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Marty presenting at B Corp
Home / Insights / ＿

Beyond shareholder value: A new era of business

A few weeks back we sponsored the B Corp meet-up at SXSW 2024, to show our support to the movement that is restoring the balance back to business. B Corp's don't believe in choice between economic growth or sustainability. We can have both.

Marty Drill
Marty Drill

06 November 2024

7 minute read

Stability in our societies was developed by focusing on the growth of our economies, though that growth has come at a cost to our people and our planet. When we look at American society, most of us would conclude that capitalism has gone too far. The focus is largely on shareholder value at the expense of broader stakeholder interests. 

Sure, we've benefited from this growth and innovation over the past century. While not all of Western society is doing well, the vast majority of people have a job, food and a roof over their heads. Despite the increasing inequities in our society, this is progress.

Yet many of us have an uneasy feeling about those inequities, the challenge of making ends meet contrast with the scale of the wealth of the super rich. For many, capitalism has many of us living better than our parents, though it feels like things are out of balance. And now, with the climate crisis looming, capitalism is under fire for a whole new reason.

Team chatting around B Corp and Luminary sign

After World War II, we rebuilt, created jobs, and established a middle class. Growth and stability gave people the chance to live fulfilling lives. This should be a core goal for any government. As our population grows, so too does our responsibility to adapt to changing needs, which is only made possible by a predictable and stable economy. 

But in the 1970s, things shifted. Shareholders became king and companies prioritised their needs above all else. Deregulation and 'shareholder primacy' led to a new corporate approach to profit. Jack Welch, with his mass layoffs at GE, became the model for Corporate America. 

The 'shareholder-first' mantra put forward fervently by Nobel Prize-winning economist and free market advocate Milton Friedman, stating that the only social responsibility of a business is to increase its profits (often referred to as shareholder primacy).

Companies used to feel a responsibility to provide steady jobs. Layoffs were a last resort, not a strategy. But in the 80s, the focus shifted to innovation, rapid growth, and constant returns. Short-term gains trumped long-term vision. CEOs and boards, pressured by the markets, chased growth at any cost. Their bonuses were tied to shareholder returns. 

It seemed logical, but it backfired.

Human nature is to chase incentives, sometimes with unintended consequences. While capitalism lifted millions out of poverty in Asia, in the West, we see a shrinking middle class and a widening wealth gap. Our society has become a servant to the economy, instead of the other way around. We're obsessed with creating new products, with little regard for the environment or what happens to them when we're done.

We're facing environmental collapse and social unrest. It sounds bleak, but it's the perfect backdrop for a new movement. One where businesses are part of the solution, not the problem. We need balance. With the right incentives, we can restore our future, or at least stop things from getting worse while building a fairer world. We need to move beyond just focusing on shareholder value and embrace stakeholder value.

How B Corp is changing that

This is where B Corps come in. They envision a future where people, planet, and profit are in harmony. They use business as a force for good. They want to leave the world better than they found it. They know companies need to be part of the solution. By embedding this into how they do business, they can drive change faster than governments, who are often slow to act.

B Corps put employees above shareholders. They consider the environment throughout a product's lifecycle. And it's not just idealistic; consumers and employees are already voting with their wallets and their feet.

Corporate social responsibility has become laser-focused in recent years as consumers and employees hold more organisations accountable for their impact. People are increasingly making buying decisions based on whether a company mission and purpose align with their values and concerns. Consumers are changing how they shop, now they care about a brand's environmental impact. They want sustainable, eco-conscious products, ethically sourced materials, and transparency. They're choosing durable, reusable goods and reducing waste. This shift, through companies like Patagonia, is forcing businesses to become more sustainable.

Imagine if every business went carbon neutral. This would be a lot easier for product and service based businesses than it would be for mining, however, it's not impossible. At some point it will be mandated, however that will take too long. The more businesses that become carbon neutral now, the more it becomes standard which puts pressure on other companies to act faster. 

woman planting mangrove trees

Doing good for shareholders used to be the only good for the business, but now things are changing. Corporate social responsibility (CSR) is no longer optional. Consumers are informed and demand businesses that share their values. Strong CSR builds trust, loyalty, and sales. As B Corps and sustainable companies grow, profit alone won't cut it. Consumers and employees will demand change or take their business elsewhere.

This means focusing on the long term, not just short-term profits. We need to think about the consequences of our actions on employees, the environment, and our communities. It's time to move beyond shareholders to stakeholders. That includes our great-grandchildren and the world we leave them. Instead of this year's returns, we need to think about the 100-year return. How will today's actions impact future generations? Getting this balance right means a better quality of life for everyone.

When we invest either our capital or our business and consumer purchases into new sustainable or alternative products, we are innovators. If we continue to invest in or buy from the current model, then there is no change. Balance is driven by demand and yet so is imbalance. We have the ability to use demand to change.

Each investment is relevant. Whether your company buys solar panels or simple renewable energy. Whether your cars are electric or simply you take the train. Whether you buy sustainable products or simply choose paper bags at the supermarket. Change comes from demand.

B Corps are setting a new standard for social and environmental responsibility. They're uplifting communities, protecting our planet, and bringing balance back to the workplace. They're creating a more stable society.

As the world changes, businesses must adapt. B Corps will increasingly grow in visibility and power as a commercial model that's better aligned with the realities of both today and tomorrow.  

It's about giving back more than we take. It's about long-term gains, happier employees, and better business results. That's a win for everyone.

B Corps are a new kind of organisation. They're for people, the planet, and profit. Focusing on stakeholders over shareholders.

Looking to the future

The future needs to be about looking beyond corporate social responsibility, profits and growth and thinking about how we can look after our people and planet in an ethical, traceable way. These are some of the issues we've been addressing:

  • Championing flexibility at work 
  • Assessing the benefits we provide to employees and giving more funding towards training
  • Donating more profits to charities that align with our values
  • Looking after our people's health and wellbeing, through initiatives like introducing an employee assistance program, stress management measures, and mental health first aid training.
  • Offering volunteer days for employees to give back to the community
  • Offsetting your carbon emissions through planting trees
  • Partnering with suppliers that are sourcing more responsibly, or even better, B Corps
  • Changing our office power to use renewable energy and installing solar panels
  • Reviewing product packaging and identifying new ways to reduce our impact, as well as increasing the use of recycled materials 

Ultimately, it's about considering our people and the planet whilst in the process of making each of our business decisions.

We’re now seeing there’s a massive risk for organisations who do not think long term and aren’t putting people and planet first. What started as a movement is now responding to consumer demand and people are choosing to work with companies that are accountable for their short and long term impacts. 

Indonesia team in front of Great Place to Work sign
Marty Drill
Marty Drill

06 November 2024

7 minute read

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