By Equipe de Redação
Posted in April 13, 2022
Every year, I eagerly await an event that marks the corporate sustainability segment, at least since 2018: waiting for and studying Larry Fink’s annual letter to his CEOs.
For those involved in sustainability/ESG who have not adopted this habit yet, I recommend you do so. Why? Because it contains some of the key elements that will be addressed by the leading companies in the market throughout the year.
This is because Mr. Fink’s letter is designated to the CEOs of the recipient companies of the ten trillion dollars that his company, BlackRock, invests on behalf of its clients. In Brazil, the portfolio of this fund includes the country’s major companies. The CEOs of these organizations take into account the content of the annual letter, making it a guiding light on how companies should navigate the ESG market, which is still largely unexplored.
The novelty of Larry Fink’s letter this year was the mention of the emergence of Stakeholder Capitalism. This theme has already been strongly addressed by the World Economic Forum, being the focus of recent Davos meetings and continuously disseminated by its founder, Klaus Schwab.
In this new vision of capitalism, companies must expand their objective of value generation beyond shareholders – the basis of Shareholder Capitalism – to include all their stakeholders, including employees, local communities, suppliers, among others. As we see entrepreneurs and fund managers supporting this idea, we can infer that there is an understanding that this change is relevant to promote the longevity of companies in the market and their capacity for value creation.
The objective of expanding companies’ commitment to value generation is commendable and makes sense in a world with increasing inequalities and environmental degradation. However, it increases the complexity of business management, encompassing the need to balance different and often conflicting demands. Thus, the integration of companies into Stakeholder Capitalism creates challenges that involve transforming business management. But, as we say in Minas Gerais, we are putting the cart before the horse and have not yet created the instruments to support this transformation.
To support our clients in this transition, we have used two references that have given us clues for years on how to involve stakeholders in business processes. The first is the Excellence Model in Management (MEG) from the National Quality Foundation (FNQ). The MEG is based on Sustainability and Commitments to Stakeholders. The Model recommends that companies listen to their stakeholders and include their needs and expectations in their processes, products, and services. Thus, we find that management excellence is the result of a continuous and deep relationship between companies and their stakeholders. However, these inputs still need to be included in the business strategy.
This is where our second reference comes in: the Global Reporting Initiative (GRI), which promotes the concept of Materiality among companies that prepare sustainability reports. According to the GRI, business priorities and strategies to achieve them should be defined by their leaders but with the inclusion of the main expectations and needs of their stakeholders. Thus, just as market analysis and economic perspectives are tools for building corporate strategies, the results of stakeholder engagement should also be used as such.
The experts I have presented here argue that the standout companies in the 21st century will be those that integrate into Stakeholder Capitalism most rapidly, meaning they have relevant and inspiring purposes and can pursue them with the support of intelligence, experience, and vision from their stakeholders. This vision is reinforced beyond the sustainability movement. And those who show this most clearly are the founders of Singularity University, who highlight these points as central to exponential companies that grow 10X faster than their competitors. I hope this serves as enough motivation for those who have not yet engaged in this process.
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