Like so many of us, capitalism kicked off 2021 with something of an existential crisis. Is it time to call time on short-termism?
Is it time to rethink capitalism? From a risk management perspective, the obvious answer is ‘yes’. The past year has seen the concepts of ESG (environmental, social and corporate governance) and stakeholder capitalism gain momentum as the corporate world has come face to face with its own existential realities.
A global pandemic, widespread mental health crisis, geopolitical unrest, social inequality and the looming threats posed by a changing climate have triggered a fundamental rethink of the purpose of organisations, the value they create and who they create it for. Spoiler alert: It goes beyond shareholders.
ESG has become more than just a buzzword. While CSR aims to make businesses more accountable, ESG seeks to make its efforts more measurable. And what can be measured, can be managed.
In January, over 60 business leaders, including members of the World Economic Forum (WEF) and its International Business Council (IBC), committed to IBC’s core stakeholder capitalism metrics. Fifty years after WEF’s founder, Professor Klaus Schwab, coined the phrase, they are weaving ESG principles deep into their cultures, strategies and missions.
“Businesses that reflect societal values, with clarity of purpose not merely empty rhetoric, can support a broad-based and sustainable economic recovery and growth, as well as the strengthening of societal trust and reduction of inequality,” concludes this year’s WEF Global Risks Report. “Such outcomes are critical for meeting current and future crises.”
Beyond being the right thing to do - and the obvious reputational benefits - an ESG approach is the resilient thing to do, and makes good business sense. But will businesses take the lead, or will new regulatory frameworks and reporting requirements be needed.
More rules in the current climate might be a tough pill to swallow, but perhaps they are needed to bring about lasting change. To maintain momentum toward a “triple bottom line” mentality in a world that faces greater shocks and uncertainty.