“These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.”
The new ‘Purpose Beyond Profit” declaration issued by the Business Roundtable and signed by 181 CEOs of leading US corporations is out to rewrite what it means to do business in the modern world.
Contrary to the belief that the “social responsibility of business is to increase its profit,” which was carved in stone by Milton Friedman in 1970, the new declaration suggests that the purpose of business is to deliver value to all company stakeholders, spanning beyond the narrow shareholders’ circle. The views expressed in the declaration depart from over 20 years of “shareholder primacy” into the world of larger social impact.
“Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country,” states the declaration. There are five groups of parties it appeals to: shareholders, customers, employees, suppliers, and communities.
While ideas of “stakeholder capitalism” have been around for decades and are already prevalent among some big companies both in the U.S. and across Europe, a declaration of this kind signals a shift in mindset in doing business in general and not only among the brands that want to show that they care.
“These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans,” Jamie Dimon, chairman and CEO of JPMorgan Chase, commented on the declaration. What this means is that making a profit should no longer be seen as the only mark of success for a business that is committed to creating a better society.
The move also signals a sea change in corporate culture, bringing greater focus on meaning and purpose among companies’ own employees, which according to recent research drives profitability up by 5% to 7% compared to the market average. Meanwhile, a more sustainable approach to doing business has also been shown to make companies more resilient in the long term.
The declaration likewise puts emphases on diversity, inclusion, human dignity, environmental protection and sustainable business practices, in line with a recent UN report which suggests that “making profit now to clean up later” is no longer an option. Much of the corporate world is also starting to unite under this common principle.
While there are many benefits to such an approach, the move highlights the growing influence of corporations in a globalized world. While expressions of care are important, it will be just as important to ensure that corporate understanding of the social good aligns with the good of both society and local communities.
In an age when “enlightened” businesses seek to promote sustainable lifestyles, reshape livelihoods and spread their own visions of the future, we have to remain cautious and critical of the ways their efforts actually shape our ways of life, especially considering the immense power of marketing to shape societal preferences that are not necessarily in line with actual human needs.
Still, in a world of growing citizen voices, we can remain positive about the interactions between corporate and societal visions. The change may also mean that businesses will become more attuned to actual ecological needs and serve them better than before.
Only time will tell what impacts the new declaration will have. Hopefully, it will actually encourage corporations to consider changing the world for the better.