important role played by family-controlled shareholder foundations and holding companies has certainly contributed to continental Europe’s distinct long-term, patient-capital corporate culture. There are over 3000 such foundations across Scandinavia, Germany and Switzerland. These account for a third of the GDP of Sweden and over half of the market capitalization of the Copenhagen Stock Exchange as well as significant share of the German and Swiss corporate communities.43 Germany’s strong base of medium-sized, family-owned industrial “Mittelstand” firms also fits within this management tradition. Although foundation-owned firms have many features in common with family businesses, they are distinguished by an additional and irrevocable commitment to the continuation of the company, that is, to sustainable enterprise value creation. As such, studies have shown that foundation-owned companies tend to have even longer time horizons than family-owned firms, which have been found to have longer time horizons than external investor-owned firms.44
Asia and Europe also have corporate governance legal frameworks and customary practices which embed many of the features of stakeholder capitalism. In Japan and elsewhere in East Asia, for example, the company and its stakeholders often perceive of themselves implicitly as akin to a family. The Japanese system has been described as
being based on ‘community logic’ against the US system which is based on ‘market logic’. In the UK and USA the tendency has been for the market to operate freely and in recent times for the state to pick up the social consequences, for example in unemployment pay and national assistance. In Japan, the tendency has been to regard it as preferable to prevent and delay potential tears in the social fabric and for government to act to mitigate the effects of any changes that cannot be avoided. This seems true at both company and national level and what it boils down to is belief that ‘the family’ comes first. Put another way, the fabric of society should not be wantonly or carelessly torn and if necessary, the state should step in to prevent it. … Of course, profit matters and is essential for survival, but to the Japanese it is not all that matters—even in these days when the importance of ‘shareholder value’ has become a sort of religion elsewhere.45
Owing to this cultural context as well as a tendency towards extensive industrial and bank cross-shareholdings or their equivalent (e.g., South Korea’s chaebol groups), corporate governance in Northeast Asia leans towards cooperation and consensus building among stakeholders—that is, the integration of multiple stakeholder interests into corporate decision-making, whether formally or implicitly, as well as a tendency to conceive of the corporation as ultimately a social rather than essentially financial construct. Indeed, for years, foreign investors have complained about the subordination of shareholder interests, sometimes vociferously. But while attitudes and practices have been changing in this respect, Northeast Asian corporate governance continues to exhibit a strong stakeholder capitalism ethos.
In South and Southeast Asian countries as well as Latin America, family-owned or family-controlled businesses dominate the corporate landscape.46 Approximately 85% of firms in the Asia-Pacific region are family-owned, including in China.47 McKinsey has estimated that the share of family-owned businesses among the largest multinational firms in the world could increase from 15% to 40% from 2015 to 2025, mainly as a result of the rising number of large family firms in the Asia-Pacific.48 In India as well, a tradition of large corporate family-owned firms prevails and there is a widespread use of company groups, often in the form of pyramids with a wide basis in many different activities and companies. In Asian and other emerging market firms, a family-centric governance model tends to be strongly preferred over the Western “professional” non-family governance model.49
Thus, the corporate governance culture of most of the world is geared towards the long-term sustainability of the company and preservation of the stakeholder relationships supporting this purpose, which is to say stakeholder capitalism. It is no wonder that directors and executives from outside the US and UK are often befuddled by the debate over stakeholder capitalism there. They have been running their firms according to these precepts for decades. At least in this important respect, the Anglo-American system has some catching up to do, even if Asia continues to catch up in other aspects of good corporate governance.50 More precisely, given their own historical tradition of managerial capitalism, the US and UK have some important rebalancing to do in order to correct their overshooting in the direction of the primacy of shareholder interests during the past generation.
Much of this international consensus outside the US and UK is rooted in law, although for the most part these corporate governance codes remain at a high level, articulating mainly the duty of directors towards the corporation rather than a particular stakeholder such as shareholders. But even in the US, the stakeholder perspective on corporate governance has influenced jurisprudence if not statutory law. In the case of Paramount Communications v. Time Inc. in 1989, the state of Delaware’s Chancery Court allowed Time Inc.’s directors to reject Paramount’s takeover offer even though that offer maximized shareholders’ financial value. In that influential case, the pure shareholder primacy argument was rebuffed by the court.51 In the case of Credit Lyonnais Bank N.V. v. Pathe Communications Corp. (1991), the Chancery further promoted a stakeholder model on the basis that directors do not owe duties to any single interest group but to the corporation as a whole and “the community of interests that the corporation represents.”52 By 2000, 25 US states had amended their General Corporation Laws to incorporate aspects of the stakeholder concept, with most of the states expressly permitting directors to take into account the interests of stakeholders in their decision-making.53
One country that has a very specific statutory basis for a stakeholder approach to corporate governance is Germany. Its Stock Corporation Act, Codetermination Act and Corporate Governance Code formally frame a system of stakeholder participation in company decision-making or more precisely of employee participation. Large companies have a management board and supervisory board. For companies with more than 2000 employees, half of the members of the supervisory board are elected by the employees. For firms with between 500 and 2000 employees, the workers select one-third of the supervisory board.54 Management boards of large firms are required to have a director for labour affairs. In addition, works councils are required in which
[e]mployees participate in discussions and decisions about all matters pertaining to conditions of employment. … The works council also has rights of co-determination in the case of dismissals, in the field of employees’ vocational training, and in the case of grievances. In bigger companies, there must also be a small economic committee. This does not have rights of co-determination but rights to information—and these are extensive, including information on: the economic and financial situation of the company; the production and sales situation; the investment programme; rationalization projects and closures; organizational changes, including mergers; proposed changes in method. The idea behind the works councils is that co-determination, that is the right to participate in decisions (about matters that affect them, plus getting crucial background information about the enterprise), should promote trust, cooperation, and harmony. What actually seems to happen is that this helps improve the whole network of relationships between employer and employee, because the mere existence of a formal right to be consulted ensures that informal discussions occur. And the supply of information forms the background for participation at board level.55
It remains to be seen whether other countries will move to enshrine stakeholder capitalism more explicitly and specifically into their corporate governance statutes and if so how.
In a related development, some jurisdictions have begun to examine whether to create or expand a statutory basis for public-benefit or so-called Fourth Sector enterprises, returning in a sense to the original British approach to chartering public-purpose corporations.
Economies typically have three sectors: the public sector, the private sector and the non-profit sector (civil society non-governmental organizations). But in some jurisdictions,56 there is an emerging fourth sector combining market-based approaches of private companies with the social and environmental aims of the public and non-profit sectors. Organizations in this sector, often referred to as for-benefit enterprises, come in a wide variety of models, from mission-driven businesses, social enterprises and sustainable businesses to cooperatives, benefit corporations and faith-based enterprises, among others.57
For-benefit or public-purpose corporations are arguably the ultimate expression of stakeholder capitalism. They have been growing in number and size in recent years in the US, UK and elsewhere58 in response to perceived limitations of the shareholder primacy laws and practices in those jurisdictions. But while several countries have adopted new corporate forms and other legal and regulatory reforms in recent years to recognize for-benefits, the Fourth Sector Group, an organization dedicated to advancing the sector, has observed:
These are still quite nascent and only serve the needs of a very narrow range of for-benefit organizations. For most part, for-benefits are not recognized as a legally distinct class of entities. Thus, when for-benefit-minded entrepreneurs set out to create a new entity to realize their goals, they are typically forced to choose a for-profit or non-profit path, or resort to creating a complicated hybrid structure if they can find (and afford) the right legal advice. This often leads to them having to sacrifice their visions and accept burdensome trade-offs. This challenge is beginning to be addressed as for-benefit enterprises become better understood. As their potential for driving economic, social, and environmental progress is seen, the fourth sector will become more formalized and distinguished in law, complementing existing sectors while enabling for-benefits to drive sustainability and equity alongside profit.59
In sum, stakeholder capitalism is already practised and anchored in law around the world to a very considerable extent, albeit in different forms. But even in those jurisdictions where it is not well rooted, a change in public statute, corporate charter or ownership structure is not required to run a business according to these precepts. Rather, this can be achieved through a clear understanding of the concept, an appreciation of the drivers of its rising relevance and a commitment to practical implementation by the board and management team based on emerging good practice. There is no inherent barrier to joining the growing movement of companies across sectors and regions taking practical steps to respond to this new business leadership imperative.
This volume is intended to serve as a conceptual and practical resource for this new generation of business leadership, an exposition of the why, what and how of stakeholder capitalism and sustainable enterprise value creation. This introductory chapter has defined these concepts and provided a brief overview of their varied historical and legal manifestation around the world. Chapter 2 examines the recent shifts in the operating context of business that are driving the practice of corporate governance and management further in this direction, irrespective of legal and cultural context. Chapter 3 provides an overview of the five main thematic elements of an agenda to implement the principles of stakeholder capitalism diligently within a firm in order to enhance its capacity to generate shared and sustained enterprise value. Chapters 4, 5, 6 and 7 provide a more detailed, functional view of this action agenda: a practical guide for the conduct of boards, management teams, corporate reporting and strategic partnerships with outside organizations and constituencies to address systemic weaknesses in the social and economic context in which the firm operates, respectively.
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