Many business leaders have recently promised to shift their business model to serve all stakeholders—not just shareholders. But as Dame Vivian Hunt, a McKinsey senior partner, explained in a TED Talk this week, executives will need to put action behind their pledges to ensure investment return will no longer take precedence over the health and welfare of employees, suppliers, and even planet Earth.
Just as a company won’t go digital by appointing a chief digital officer any more than it can become more diverse by simply hiring a chief diversity officer, business leaders must understand that they need to do more. “We need to reset,” says Dame Vivian. “If we really want to serve stakeholder needs, we need to get everyone involved.” Here are a few ideas from her discussion, which you can view in full here.
Starting at the top: the boardroom
Boardrooms are where a company’s strategy is set and governed. If all stakeholder needs aren’t accounted for here, sustained change is unlikely. “By definition, a board can stand in the way of serving all stakeholders,” Dame Vivian says. “Why? Because often, a board is elected by shareholders. It represents their interests. It’s there to act on their behalf.” If organizations want to have a more inclusive business model, they’ll need board members “who truly understand the experience and represent the diversity of our stakeholders.” This isn't about ticking boxes on age, ethnicity, or gender.
Protecting the environment
“Sustainability goals have been written into annual reports all over the world,” Dame Vivian says. “The goals are very lofty, and very long-term, and none of them will be accomplished if they don’t have real steps along the way.” That’s why CEOs need concrete, achievable, measurable goals. They also need to share their data and progress along the way. Dame Vivian talked about the Brazil-based cosmetics company, Natura, which measures and publishes their impact on the environment—from seeds planted to trash disposed—alongside their usual profit-and-loss statements for investors. “Being green is good for the bottom line in the long run, but it requires investments, and those have to be shared.”
Empowering suppliers
Suppliers are the connective tissue underneath many companies: drivers, widget makers, service employees. “They’re like an invisible life force that power our economy, and one thing we know for sure is that the success or failure of your business depends on your suppliers and partnerships,” she says. During the COVID-19 outbreak, suppliers have delivered the masks, ventilators, testing kits and vaccines that we all need. Elsewhere, Dame Vivian referenced BHP Billiton, an Australian mining company that committed to ending gender imbalance in its workplace by 2025. To do so, BHP Billiton partnered with Kal Tire, a supplier in Chile, to proactively encourage women to apply for jobs. Today, across BHP’s supplier networks, women are now 15 percent more likely to get the job than they were even a year ago today.
Focusing on customers’ long-term needs
When shareholders are the priority, some companies may have an incentive to focus on customers’ short-term desires rather than their long-term needs. As an example, Dame Vivian discussed the increase in processed-food consumption globally—as well as the increase in obesity rates—and pointed to the Access to Nutrition Foundation, which now tracks the salt, fat, and sugar that global food and drink companies include in their products, as well as whether they market them responsibly. “Companies that have been paying attention to this have begun to make changes, including ingredients and formulations,” Dame Vivian says. “We know that consumer needs change over time, but companies that make these investments proactively can be better positioned in the long term, even for shareholders.”
“If customers are stakeholders, then they should not be harmed by the goods, services and products we produce. It’s that simple.”