Aligned Stakeholders & Prioritizing Purpose Is More Important Than Ever
When it comes to decision-making and strategic planning, purpose-driven brands and conscious companies take into consideration the larger ecosystem of which they are composed. These brands and companies abide by the guiding principle that long-term business sustainability is achieved by prioritizing stakeholder interest instead of shareholder primacy. The COVID-19 crisis has started to expose the cracks in companies that have yet to adapt with a stakeholder-driven model of businesses.
In a recent interview, B Lab co-founder, Andrew Kassoy, notes that the COVID-19 crisis has made the need for a more just and holistic approach to business more apparent than ever.
“While shareholder primacy didn’t cause the COVID-19 crisis, it certainly laid bare the fact that we have a system where workers and communities aren’t prepared for a downturn like this,” Kassoy says. “You can see it in how fast the unemployment numbers went up. You can see the desperation of lots of workers to find alternative sources of income and the need for a massive bailout. And so in a different system, where companies were actually paying our workers well enough that people had reserves, we might be in a different situation than we are today and needing a multi-trillion-dollar bailout.”
EPOCH Pi co-founder, Bill Vogelgesang, adds that the pandemic could mark a true watershed in how we view and conduct business moving forward.
“Crises cause people to open their minds to new ideas as they see their previous beliefs fail to provide the intended utility,” Vogelgesang says. “The Conscious Capitalism and the B Corp movements, for example, accelerated after the great recession.”
This shift has long been in the process and some of the world’s most influential business leaders are beginning to heed the call. Research has shown that our financial markets’ short-term perspective — the fixation on shareholder return and profit maximization at any cost — might finally be fading. Purpose-driven companies have a competitive edge and investors are taking note.
One study determined that brands and businesses driven by purpose outperform their competition in the stock market by 42 percent. The COVID-19 pandemic proves that this result isn’t an outlier — businesses that have prioritized their workers and customers throughout the crisis outperformed the market in the first quarter of 2020, while the companies that put less emphasis on their workers and customers respectively underperformed.
And it’s not just Wall Street— consumer demands are leading the change. Nearly two-thirds of consumers globally (63 percent) prefer to buy goods and services from companies that stand for a shared purpose that reflects their personal values and beliefs and are ditching those that don’t.
With many of the signs pointing to prioritizing stakeholders as the next logical move, it’s up to business leaders to decide whether or not this serves as a wake-up call or a swan song.
At EPOCH Pi, we take a purpose-driven approach to each of our clients’ corporate transactions. By leading with company values, we can better identify philosophically-aligned parties and partners, enabling you to sell without selling out. Want to learn more about our process? Contact us for a free consultation.