by Walker Post, Editorial Fellow, GreenHouse::Innovation
A host of chief executives from the Business Roundtable, which includes the likes of Amazon, JP Morgan Chase and Walmart, recently committed to reshape the corporation’s role in society.
In the Purpose of a Corporation statement, 181 CEOs pledged to invest in all stakeholders — not simply a corporation’s investors. The executives agreed to better support communities, employees, customers and the environment — in other words, those who have a stake in what we call civil society, which confers upon those corporate bodies the right to exist and from where they derive their profits.
Many in the media — including those at Harvard Business Review and Bloomberg — were quick to pounce on the Business Roundtable as all bark and no bite. Most people, especially those who have felt slighted by large corporations, struggle to entertain the idea that the top executives in the U.S. could support systematic corporate change. And it's easy, if not expected, to assume that these companies are doing this for good publicity.
But what if it’s actually a good business model? What if the new norms of corporate obligations could be built on utilitarian values — generating societal gains while letting big business keep its piece of the pie?
This might be a radical idea for some, including the late American economist Milton Friedman. Considered the architect of those age-old corporate norms, Friedman was openly challenged at the roundtable; specifically, his oft-quoted belief that “there is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”
The rules of the “game” — loosely regulated capitalism — have far too often been exploited. The actors who cemented the business norms in the pursuit of profit, often times at the expense of their own customers and employees, are seeing their peers stumble. Silicon Valley is being strongly regulated and fined for privacy issues; oil tycoons are one eco-friendly president away from losing their rigs; and the pharmaceutical industry is seeing a reckoning unlike anything ever seen: Purdue Pharma, the Oxycontin connoisseurs, just filed for bankruptcy for its role in the opioid crisis in order to settle thousands of lawsuits.
CEOs are doubling down on sustainability for long-term profit and growth— the kind of profit and growth that requires a safe, habitable planet for generations of consumers.
Popular interpretations of Friedman’s dogma suggest businesses cannot simultaneously drive social good and profitability. They can be one and the same in this newly found era of corporate social responsibility. They must — if corporations want to remain trusted brands in the eyes of their consumers; and if those same corporations are in it for the long haul.
Some are seeing the writing on the wall sooner than others.
While Rep. Alexandria Ocasio-Cortez’s Green New Deal remains nothing but a proposition, Amazon CEO Jeff Bezos took it upon himself to roll out his own plan to attack climate change. The heads of Norwegian Cruise Lines Partners and Nestlé, not waiting to comply with future legislation, are pursuing policies to dramatically decrease their carbon footprints, even as the Trump Administration continues to rack up environmental rollbacks, which number 85 at this writing. Doug McMillon, CEO of Walmart, after the El Paso and Southaven shootings in Texas, decided to stop selling certain kinds of weapons and ammunition; and Colt Manufacturing has simply turned its back on the civilian market for AR-15s — all this while a gun reform bill languishes in the Senate.
It’s easy to see what Jim VandeHei, Axios co-founder, meant when he called CEOs “America’s new politicians.”
Each one of the above “social impact”' examples could be considered a smart business investment if only because CEOs are doubling down on sustainability for long-term profit and growth— the kind of profit and growth that requires a safe, habitable planet for generations of consumers.
That’s why those who pursue profit over people may see their profits dry up like the last drops of water in a desert as consumers begin to seek out brands that have their best interests— like survival— at heart. Those who advocate for long-term, systemic changes — who deviate from the norms upheld by CEOs for decades — will see their businesses profit and their stakeholders flourish over time.
And while not every CEO is privileged enough to have a seat at the Business Roundtable, one doesn’t have to launch sweeping policy overhauls to change the world. Start with one’s stakeholders: Expand parental leave. Double down on flex-time. Invest in employee wellness.
Whether you’re making an impact at the macro or micro level, those around you will take note.
And it will be clear to them, you’re playing the long game. ::