Conventionally, a business solely exists to maximise shareholder returns. Sometimes to the detriment of wider stakeholders. But are businesses about to follow Patagonia’s lead?
The Business Roundtable, a group of CEOs from leading US companies, have recently signed a pledge on the purpose of a corporation. The goal is to create “an economy that serves all Americans”.
Patagonia, an American clothing brand that markets and sells high quality clothing, has operated such a business model for some time. The objective of this is to create a sustainable business model that balances profitability with the needs and desires of society. Stakeholders are a broad group including:
- Local communities
- Governmental organisations
Patagonia’s mission statement – “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”
Jason Wingard, of Forbes, outlines three areas business leaders can build a more socially responsible operating model. The first is to develop ethical supply chains, including:
- Ensuring good factory working conditions
- Using suppliers with genuine commitment to minimise environmental impact
- Buying Fair Trade goods
- Paying local taxes in full
- Long-term investment in communities
In today’s global economy, the scale of supply chains is enormous and probably reach further into communities than any other business function. It is exciting to be working in a function that will have to address these areas over the coming years.
A key theme of my Corporate Social Responsibility (CSR) module at university stated that even CSR initiatives are investments, they are made to extend the brand or win more customers, translating into more profits, and then more dividends for their shareholders.
Does the Business Roundtable’s pledge herald an era of enterprise or signify business as usual? Time will tell…