Being a Force for Good Is Part of Your Company’s License to Operate
How do we measure our success as corporations and as individuals? And what should we do about the divergence between the two? This is a dilemma for the chief executive officer who finds that what the customer wants isn’t the same as what the board wants.
This paradox means it’s near impossible for them to meet the varying needs of their stakeholders. And although the board tends to still be focused on earnings before interest, tax, depreciation, and amortization (EBITDA) and seeing as far as the next quarter’s numbers, it’s the consumer who will shape the long-term direction of our corporations.
I see a time very soon when being a force for good in the world will be a part of a company’s basic license to operate. The quality of the employee experience, the strength of a company’s community convictions, and their role in environmental sustainability are not yet tied to the top and bottom line. But it’s only a matter of time before they will have to address these topics.
Taking action on the things that matter is more than moral prodding and good press. Companies that actively work toward the UN’s Sustainable Development Goals experience 18% higher returns on investment. Companies that are culturally and ethnically diverse are 36% more profitable.
Conversely, leaders who don’t sense and continuously respond to these shifts risk the long-term future of their business. To quote the authors of Net Positive, “The economics of business as usual will not favor them, society won’t accept them, and younger generations won’t work for them.”
So how long will it be until we see more Unilevers or more Canvas? How long until the Fortune 500 and Forbes lists are updated to include more than sales, profit, and market value? And how long until more (necessarily) diverse boards will become more creative in their thinking about stakeholder value over shareholder value?
Increasing amounts of data support the argument that businesses that make a commitment to people and the planet do well. This should come as good news, as it lessens the risk and apprehension for CEOs who are contemplating making a pivot.
But CEOs are busy people who often do not have the thought space and resources to think about what they and their organizations stand for beyond their daily tasks. And so unless we transform the way we define CEO performance, then demonstrably doing good in the world feels like too much of a luxury for many.
Courageous companies that do make the change are those in which the board allows and supports the move—enabling the CEO’s role to change to reflect the company’s renewed focus. The positive effect spreads as the firm reaps benefits and, in turn, nudges other organizations to think about doing the same.
Will your organization be one of the trailblazers?
For another perspective on sustainable leadership, David Astorino shares his thoughts on doing good and generating financial returns in his post Why Leaders Need to Shape Sustainable Organizations.