The global community is facing many crises, including an ongoing pandemic, the tragic consequences of centuries of racial inequality, and a climate emergency.
By Suzanne DiBianca, chief impact officer and executive vice-president: corporate relations at Salesforce
But this year will also bring new opportunities for companies to work with governments and individuals to rebuild and create a fairer, more sustainable future for all.
With nearly 90 percent of customers expecting corporations to live up to a set of values higher than shareholder return alone, global leaders need to weave environmental, social and governance (ESG) impact deep into their culture, strategy and mission. In 2021, this is a business imperative.
The impact revolution has even outgrown its own name, as 90% of the S&P 500 now produce ESG reports, and Morgan Stanley has declared that ESG will define the next decade of investing. Countries including the United Kingdom are passing mandatory private-sector climate disclosure rules, while Japan is leading a wave of nations striving to reach net zero emissions by 2050. In the EU, the Non-Financial Reporting Directive is driving additional corporate ESG transparency.
At the same time, business decision makers are seeing how impact strategies create positive flywheel effects. This pivot is a surefire growth strategy, builds positive brand reputation, increases customer engagement and builds trust with stakeholders. It is even a smart tool for employee recruitment and retention, with 70% of employees wanting to work for purpose-driven companies.
Innovation and transparency must go hand in hand
Now more than ever, CEOs no longer have to choose between doing well and doing good. ESG should be treated as a comparative advantage in a competitive marketplace, and the private sector must stay committed to innovation as well as transparency in this space. There must be accountability and standardised metrics, otherwise the rally cry for ESG will become a critique of greenwashing.
To keep impact on a growth trajectory, ESG-committed leaders first need to develop their impact strategies with intersectionality in mind. According to Accenture research, 78% of C-Suite executives say they plan to align their business strategies with sustainability challenges such as the United Nations Sustainable Development Goals (SDGs).
There’s a reason the UN articulated all 17 SDGs together. We can’t solve poverty without combating hunger; gender equality is part and parcel of education reform. The fact is companies cannot silo their concerns either, and we are not fulfilling our responsibility if we think about addressing carbon neutrality or racial justice alone.
But intersectionality is only possible when we all work with one another. As the UN Foundation states, “When we act together, change happens.” Take the 1t.org initiative – a multi-stakeholder project with the goal to grow, restore and conserve one trillion trees around the world by 2030. Only a public-private partnership of scores of organisations with overlapping and complementary resources and skill sets can accomplish this ambitious target. It’s actions like these that are urgently needed across all sectors to solve the UN SDGs.
Valuing purpose and measuring impact
For corporate enterprises, putting intersectionality into practice is all in the design and strategy. It starts with an accounting and reconfiguration of every asset a company can bring to bear to create impact. That means adapting the themes and goals of company events; greening financial instruments like bonds; and reimagining philanthropic efforts.
Launching venture funds focused on impact is one clear opportunity. Corporations including Citi, JPMorgan, Amazon, and Salesforce have created funds that help advance the growth of companies driving impact across education and workforce development, sustainability, diversity, equity, and inclusion. In June 2020, the Global Impact Investing Network (GIIN) estimated that this sector had ballooned to $715 billion, up more than 40% from 2019.
Diversity in a traditional portfolio helps reduce risk, and it helps optimise reward in the impact context. Perhaps the most important plank of this venture platform is a commitment to investing in women and underrepresented founders, who historically lack access to capital.
Ultimately, these efforts will not create sustainability without meaningful transparency. An ESG reporting framework convergence will give all stakeholders visibility into the actual impact of a company. For too long, impact has lacked an accessible measurement for stakeholder value. Many voluntary frameworks exist, yet no single, accepted global ESG standard for corporate disclosure is yet in place. However, on January 26th, corporate members of the World Economic Forum and its International Business Council voiced their public support for stakeholder capitalism and called for ESG convergence, a promising step towards standardised reporting.
A growing corporate coalition is putting its best foot forward to redirect and redesign the machinery of the private sector by focusing on stakeholder capitalism. Capitalism as it is currently designed doesn’t work for everyone. We need a more equal, fair and sustainable way of doing business that values purpose alongside profit. If we remain committed to reform and innovation, impact has the opportunity to prove that the challenges we face can accelerate progress, not inhibit it. This is our promise — a promise we call on others to make alongside us.