Words are empty unless they are followed by deeds. We need to keep this in mind as investors, business leaders and other stakeholders parse a much-ballyhooed “The Purpose of a Corporation” statement released last week by more than 180 chief executive officers of major U.S. corporations.
The CEOs are members of the Business Roundtable, a business group representing more than 15 million employees and more than $7 trillion in annual revenues, and are major employers in every state. In the statement, they emphasize that corporations have a responsibility to create value not only for shareholders, but also for their broader stakeholder base, including employees, customers, suppliers and the communities in which they operate.
On its face, the statement gives me hope. It is both timely and prescient, and should be applauded. With it, the largest companies in the U.S have affirmed that fair dealings with customers, employees, suppliers and communities are core to a company’s purpose and to its overall role in the American economy and society. I could not agree more.
But the statement is only a small step in the marathon of challenges before us. We require bold, immediate action from these powerful corporate leaders — whose products underpin every aspect of our daily lives and whose influential voices can move policy proposals that impact our economy and the world around us.
Consider just some of the news around the same time as the CEO statement: A new report showing that July was the hottest month ever recorded on Earth. New high-tide flooding records in Miami due to rising sea levels. Massive fires in the Amazon rainforest due to human-driven deforestation caused by soybean farmers and cattle ranchers.
These sobering headlines – and the Business Roundtable statement – are all interrelated. All of these trends – rising CO2 levels, rising sea levels, heat-inducing deforestation – are due in part to the energy and commodity sourcing practices of these global companies. Companies like ExxonMobil (on energy) and Cargill (on consumer goods) – must act boldly to solve these problems. To truly “embrace sustainable practices across our businesses,” companies must find ways to address these trends with more urgency.
In the case of climate change, for example, the corporate community can push more forcefully for policies that will reduce greenhouse gas emissions and increase renewable energy and related clean energy jobs. We should move away from sourcing livestock and livestock feed from suppliers that burn precious rainforests, which act as carbon sinks and produce enough oxygen to be called “the lungs of the planet.”
So the next necessary steps for the signatories are to listen to what stakeholders are saying, particularly about climate change and other environmental, social and governance (ESG) issues, and match their words with tangible, bolder actions.
The overlapping perspectives – of employees, customers, suppliers, communities and shareholders – align powerfully to the current climate, water and human rights crises we face in the U.S. and abroad. Each of these constituencies is speaking up and stepping up action on these global challenges in unprecedented ways.
For example, we have seen thousands of employees at Google and Wayfair stage mass walkouts over immigration and workplace practices. Eight thousand (and counting) Amazon employees backed a shareholder resolution asking the company to create ambitious climate plans. And concerns over water pollution led a community in Kansas to reject Tyson Foods’ proposal to build a $320 million chicken processing plant. Environmental and social concerns continue to be top of mind for investors, as we’ve seen in the most recent proxy season.
To be sure, some of the CEOs who signed the Business Roundtable statement are taking steps that will make a significant difference: robust board oversight and executive compensation linked to addressing ESG issues, setting science-based emissions reduction targets, integrating a price on carbon as a part of decision making, and assuring human rights both in their companies and across their supply chains. These and other examples are important steps forward, but companies must continue to scale up their ambition at the pace needed to address today’s economic, environmental and social challenges.
Being a purpose-driven corporation means being consistent in integrating sustainability, from the boardroom, to the supply chain, to public policy positions. We must move away from the practice of issuing public statements on the importance of addressing climate change, water shortages, human rights abuses or other ESG issues from one office – and then paying Washington lobbyists to work against the regulatory measures needed to spur action from another office. Stakeholders now expect corporate statements and corporate lobbying efforts to be aligned.
Words matter, and the words in this statement are most welcome. And of course, statements aren’t, by themselves, enough.
We are now at a momentus turning point. Capitalism today must benefit society at large as well as shareholders. And we just might find that the two go hand in hand. So let’s take this statement on the purpose of a corporation and use it to help create a purpose-driven capitalism wherein all companies act to deliver value to consumers and shareholders, while remaining accountable to the broader range of stakeholders, their communities, and the planet.
