Stakeholder Capitalism: Turning ESG into Revenue Growth

Stakeholder Capitalism: Turning ESG into Revenue Growth

Twenty or thirty years ago, the assumption was that companies had a choice. You could either do the right thing and address climate concerns and social issues. And then take the financial hit that resulted. Or, you could simply focus on making your business as profitable as possible.

But that was then, and in the intervening years the whole world of business has completely reorientated itself. It’s no longer either or, it’s and. You need to generate profits and do the right thing. Because doing the right thing is what makes you more profitable.

What’s changed is the way people perceive the world of business and commerce. Of the 34,000 people surveyed for the 2020 Edelman Trust Barometer,

“56% believe today’s capitalism does more harm than good in the world.”1

The result is the rise of stakeholder capitalism.

Stakeholder capitalism

In a word, stakeholder capitalism says that the trap many businesses fall into is to focus on short-term revenue goals. Genuine profitability is only possible when your revenue growth is sustained into the medium and long-term. And companies that fail to appreciate this will operate at a competitive disadvantage, and will eventually go out of business.

As Bruce Simpson concludes, in the study he and Dame Vivien Hunt produced for McKinsey,

“Companies with a long-term view outperformed the rest in earnings, revenue, investment, and job growth.”2

And that,

“Happy employees, collaborative suppliers, satisfied regulators, and devoted consumers deliver higher benefits over a longer-term period.”3

Focusing exclusively on the bottom line might have been all right in the past, but for genuine, long-term profitability you need to be as focused on the people around you as you are on your short-term margins. Because we are all customers and workers, and know and are related to people who work along a supply chain like yours.

And many of us are as concerned that what we do and buy, and the services we use, are produced in a way that we’re comfortable with, as we are that they are good value and easy to access. If we’re not happy, we’ll go elsewhere.

ESG metrics

So today’s most successful companies are all focused on doing what they do as responsibly as they can, not just because they want to make the world a better place. But because they understand it’s this that will improve their long-term margins and guarantee their revenue growth.

You reduce legal costs and regulatory interventions, your workers are happier and hence more productive. You make more efficient use of your resources and assets, so you produce less waste. Which then makes you more attractive to investors. All of which, crucially, can be measured.

Your environmental, social and governance (ESG) metrics allow you to demonstrate that you’re not just talking about making changes, you’re actively changing the way you do business.

The right software

So you need to employ a sophisticated software package to manage all your data. It will centralize all that data so that you have immediate access to any of those metrics whenever you need them. And it will keep those metrics permanently up to date, and in real time.

By pulling all your data together and presenting them in easy-to-understand graphs and Gantt charts, you’ll be able to demonstrate the changes you’ve been making, and the results that they’re producing.

And by streamlining your processes, and standardizing the way everyone works, your software package will further improve all those metrics. Because as often as not, waste and cost overruns are as much a result of bureaucratic mismanagement as they are of operational inefficiencies. Your metrics will improve just by being better organized and managed.

Stakeholder capitalism means better margins

Stakeholder capitalism is not a momentary fad. It describes the change that has already taken place in the world of business. Thinking about your customers and workers as people, and about the things that matter to them, improves your bottom line. Because ultimately, it makes the way you do business more efficient.

Your ESG metrics are how you demonstrate that to the people around you. And the right software will provide you with the tools to be able to do that reliably and efficiently.

Watch this project controls video to see the practical ways our software solution improves your bottom line.

Sources

  1. https://www.edelman.com/trust/2020-trust-barometer
  2. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/the-case-for-stakeholder-capitalism
  3. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/putting-stakeholder-capitalism-into-practice