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George Serafeim is the Charles M. Williams Professor of Business Administration and the Faculty Chair of the Impact-Weighted Accounts Project at Harvard Business School. In this article talks through the thinking behind the Impact-Weighted Accounts Project.
"The coronavirus crisis is a major and imminent social problem. But, unfortunately, it’s far from the only social problem that the world in 2020 faces. Climate change, income inequality, population growth, resource usage, the displacement of workers through automation – the list is endless. Who should solve these social problems? We typically look to governments …
Reputation Institute’s third annual report about the trends affecting reputation in 2020 identified 10 global priorities that are shaping reputation and impacting businesses this year. Those trends include higher purpose, data privacy, climate change, influencers, and CEO activism. Of the trends that have been ranked each of the past three years, only two are gaining importance: higher purpose and data privacy.
At the launch of the World Economic Forum in Davos, founder Professor Klaus Schwab calls for the world to coalesce around a different form of capitalism - stakeholder capitalism. The Davos Manifesto is the World Economic Forum's view of 'stakeholder capitalism' and the best response to today's social and environmental challenges.
Becoming a better leader calls for 3 critical behaviours: as outlined by Jill Ader, Chairwoman, Egon Zehnder. Curiosity which means an appetite to ask great questions and listen for the answers about yourself, others, situations and the world: tapping into your capabilities for adaptability, flexibility, expressiveness, empathy and intuition; as well as having an understanding your purpose.
A refugee camp is one of the seemigly unusual places to challenge our thinking around the meaning of work and the role businesses can play in helping to address humanitarian crises. According to research by Reshmaan N. Hussam who teaches the course Business, Government and the International Economy to MBA students at Harvard Business School, "almost 1 million Rohingya refugees are sinking deeper into despair while sitting idle in a camp they can’t easily leave. But the opportunity to work might provide a resource more scarce than cash: hope." She continues to suggest that "work means much more than just an income. It gives you a sense of identity, of purpose, of a larger goal. It gives you an opportunity to build a social life.”
We live in an age where companies and brands with a compelling sense of purpose seem to have a significant competitive advantage. I read articles every day about how purpose-led companies outperform those that are not.
Laws in India state that companies must spend 2% of their profit on CSR activities. However, attempts to enforce such a policy effectively have proven to be problematic. This move is the latest development by the newly elected Indian government to support the law though legislation. Although this is arguably a downgrade on previous policy which stated that failure to comply was a penal offence punishable with a jail term.
There is a movement where employees want a job that gives them a sense of purpose and customers want to buy from companies whose brands are based on values that they identify with. Here's why purpose has become a powerful force giving companies a competitive advantage.
This is a great overview from the Social Purpose Institute at United Way about what defines purpose driven businesses. It explores the difference between Purpose and Social Purpose and helps to distinguish Mission from Purpose also outlining what Purpose in not. Social purpose companies can certainly have a profit motive but a compelling social should transcend this. For these companies making money should be more of a consequence of achieving positive social impact than the raison d'etre.
Recent research commissioned by the Canadian government suggests that social responsibility (CSR) doesn’t cut it any more. In fact, leader companies are putting distance between themselves and this approach. They don’t find it to be relevant to their growth or business models. Instead almost half the companies indicated they have, or were planning to, adopt a social purpose as the reason they exist and to build their social purpose into everything the company does. It hasn’t always been this way. From the experience of these social purpose companies, this shift away from CSR has accelerated over the past five years. The companies reveal the main shifts have included a transition from ad hoc, transactional and incremental approaches to those which are strategic, holistic, social purpose-driven and transformational.
Brand purpose is not just another trendy marketing term, but a fundamental part of every brand’s core identity.
So give the other historical perspective what went wrong with WorldCom and Enron.BP you know recently Wells Fargo mean or all...
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'The Covid-19 crisis requires our societies to make critical choices about the kind of economies we wish to rebuild. Coming on top of the financial crisis, and the climate change and heightened inequalities widely experienced in the last decade, the global pandemic has raised serious questions about the nature of our economic system. The world faces profound economic, environmental and social challenges, but many of the policies implemented over the last forty years or so are no longer able to improve economic and social outcomes in the ways they once promised. Four trends are combining to make the need for change pressing. Accelerating environmental crisis is the most urgent. To keep the average surface temperature rise to 1.5C, global greenhouse gas emissions must be approximately halved by 2030, and reach net zero by around 2050. That is a transformative task of unprecedented proportions, made greater by the need to tackle simultaneously biodiversity loss, soil degradation, and pollution. Rapid technological change is transforming many aspects of our economies, changing the numbers and kinds of jobs and the ways they are organised. Multinational companies, including digital platforms, have grown to positions of market dominance unrivalled in the modern era. New patterns of globalisation are also emerging. Investment and trade continue to shift to the south and east of the world, as large transnational corporations form complex global production networks and supply chains. Demographic change underpins each of these trends, with ageing societies calling into question the ability of those of working age to support non-working age populations. Intergenerational inequalities are compounding inequalities of income, wealth, gender and race.
This Forbes article by Nell Derick Debevoise takes us back in time to create an understanding of coroprate purpose and it importance today. What's useful is to look at the "increasing integration of our work in our lives" and how that "leads us to hold higher expectations of the companies we work for and buy from"
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There is an old Chinese saying, ‘May you live in interesting times’ When someone said that to you, it was viewed as both a blessing and a curse. A blessing, because interesting times meant change, volatility and uncertainty which invoke adaptation, transformation and a reaching beyond the existing status quo into new found heights. A…
IESE Business School´s Conor Neill shares the seven mindsets for a happier and more purposeful life. According to David Maister, Harvard Professor "Success is enjoying your life. If you don’t enjoy what you do, the company of the people you do it with, and the impact you are making in the world… it cannot be considered success.
"No longer is merely making money a sufficient corporate purpose; rather, businesses must “share a fundamental commitment to all of their stakeholders,” including customers, workers, suppliers and the broader communities within which they operate"
The BBC reports on the launch of a new report from the British Academy on the Future of the Corporation entitled Principles for Purposeful Business. We urgently need to rethink the role of business in society, says the it's author Colin Mayer of the British Academy. One of his findings is that the UK has particularly extreme form of capitalism. "Most ownership in the UK is in the hands of a large number of institutional investors" reports Mayer, "none of which have a significant controlling shareholding in our largest companies". He goes on to argue that, "the state has an important part to play. But we should think about the state in a more imaginative way, as to how it can promote successful business, how it can reform the nature of business in society." This will require strong government and positive public will.
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Is business a legal entity to generate profits? Or something else? (Clue: it’s something else)
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We need to develop new processes of collective storytelling across sectors to navigate turbulent times and foster systems change.
According to Gallup's latest book, It's the Manager, , to change a culture, leaders must do the following: 1. Identify your organization's purpose and brand. The CEO, CHRO and executive committee need to clearly identify the organization's purpose -- why they are in business -- and how they want the brand to be perceived by applicants, employees and customers. Purpose and brand set the stage for everything else. Top executives need to be aligned, consistent and committed to the purpose and brand. That is the starting point for bringing teams together and effective decision-making. 2. Audit all programs and communications. This includes human capital practices, performance management, values and rituals, and team structures for alignment and consistency with the organization's purpose and brand. Gallup has found that this can be a quick process and should be done annually. 3. Shift your managers' mindsets from being a boss to being a coach. The culture you want can only be implemented by your best managers. A great culture is one of the few things an organization can't buy. Managers will make or break your culture change, for good or ill. By repositioning your managers from boss to coach, your organization will increase employee engagement, improve performance, and start to see the cultural shift you desire. The engine of purpose-focused culture change takes a great deal of fuel, and it needs to come from the top. But once leaders have the machine running, the measurement and management of culture becomes vastly less difficult. .
My favorite quote is probably: "Strategy without tactics is the slowest route to victory. Tactics without Strategy is the noise before defeat".Sun Tzu - 512 BC Besides being a favorite of mine, I believe this insight is one that transcends time and is as relevant today as it was over 2,500 years...
Dear CEO, Each year, I write to the companies in which BlackRock invests on behalf of our clients, the majority of whom have decades-long horizons and are planning for retirement. As a fiduciary to these clients, who are the owners of your company, we advocate for practices that we believe will drive sustainable, long-term growth and profitability. As we enter 2019, commitment to a long-term approach is more important than ever – the global landscape is increasingly fragile and, as a result, susceptible to short-term behavior by corporations and governments alike. Market uncertainty is pervasive, and confidence is deteriorating. Many see increased risk of a cyclical downturn. Around the world, frustration with years of stagnant wages, the effect of technology on jobs, and uncertainty about the future have fueled popular anger, nationalism, and xenophobia. In response, some of the world’s leading democracies have descended into wrenching political dysfunction, which has exacerbated, rather than quelled, this public frustration. Trust in multilateralism and official institutions is crumbling. Unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies, both public and private, to address pressing social and economic issues. These issues range from protecting the environment to retirement to gender and racial inequality, among others. Fueled in part by social media, public pressures on corporations build faster and reach further than ever before. In addition to these pressures, companies must navigate the complexities of a late-cycle financial environment – including increased volatility – which can create incentives to maximize short-term returns at the expense of long-term growth. Purpose and Profit: An Inextricable Link I wrote last year that every company needs a framework to navigate this difficult landscape, and that it must begin with a clear embodiment of your company’s purpose in your business model and corporate strategy. Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being – what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them. Profits are in no way inconsistent with purpose – in fact, profits and purpose are inextricably linked. Profits are essential if a company is to effectively serve all of its stakeholders over time – not only shareholders, but also employees, customers, and communities. Similarly, when a company truly understands and expresses its purpose, it functions with the focus and strategic discipline that drive long-term profitability. Purpose unifies management, employees, and communities. It drives ethical behavior and creates an essential check on actions that go against the best interests of stakeholders. Purpose guides culture, provides a framework for consistent decision-making, and, ultimately, helps sustain long-term financial returns for the shareholders of your company. The World Needs Your Leadership As a CEO myself, I feel firsthand the pressures companies face in today’s polarized environment and the challenges of navigating them. Stakeholders are pushing companies to wade into sensitive social and political issues – especially as they see governments failing to do so effectively. As CEOs, we don’t always get it right. And what is appropriate for one company may not be for another. One thing, however, is certain: the world needs your leadership. As divisions continue to deepen, companies must demonstrate their commitment to the countries, regions, and communities where they operate, particularly on issues central to the world’s future prosperity. Companies cannot solve every issue of public importance, but there are many – from retirement to infrastructure to preparing workers for the jobs of the future – that cannot be solved without corporate leadership. Retirement, in particular, is an area where companies must reestablish their traditional leadership role. For much of the 20th Century, it was an element of the social compact in many countries that employers had a responsibility to help workers navigate retirement. In some countries, particularly the United States, the shift to defined contribution plans changed the structure of that responsibility, leaving too many workers unprepared. And nearly all countries are confronting greater longevity and how to pay for it. This lack of preparedness for retirement is fueling enormous anxiety and fear, undermining productivity in the workplace and amplifying populism in the political sphere. In response, companies must embrace a greater responsibility to help workers navigate retirement, lending their expertise and capacity for innovation to solve this immense global challenge. In doing so, companies will create not just a more stable and engaged workforce, but also a more economically secure population in the places where they operate. A New Generation’s Focus on Purpose Companies that fulfill their purpose and responsibilities to stakeholders reap rewards over the long-term. Companies that ignore them stumble and fail. This dynamic is becoming increasingly apparent as the public holds companies to more exacting standards. And it will continue to accelerate as millennials – who today represent 35 percent of the workforce – express new expectations of the companies they work for, buy from, and invest in. Attracting and retaining the best talent increasingly requires a clear expression of purpose. With unemployment improving across the globe, workers, not just shareholders, can and will have a greater say in defining a company’s purpose, priorities, and even the specifics of its business. Over the past year, we have seen some of the world’s most skilled employees stage walkouts and participate in contentious town halls, expressing their perspective on the importance of corporate purpose. This phenomenon will only grow as millennials and even younger generations occupy increasingly senior positions in business. In a recent survey by Deloitte, millennial workers were asked what the primary purpose of businesses should be – 63 percent more of them said “improving society” than said “generating profit.” In the years to come, the sentiments of these generations will drive not only their decisions as employees but also as investors, with the world undergoing the largest transfer of wealth in history: $24 trillion from baby boomers to millennials. As wealth shifts and investing preferences change, environmental, social, and governance issues will be increasingly material to corporate valuations. This is one of the reasons why BlackRock devotes considerable resources to improving the data and analytics for measuring these factors, integrates them across our entire investment platform, and engages with the companies in which we invest on behalf of our clients to better understand your approach to them. BlackRock’s Engagement in 2019 BlackRock’s Investment Stewardship engagement priorities for 2019 are: governance, including your company’s approach to board diversity; corporate strategy and capital allocation; compensation that promotes long-termism; environmental risks and opportunities; and human capital management. These priorities reflect our commitment to engaging around issues that influence a company’s prospects not over the next quarter, but over the long horizons that our clients are planning for. In these engagements, we do not focus on your day-to-day operations, but instead seek to understand your strategy for achieving long-term growth. And as I said last year, for engagements to be productive, they cannot occur only during proxy season when the discussion is about an up-or-down vote on proxy proposals. The best outcomes come from a robust, year-round dialogue. We recognize that companies must often make difficult decisions in the service of larger strategic objectives – for example, whether to pursue certain business lines or markets as stakeholder expectations evolve, or, at times, whether the shape of the company’s workforce needs to change. BlackRock itself, after several years of growing our workforce by 7 percent annually, recently made reductions in order to enable reinvestment in talent and growth over the long term. Clarity of purpose helps companies more effectively make these strategic pivots in the service of long-run goals. Over the past year, our Investment Stewardship team has begun to speak to companies about corporate purpose and how it aligns with culture and corporate strategy, and we have been encouraged by the commitment of companies to engaging with us on this issue. We have no intention of telling companies what their purpose should be – that is the role of your management team and your board of directors. Rather, we seek to understand how a company’s purpose informs its strategy and culture to underpin sustainable financial performance. Details on our approach to engaging on these issues can be found at BlackRock.com/purpose. I remain optimistic about the world’s future and the prospects for investors and companies taking a long-term approach. Our clients depend on that patient approach in order to achieve their most important financial goals. And in turn, the world depends on you to embrace and advocate for a long-term approach in business. At a time of great political and economic disruption, your leadership is indispensable. Sincerely, Larry Fink Chairman and Chief Executive Officer Read this letter on blackrock.com Eight deadly sins to avoid when creating a banking cover letter Cover letters need to do three things: prove you can do the job, differentiate you from… 2019 Global Investment Outlook By BlackRock We identify three new market themes and update our asset views for 2019. We see… The investment banking cover letter that will get you a job Do you really need to write a cover letter when you’re applying for a job…
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The Impact-weighted Accounts Project at Harvard led by George Serafeim is a concerted effort to measure the true cost and impact of a company's operations.
Traditional accounting just looks at the financial numbers and everything else is externalised. Although there is wider acknowledgment that issues like sustainability and good governance will have an impact on share price, Serafeim argues that too much of the negative and positive impact that a company has is missed if we only rely on looking at things through this lens. Consider for example the cost to society of a company producing food that has a big impact on obesity and diabetes. The costs of this can be huge but the bill is picked up somewhere else (in healthcare systems etc ) and not on the company's traditional accounts unless there is some form of fine or legal implication.
Using the mantra of 'what matters gets measured', Serafeim and his team are creating a set of metrics that will help analyse the full cost and benefit to society of what a company does. Many would argue that it is only when we think of things in these terms that we can properly move the needle on the big environmental and social issues of our time.