The new imperative
1 October 2020 at 8:25 am
The launch of Imperative21 signals a substantial movement seeking to reframe the purpose of business around benefitting our communities. It’s time for charities to look beyond government and consider where potential alliances might be formed with business, writes David Crosbie.
“Free markets must be balanced by democratically accountable, transparent governments and strong civil societies, if we are to build a just and sustainable future. Business must step up to make this possible. Our economies, and with it our firms, will suffer enormously if we don’t address the problems that we face.” – Reimagining Capitalism in a World on Fire, Harvard Business School Professor Rebecca Henderson.
The emerging trend for business to actively seek a “social license” offers significant potential for charities to help drive positive change in our communities. Working with business will become more important for many charities, especially as governments around the world increasingly enact the wishes of short-term vested economic interests.
In a world of obscene inequality, increasingly selfish and nationalistic leaders unable to coalesce around critical global public interests like climate change and loss of critical habitat, it is difficult to argue that our governments and the economic systems they maintain are serving the majority of the people. This perspective has been reinforced by a health pandemic, economic shocks, climate change impacts and racial injustice all highlighting structural inequalities and failures that many governments are struggling to address.
On 14 September a new global campaign was launched. It began with images flashed on to the iconic Nasdaq Time Square electronic billboard proclaiming:
Extractive to regenerative
Minimum wage to living wage
Neglect to respect
Winner takes all to shared prosperity
People and planet disrespected to people and planet respected
The imperatives for economic system change to shared wellbeing on a healthy planet
The final tagline was: “Nasdaq is proud to support the reset – Imperative21.”
Nasdaq is a stock exchange based in Times Square New York, the second largest stock exchange by market capitalization of shares traded in the world. Nasdaq is business driven. It seems incongruous at best for an organisation like Nasdaq to be supporting a major campaign grounded in acknowledging major failures in our current political and economic systems. But this is only the beginning.
Imperative21 – the group Nasdaq belongs to – is a business-led network that:
- equips leaders to accelerate their transition to stakeholder (as opposed to shareholder) capitalism;
- shifts the cultural narrative about the role of business and finance in society; and
- realigns incentives and facilitates a supportive public policy environment.
Imperative21 represents 70,000 companies, 20 million employees, $6.6 trillion in revenue, and $15 trillion in assets under management. Originally convened by the Ford Foundation, Imperative21 has facilitated a co-creation process with 250 global allies to identify three principles for the economic system we need:
- Recognises the interdependence of healthy people, planet, and economies; reimagines the relationships between the private sector, government, and civil society; and ensures that everyone has access to free and fair markets.
- Removes structural inequality; ensures leadership and ownership are more representative and investment more accessible; uses technology to advance democratic ideals and human rights; and promotes greater voice, power and opportunity for those currently marginalised.
- Measures success based on credible common metrics of value creation for all stakeholders; creates incentives that reward business and investments creating social and environmental value; and enhances standards of fiduciary duty.
The campaign was launched on the 50th anniversary of the publication of Milton Friedman’s often cited article about the primary purpose of business being to maximise shareholder returns. Imperative21 rejects the notion of business serving shareholder interests, arguing that this approach has not only exacerbated multiple levels of inequality (including gender), but also failed to address fundamental issues across our communities such as climate change, racial discrimination, health pandemics, community building and worker entitlements. Imperative21 is a substantial movement seeking to reset business fundamentals.
In Australia we have recently seen the power of shareholder action to bring corporate companies to account for bad behaviour. Imperative21 is about a broader reframing of the purpose of business around benefitting our communities. It is a whole new level of social license and corporate responsibility. It builds on some important work in the establishment of B Corps – including Pro Bono Australia – companies committed to delivering benefits to all their stakeholders including their communities. The Imperative21 principles are consistent with the recommendations outlined by impact investment leaders at their recent Global Impact Summit where they called for an impact led COVID-19 recovery.
As governments seem ever more indifferent to social policy reform agendas, businesses are talking about creating increased social and environmental value. And herein lies the opportunity for charities. Many Australian businesses are well ahead of government in relation to climate change and energy, just as many businesses were well ahead of government in protecting their staff and their customers when COVID-19 emerged in Australia.
Government revenue is still the biggest source of income for charities and that is unlikely to change in the medium term. Working with governments will continue to be critical for many charities. But when we think about driving policy reform, seeking to make sustained changes that will benefit our communities, now more than ever we need to look beyond government and consider where potential alliances might be formed with business.
Purpose, opportunity, hope and change are what most charities specialise in. As business increasingly focus on their own role and their contribution to communities, the least we can do is offer our expertise.