Realizing the full potential of stakeholder capitalism

March 22, 2021 by  
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Realizing the full potential of stakeholder capitalism Michael Wilkins Mon, 03/22/2021 – 00:30 Under the traditional capitalist model, financial performance for shareholders has been the primary measure of the success of a business. However, a growing awareness of ESG trends has given rise to the concept of “stakeholder value,” whereby the focus is on long-term value creation for customers, employees, society and the environment rather than just short-term value for shareholders. The pandemic has sharpened this focus by highlighting the importance of metrics such as employee health and well-being, safety protocols, cybersecurity and business continuity, to name a few. While undoubtedly beneficial in theory, the pursuit of stakeholder capitalism comes with a number of practical challenges. How do businesses measure the value created by stakeholder capitalism? How do they balance stakeholder and shareholder interests? And where does all this leave fiduciary duty? These questions are difficult to answer, and the solutions may not be immediately evident. But one thing is clear: If businesses want to achieve long-term sustainability, they must work to overcome these obstacles. Aligning stakeholder interests The interests of shareholders and other stakeholders often conflict. Although it is no simple task, businesses must find a way to reconcile clashing priorities if a true stakeholder capitalism model is to be reached. Often, the answers lie in understanding the nuances between (and, sometimes, within) each stakeholder group. The allocation of voting powers between majority and minority shareholders, for instance, is one significant area of debate. Should one share equal one vote or should long-term shareholders be granted additional voting rights? Businesses must decide whose interests should be prioritized, and to what extent. Once such priorities are established, determining the framework through which the value created should be measured further complicates the issue. The race among AstraZeneca, Moderna and Pfizer to develop a COVID-19 vaccine perfectly exemplifies the difficulty of satisfying the needs of each stakeholder group simultaneously. Should one share equal one vote or should long-term shareholders be granted additional voting rights? AstraZeneca, for instance, prioritized wider societal needs by pricing its vaccine lower than any of the others — thereby providing the greatest long-term “value” to its recipients. The Moderna and Pfizer vaccines, however, delivered greater relative value to shareholders, by reason of the higher price.  This begs the question: Can the interests of shareholders and stakeholders ever be reconciled? Critics of the stakeholder capitalism model argue they cannot — believing that the quest for such a reconciliation is not just a fundamental limitation, but a potentially insurmountable weakness for addressing today’s global challenges. Indeed, Eugene F. Fama, winner of the Nobel Prize in Economics in 2013, goes as far as arguing stakeholder capitalism is “indefinite and ineffective,” for this very reason. Measuring success The “value” created by stakeholder capitalism is difficult to measure, and this could limit its operational effectiveness. The solution to this is perhaps more transparency and accountability — which can be achieved only through enhanced, standardized, non-financial disclosure metrics, as well as the acknowledgement and management of externalities, such as global warming, increasing social fragmentation and unrest. The drive to improve disclosure around such metrics is ongoing. In September, for instance, the World Economic Forum (WEF) released guidance in collaboration with the big four global accountancy firms on measuring stakeholder capitalism. In its report, the WEF suggested companies track their shared value contribution by defining metrics organized into four categories — Principles of Governance, Planet, People and Prosperity — in order to increase the comparability of sustainability reporting. While this was a step in the right direction, many believe we are still some way away from standardized reporting. To make matters more challenging, for many companies, it remains unclear what they are being asked to disclose or how to disclose. Often, this means publicly disclosed data is insufficient to perform detailed, comparable and up-to-date analysis and benchmarking of sustainability performance — a key requirement to determine value creation for stakeholders. There has been some movement in the right direction, however, and a number of high-profile institutions responsible for global reporting standards have begun addressing this issue. The IFRS Foundation, for example, recently consulted on the establishment of a Sustainability Standards Board and looks set to pursue its establishment. The new board would operate alongside the International Accounting Standards Board under the same three-tier governance structure, build on existing developments, and collaborate with other bodies and initiatives in sustainability, focusing initially on climate-related matters. The hope is that the emergence of such initiatives will make the transition to stakeholder capitalism quicker and more straightforward for businesses. Redefining fiduciary duty Under corporate law, fiduciary duty requires a corporation to act in the best interest of its shareholders, rather than serving its own interests, recognizing loyalty and prudence as the most important duties. The traditional interpretation of this has been to pursue optimal profit margins. Stakeholder capitalism, however, challenges this view and suggests directors should expand their definition of fiduciary duty, by considering the impact of board decisions on all stakeholders — both internal and external — despite there currently being no legal requirement to do so. The ‘value’ created by stakeholder capitalism is difficult to measure, and this could limit its operational effectiveness. Already, a number of initiatives, such as the United Nations-supported Principles for Responsible Investment (PRI) and the U.N. Environment Program Finance Initiative (UNEP FI), have highlighted the importance of redefining fiduciary duty, in order to stimulate long-term sustainable growth and the economic health of companies. Indeed, sustainable finance veteran Paul Watchman (an advisor to UNEP FI) argues “the concept of fiduciary duty is organic, not static. It will continue to evolve as society changes, not least in response to the urgent need for us to move towards an environmentally, economically and socially sustainable financial system.” We have certainly seen this to be the case in the last two decades. Future-proofing: The potential of stakeholder capitalism Despite the challenges associated with implementing stakeholder capitalism, empirical evidence reveals that companies focusing on sustainability issues achieve lower costs, enhance employee productivity, mitigate risk and generate new growth opportunities. In fact, research from Bank of America Merrill Lynch suggests integrating greater stakeholder engagement and ESG initiatives in corporate strategy could help prevent around 90 percent of bankruptcies. While this wider shift toward stakeholder capitalism has been ongoing for some time, it has been catalyzed by the COVID-19 crisis, which has reaffirmed the materiality of sustainability-related risks, and the deep links between businesses and their stakeholders across the value chains. In today’s world of deepening socioeconomic challenges, effective stakeholder management will become critical for companies looking to continue operating successfully. Pull Quote Should one share equal one vote or should long-term shareholders be granted additional voting rights? The ‘value’ created by stakeholder capitalism is difficult to measure, and this could limit its operational effectiveness. Topics Finance & Investing ESG Stakeholder Engagement Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off An Earth-Strike demonstration in Austria in 2019. Image by Shutterstock/Stefan Rotter

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Realizing the full potential of stakeholder capitalism

Game on: New study shows which sports teams have the greenest fans

December 22, 2020 by  
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Game on: New study shows which sports teams have the greenest fans Kristen Fulmer Tue, 12/22/2020 – 01:00 Ever wondered which sports team has the most sustainable fans? From the perspective of a rights holder, this is becoming a critical question. The answers will drive business decisions for venue operations, fan engagement and brand partnership activation. For the green sports movement, the answers may be the key to solidifying the importance of integrating sustainability into sports.  A new report by Recipric, powered by Zoomph’s technology, helps us understand the answer. Recipric , an agency that represents sustainability and positive change within sports, leveraged Zoomph’s Audience Analysis Tool to help answer this question. Together, they co-published Sustainability in Sports , a report that ranks teams from various professional leagues — including baseball, football, basketball and soccer — according to which teams have the most “sustainability-minded” fans. The report also reveals which teams are most likely to have fans that are vegetarian, have an affinity for the outdoors, a particular stance on climate justice, and those most likely to follow Al Gore and Greta Thunberg.  It solidifies that sustainability can be enhanced through the power of sport because of the overlap between sports lovers and people that seek positive change. To reach these rankings, Zoomph’s platform started with about 342 million anonymized profiles. It developed the sustainability-minded audience by capturing a list of terms that someone interested in sustainability may use in their Twitter bio, or by tagging accounts that a climate activist may follow. From there, a segmented audience of more than 500,000 profiles was cross-referenced against Zoomph’s sports analytics platform to understand who this sustainability-minded audience may follow, including sports leagues, teams and brands.  To guide fan engagement strategies and to activate brand partnerships, sports teams often will poll their fan base to gain an understanding of their spending habits, their hobbies or even their passions outside of sports. While this may tell a story about the preferences targeted by a survey, Zoomph unpacks tendencies on social media without explicitly asking questions. This provides raw insights into a particular group of sports fans, but can tap into interests, brand endorsement and even behavioral data in a way that a survey question may not.  While it’s fun to see if assumptions line up with the results of the study, this data can be hugely impactful to the larger sports industry. Teams can look at this data to understand the specific interests of their followers, which can guide on-the-ground community engagement strategies that drive ticket sales or can tell them how to better leverage their brand partners. Brands can use this data to understand which team or even which league may provide the most engaged audience. Even agents could gauge the interests of their represented athletes’ followers to understand the value of a sponsorship deal.  An example from the report highlights U.S. pro sports teams most likely to have vegetarian or vegan followers. The shortlist shows the top five:  Los Angeles Lakers (NBA) New England Patriots (NFL) Toronto Blue Jays (MLB) Golden State Warriors (NBA) Boston Red Sox (MLB) While a casual fan may enjoy making assumptions about the stereotypical tendencies of each of these team’s fans, reasoning the list against demographic trends, or positing about various geographies, this list actually can mean big business for the rights holders and potential brands.  Not surprisingly, the Lakers and Beyond Meat launched an official partnership in 2019, and JaVale McGee, a Laker at the time, was named an official brand ambassador. However, the Lakers can continue to leverage these findings to identify additional vendors for the Staples Center, create a “Plant-Based Day” with incentives to support a local plant-based restaurant, or provide discounted tickets to plant-based fans. With the power of the analytics, a team can drive holistic positive change that engages their fans while taking climate action and improving health and well-being.  This study highlights the importance of sustainability-driven values for rights holders to engage with their fan base and to potentially tap into a larger audience. This drives revenue and is so critical to sustainability professionals charged with creating a data-driven strategy. It solidifies that sustainability can be enhanced through the power of sport because of the overlap between sports lovers and people that seek positive change. Pull Quote It solidifies that sustainability can be enhanced through the power of sport because of the overlap between sports lovers and people that seek positive change. Topics Marketing & Communication Sports Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off The Los Angeles Lakers and plant-based products company Beyond Meat launched an official partnership in 2019.

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Game on: New study shows which sports teams have the greenest fans

What Makes a Product Sustainable?

July 7, 2020 by  
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We talk a lot about the importance of sustainability and … The post What Makes a Product Sustainable? appeared first on Earth911.com.

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What Makes a Product Sustainable?

Rimbin concept offers a look into the future of infection-free playgrounds

June 1, 2020 by  
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Berlin-based inventors Martin Binder and Claudio Rimmele believe that parents shouldn’t have to make the choice whether or not to let their children enjoy a playground in a world changed by COVID-19. In the early days of the pandemic, Binder, a designer and artist, and Rimmele, a psychologist and publicist, noticed a shift in the playgrounds of their city. Where there were once lively, laughter-filled spots in the city were now forbidden and barren because of necessary precautions in the fight against the novel coronavirus. The two understood the importance of playgrounds for developing children’s social skills and improving mental health. Six weeks later, they found their solution in Rimbin, an infection-free playground concept inspired by nature and influenced by Berlin parents. Related: Solar-powered “bubble shield” focuses on physical distancing in public The concept calls for a separate play platform for each child and a playground path leading to each area with a separate entrance. The platforms are large enough for children or siblings of the same household to stay together, far enough from unfamiliar children to ensure social distancing, yet open enough for kids to communicate and play games from a safe distance. Features in between the platforms, such as speaking tubes, horizontal ladders and seesaws, offer interaction without the need for physical contact. Surface areas, handles and tubes would be made of metal materials that are easy to sterilize, and permanent disinfectant dispensers would be installed for parents if they’d like to clean as an additional safety precaution. Inspiration for the playground and platforms came from biology and nature, according to the designers. The play areas were created to imitate the leaves of the Amazon water lily, inspired by the 1849 project conducted by biologist Joseph Baxton where he placed his young daughter in the water lily leaves to demonstrate their strength and carrying power. Rimmele and Binder hope that the concept will allow the children of the future to continue to enjoy the social interactions, creativity and imagination that playgrounds helped encourage before the pandemic . + Martin Binder Images via Martin Binder

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Rimbin concept offers a look into the future of infection-free playgrounds

Amid plunging stock prices, ESG leaders are holding their own

April 13, 2020 by  
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The pandemic and economic meltdown are highlighting the importance of integrating environmental, social and governance analysis into investment strategies.

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Amid plunging stock prices, ESG leaders are holding their own

Amid plunging stock prices, ESG leaders are holding their own

April 13, 2020 by  
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The pandemic and economic meltdown are highlighting the importance of integrating environmental, social and governance analysis into investment strategies.

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Amid plunging stock prices, ESG leaders are holding their own

Earth Day and the polling of America, 2020

April 13, 2020 by  
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In the future, it seems, we’re all model green citizens, at least in our minds.

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Earth Day and the polling of America, 2020

Earth Day and the polling of America, 2020

April 13, 2020 by  
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In the future, it seems, we’re all model green citizens, at least in our minds.

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Earth Day and the polling of America, 2020

Hip hop can bring green issues to communities of color

April 13, 2020 by  
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The environmental movement largely has failed to connect with people of color and marginalized urban communities. By confronting issues from contaminated water to climate change, hip hop music can help bridge that divide and bring home the realities of environmental injustice.

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Hip hop can bring green issues to communities of color

Erika Karp of Cornerstone Capital Group on fixing capitalism with ESG analysis

August 3, 2019 by  
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Impact investors need the right language to communicate the importance of environmental, social and governance factors.

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Erika Karp of Cornerstone Capital Group on fixing capitalism with ESG analysis

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