In recent years, we have witnessed an uneven but determined march toward more responsible business practices that would allow for a more sustainable future. These practices, embodied in the UN Global Compact and echoed less than a year ago in a Business Roundtable statement, are being implemented by an increasing number of companies around the world that are committed to putting stakeholders, not just shareholders, at the center of the corporate mission.
Companies have donated cash, supplies, and equipment, and set research capacity to developing diagnostics and vaccines. The World Economic Forum has launched a platform to better coordinate these efforts.
Few would have guessed that public pledges to abide by this stakeholder mindset, which so often are a topic of conversation at the World Economic Forum and other gatherings, would be put to the test so definitively by the COVID-19 pandemic. An uneven response by governments across the globe has dealt a serious blow to the viability of many businesses and their diverse stakeholder sets and forced companies to step up not merely to assist in the fight and recovery, but to lead.
Just as after the crisis of 2008, some companies will emerge as either heroes or villains. The stories that develop will depend on how these companies navigate this moment for their employees, customers, shareholders, and other stakeholders. The companies that best weather this storm will be those living up to the values of the Business Roundtable statement.
Those that struggle in this moment, on the other hand, will be those focusing on their own short-term gain, often at their stakeholders’ expense. Living up to more than the shareholder mantra will position companies not only to contribute to the greater good in a time of need, but to survive an economic downturn and do right by their own employees.
Companies around the world have already stepped up to help many of their stakeholders directly and indirectly affected by the coronavirus. Take LEGO, for example; the Danish group pledged $50 million to help those affected by the virus.
That is laudable, but it is not the interesting part. LEGO launched two initiatives designed to reach different sets of stakeholders. First, it focused its efforts on helping children and families in urban areas — LEGO’s core customers — to make sure they had additional resources to learn and play. Second, recognizing its duty to a global community in crisis, LEGO also pledged to help children in war-torn and poverty-stricken areas.
Similarly, India’s Tata Consultancy Services pledged $200 million to those in affected communities. Recognizing its corporate strengths, it also went further, providing free education software and — critically — a patient tracker to help fight the virus.
Neither LEGO nor TCS — nor many other companies that have responded in the wake of the crisis — has placed its shareholders as the only stakeholders worthy of a response.
In contrast, the fossil fuel industry and others have for years pursued a shareholder-only approach in which stock value is put before workers’ rights, wildlife preservation, and the fight against climate change. Most recently, the industry’s pervasive influence on regulators resulted in the rolling back of long-standing U.S. Environmental Protection Agency standards for emissions — in the middle of a respiratory pandemic.
Make no mistake: The link between the fossil fuel industry’s contribution to climate change and pandemics such as COVID-19 is real. Nine out of every 10 of the world’s children breathe the toxic air created by these companies every day, often leading to chronic, underlying conditions that increase the number of people susceptible to COVID-19 and other respiratory afflictions.
The warmer temperatures created by greenhouse gases also play a role in allowing viruses — particularly influenza — to hit populations harder. A 2013 study from the Public Library of Science suggested that “fewer people are infected with influenza during warm winters, thereby leaving an unnaturally large fraction of susceptible individuals in the population going into the next season.” 2019 was the second-warmest year on record, continuing a dangerous trend that could leave populations more vulnerable to pandemics such as COVID-19.
This outbreak will permanently change expectations of business — likely in the same direction that the Business Roundtable and the UN Global Compact have already identified. To encourage more companies to develop a stakeholder mindset, we must convince skeptics that behaving this way is in their best interest. The coronavirus crisis is the first economic stumble since the signing of the Business Roundtable statement — but it will not be the last.
In the coming months, we should begin to measure companies against these stakeholder goals with the same fervor that we bring to analyzing quarterly earnings reports. Success or failure cannot simply be defined by the bottom line but should also incorporate measurements against the commitments that these companies have made publicly.
We should measure companies’ carbon output alongside revenue and the health of their employees in tandem with operating expenses. We ought to value their contributions to the greater good during a pandemic as much as the dividends a company pays its shareholders.
When we look back on the corporate response to COVID-19, it will become clear that companies living up to the values in the statement will have done the most good for themselves and the rest of the world. Those that are not — ill-positioned for the economic upheaval and doing little to solve the crisis — are certain to suffer for it.
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