Sustainable value: is your company a giver or taker?
Austerity, job losses, erosion of wealth and frustration are causing individuals and society at large to revisit and re-calibrate their values – resulting in changing expectations around the creation of a better society and environment. The corporate world is increasingly being included in this thinking.
Through the 20th century, companies were largely regarded as economic entities with their primary responsibility being the creation of wealth for their shareholders. The end of the 20th century also saw professions being judged by the income they provided for their members – resulting in a substantial talent drain into the higher paying jobs.
Are you a giver or taker?
The aftermath of the financial crisis is now seeing companies and professions being judged in a new way: the extent to which they give or take. Further, society is beginning to demand that those who take too much rebalance their approach.
Take the banking profession for example. Prior to the financial crisis, banks (and bankers) were seen as givers – providing essential capital to facilitate economic growth and enabling productive commerce – and society was happy to remunerate bankers generously for their services. However, it is now being revealed that banks were in fact taking from society and being richly rewarded for it – to the extent that they have bankrupted economies and diminished the savings of billions of people.
In the after-financial crisis (afic) world, to rebalance this taking, there is now societal pressure to reduce salaries and bonuses and regulate banking activities to curb the taking. Regulation, such as the Glass-Steagall Act, passed in the 1930’s to separate insurance and commercial banking from investment banking and thereby discourage a repeat of the Great Depression and repealed in the 1990’s following lobbying by banks, is now being considered. Taxes on banker’s bonuses and caps on salaries (within government-owned banks) are also being reviewed to address the perceived greed.
There are a significant number of other examples including:
- Executives of underperforming companies, who are being challenged on their remuneration by unhappy shareholders
- Oil companies, who are having to actively contribute to the development of nations in return for production licences
- Producers of unhealthy food who are under pressure to address consumer health
Many of the economic, social and environmental measures being taken voluntarily by companies are traditionally connected under the umbrella of “sustainability”. Other measures are being forced by regulation – less preferable to most companies who are therefore driving voluntary sustainability measures.
We therefore see companies using sustainability to unlock additional value beyond the cost reduction and growth opportunities that sustainability should always provide. The value added by rebalancing corporate giving and taking includes: boosting brand value, assisting in attracting and retaining staff, keeping shareholders happy, supporting a company’s licence to operate, and discouraging unwanted regulation.
The dimensions of sustainable value continue to unfold!
We welcome your thoughts on this topic. Please add you comments in the comment box.