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In the 1970s, after a decade of lackluster returns, it became the prevailing mission of corporations to generate value for their shareholders. Business leaders generally believed that the market would adjust to take care of other parties. Fast forward to 2020 and the world’s largest investor, Blackrock, has expanded the mission of companies everywhere with the statement “climate risk is investment risk.” This has ignited a new discussion in boardrooms to refocus on stakeholders, as opposed to the myopic focus on shareholders.
Corporate leaders are now developing plans to mitigate their environmental, social, and corporate governance (ESG) risks in ways that benefits all their stakeholders over the long term.
Initial sustainability initiatives were focused on the cost of introduction, rather than the opportunity it provides. Businesses across sectors that have begun to embrace ESG have realized that reducing waste of raw materials and energy also provides direct bottom-line savings. Outside of operations, businesses are also thinking about how to best satisfy an important stakeholder group – consumers, many of whom are demanding sustainable products and processes by choosing brands, like Patagonia and Allbirds, over less sustainable alternatives.
This article investigates how sustainability and profit come together to drive value for stakeholders around the world.