How will CEO roles redefine shared outcomes in today’s society?

WHEN he voiced the view, back in 1973, that “companies must start justifying their worth to society with greater emphasis placed on environmental and social impact rather than straight economics”, it could be said that Dick Dusseldorp was ahead of his time.

Today, the Lendlease founder’s words are truly ones to live by as we enter a new age of stakeholder capitalism where consumers and the society at large expect businesses to deliver more than sheer economic value. In other words, businesses should address the needs of stakeholders, not just shareholders, in the pursuit of long-term value creation.

There is cause for concern: Many global executives surveyed by management consultancy McKinsey are under pressure to cut their investment into long-term growth drivers in favour of meeting short-term earnings targets.

At the same time, consumers are expecting companies to solve society’s biggest problems, based on research by global public relations firm FleishmanHillard on the authenticity gap between what brands are promising and delivering.

The start of this decade has initiated a seismic shift in business leadership necessitated by the wide-ranging implications of the Covid-19 pandemic on top of the ongoing climate crisis, geopolitical uncertainties and looming recession. The pandemic in particular has derailed decades of progress in global health and exacerbated social inequalities.

As we confront a confluence of social, economic, and healthcare challenges, it is time to re-orient business leadership for the greater good.

The evolving roles of today’s CEOs

In its 2030 Agenda for Sustainable Development, the United Nations (UN) issued an urgent call-to-action for global partnerships to address some of the biggest existential threats facing our generation today.

The sheer scale and wide-ranging demands of the Sustainable Development Goals (SDGs) mean that it cannot succeed without the support and resources of the private sector.

At the same time, it has created a massive opportunity for corporations to step up and re-frame corporate social responsibility and their value proposition to strengthen societal resilience, improve human lives and protect the environment in the course of business.

The Business and Sustainable Development Commission has pointed to US$12 trillion in market opportunities for the private sector by 2030 and the potential for creating 380 million jobs if corporations were to integrate the SDGs in their business strategies.

We are looking at a whole new set of problems to solve on top of the ones we have already identified pre-pandemic. More than ever, today’s chief executive officers (CEOs) need to rally together and put their collective resources and innovative capacity to good use, in service of our people and communities.

Measuring social impact as important as tracking carbon footprint

The role of business enterprises in society is changing and the way they view corporate social responsibility has evolved over the years. While corporate charity has been widely recognised as a defining feature of corporate citizenship, it has not driven the social impact we now need to achieve tangible change.

We have also seen corporate social responsibility evolve from a once-a-year, extra-curricular activity to a strategic programme of wide-ranging initiatives aligned to the causes embraced by each organisation. Companies today are more deliberate about who they partner with and what they plan to do to effect positive change.

Companies should move away from solely corporate giving towards skilled volunteering and impact investing for the best social outcomes with their investment and efforts.

A big part of this recalibration lies in understanding and measuring each organisation’s social impact in the same vein as tracking one’s carbon footprint.

To understand where change is needed, we need to have some measure of the nature and level of social change caused directly and indirectly by the activities of a company and an industry.

Organisations also need to get serious about creating social value and measuring their social return on investment by understanding how to properly account for, measure and drive tangible outcomes.

Similarly, when negative environmental externalities spill over to the public realm, we need to hold bad actors responsible. Proper impact measurement will allow us to know where to start and what we should do.

When CEOs collectively make social impact measurement a priority, the private sector will be able to create shared value, by connecting societal and economic progress towards addressing the needs and challenges of the communities they operate in.

A global economy that works for progress, people and the planet

As the founder of the World Economic Forum, Klaus Schwab, suggests in his 2021 book on stakeholder capitalism, we need a global economy that works for progress, people and the planet.

There is also a business case for the private sector to be a key driver of social value. The ability of companies to create positive social outcomes will prove to be a competitive advantage.

McKinsey’s research has shown that companies that think long-term, over at least a five- to seven-year horizon, have registered 47 per cent higher revenue growth over a 15-year period.

A measure of societal resilience is how well we respond to the disruptive forces today and create a sustainable tomorrow. If the public and private sectors were to join forces in scaling up the creation of social value under a structured framework with clear, tangible metrics, we would go a long way to solve the most pressing issues facing our times.

When today’s CEOs collectively wield their enormous influence over consumers’ lives for the positive and focus on solving our biggest problems, we will find lasting progress for our people and planet.

The writer is chief executive officer, Asia, at Lendlease.