When BlackRock informed corporate CEOs last week that companies that did not make a contribution to society would risk losing the support of the largest investor in the world, conscious capitalists around the world rejoiced. Finally, the support of the financial industry, which has been a long-standing holdout of the movement that proves that that doing good can help companies do well.
What’s more important than the fact that he wrote the letter is the reason why he wrote it.
“To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society,” wrote CEO Laurence Fink. Not just because it’s a good idea. Not because it will make people feel good. Not because it’s good marketing. Fink, a man who knows how to make money, understands that companies that are making a positive contribution to society will profit as a result, and therefore they will be good investments. He wrote, in short, that it was his fiduciary responsibility to shareholders to invest in companies that understand the value of operating with purpose.
This is music to our ears. For the past decade, since corporate social responsibility has been a thing, the skeptics have been louder than the believers. Why the change? Why now?
“Many governments (are) failing to prepare for the future, on issues ranging from retirement to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking the companies to respond to broader social challenges.” And as society is looking to companies to serve a social purpose, there is money to be made in doing so. Profits come from purpose.
More good news came later in the week when ValueAct Capital, the $15 billion activist firm, announced it is launching a fund focused on promoting environmental and social goals for the companies it invests in.
“There is not just a societal good to be done, but excess return to being captured in identifying and investing in businesses that are emphasizing and addressing environmental and societal problems,” said CEO Jeff Ubben. Can’t dislike a man who is honest and straightforward.
But still, the web lit up with skeptics voicing their concerns that these financial giants would not live up to their promises or that they would not make a profit if they did. To be expected. As a result, and as more companies come into the sustainable/responsible space, they will likely struggle with how to maintain their authenticity and avoid unnecessary negative chatter from the haters.
“The time has come for a new model of shareholder engagement—one that strengthens and deepens communication between shareholders and the companies that they own,” Mr. Fink wrote.
Exactly. Communication is the key.
As sustainability in business becomes more prominent, so will the challenges of communicating purpose in an understandable, truthful and compelling way. Over the past decade as big business has marched on, often in fits and starts, to become more sustainable, the communications around doing so have been less than elegant, sometimes ineffective, and, upon occasion, even damaging. But it doesn’t have to be.
There are many ways communicators can share their companies’ messages of purpose in a way that drives positive recognition. This positive recognition translates into sales and revenue for the company and encourages other companies to join the movement. When they do, more capital will be put behind social issues, and society we will see greater positive change as a result.
Read more from Teak about communicating corporate social responsibility.
