13 February 2020
By Phumza Macanda, Head of Media Relations, Absa Group
The Annual Meeting of the World Economic Forum (WEF), held in Davos each January, is often seen as a gathering of the world's elite and decision makers, who come together to find solutions to pressing problems they may never have to deal with. Yet, it is so much more than that. The gathering, which celebrated its 50th anniversary this year, provides a platform where ideas are exchanged, networks forged, and commitments made.
It's where concepts are tabled and become – in one form or another – concrete reality.
Underpinning this year’s Annual Meeting was the Davos Manifesto 2020. This document builds on the original Davos Manifesto of 1973, which first articulated the stakeholder concept that businesses should serve the interests of all society rather than simply their shareholders. The updated 2020 Manifesto provides a vision for stakeholder capitalism that touches on a range of important issues of our time, including climate change, automation and globalisation, fair taxation, zero tolerance for corruption, executive pay and respect for human rights.
Globally, stakeholder capitalism is fast gaining momentum. The current [capitalist] economic system represents a betrayal of future generations, owing to its environmental unsustainability. Pure capitalism does not pay enough attention to the impact of business on society and on the environment and we have witnessed customers using their purchasing power to protest against companies who do not have sustainable business practices.
This has become more pronounced in recent years and we have seen the greatest advocacy coming from the youth.
Generation Z, such as 17-year old Swedish climate activist Greta Thunberg, no longer want to work for, invest in, or buy from companies that lack values beyond maximizing shareholder value. They expect the companies in their lives to be aligned with their values and building trust in a company is no longer just about how it treats them, it’s also about how it contributes to the broader society and the environment.
Future generations will increasingly demand conscious companies driven by conscious leaders, and executives and investors have finally started to recognize that their own long-term success is closely linked to their stakeholders. The simple idea - that you can do well by doing good - has created exciting new opportunities and has given many businesses a distinct competitive advantage.
Many people however still have the misconception that “doing good” means making less money and that there is always a trade-off between financial return and impact. This is frankly not the case. In fact, this is the only business model that will survive.
The Business and Sustainable Development Commission, launched in Davos in January 2016, did an exercise which showed how the Sustainable Development Goals (SDGs) can unlock $12trillion in business opportunities, presenting the obvious opportunity of doing well whilst doing good. We have seen this with companies like Unilever, Whole Foods Market, and Starbucks who are revolutionising capitalism, by considering the community and the environment as key stakeholders and integrating them into every business decision.
The move is reappearing against a backdrop of climate crisis and alarming social challenges, with Klaus Schwab, founder of the WEF, believing that all stakeholders should be influenced by long-term perspectives. Changing the narrative won’t happen overnight, but the consensus reached at WEF is that we need to make room for the conversation.
As Director-General of the International Labour Organisation (ILO), Guy Ryder said, ‘this includes making sure that there are no human rights violations anywhere in your supply chain, and this means auditing the process down to a granular level. Ensuring that the nuts in a food product aren’t harvested from a remote village endorsing child labour’.
The tough part about this is whether investors and consumers would know if this sort of abuse is happening or swept under the rug. The stark reality is that, unless there's a media expose, most people simply will not be aware if a company uses child labour, or if they are polluting the Amazon.
And this is where a new set of measurements for companies comes in.
Measuring the impact of companies
Brian Moynihan, American businessman and the Chairman and CEO of Bank of America is behind a move, endorsed by Schwab, to bring about a set of metrics against which companies will measure their impact on the communities and environments in which they operate, or impact.
These measures are set to be available by August this year, allowing companies to measure their sustainability, with the plan being to encourage sustainable business and sustainable investment. These measures are the outcome of bringing together the minds of 100 Chief Executive Officers across the globe.
What this means is that companies can actually measure sustainability, in a way that all stakeholders – from investors to companies – can agree upon. These metrics could then be measured against and reported upon in annual reports, and the plan is now to ensure wider adoption.
What the new set of measures also do is trim the number of metrics against which a company can be measured. The previous 650 measurements were far too weighty and complex to allow anyone to draw meaningful comparisons. Now, there are 22 metrics, which are clearer and more concise.
Perhaps best of all, investors will use these results when deciding where to place theirs or others' funds. Investors will now easily be able to see which companies are sustainable and will contribute towards the long-term future of the planet, and all those who live here.
An important part of ensuring that companies are sustainable into the future is ensuring that they have a workforce that is future fit.
Another key theme to emerge from WEF this year was just how to make certain that your employees can help your company grow as the Fourth Industrial revolution (or 4IR as it is commonly abbreviated) become increasingly entrenched in everyday lives.
Ginni Rometty, chair, president, and CEO of IBM, explained during a session that the era of 4IR means all jobs will change; tasks are moving to the high-end and low-end, hollowing out the middle. This calls for massive retraining and a change in the paradigm around future skills.
In keeping with the notion of stakeholder capitalism – maximising benefits for all – there is no point in the digital era if it is not inclusive but divides the world into more haves and have nots. That means ushering this technology in a way that is beneficial to everyone.
During one session on the second day of the WEF Annual Meeting, members of the audience were asked to vote on whether they thought their current skills would outlast their career. They were also asked whose responsibility it is to help reskill the workforce.
The answer to the first was an overwhelming no, while more than 80 percent of the audience said a collaborative effort was required to reskill employees.
What does this mean? Well, there seems to be agreement that reskilling and upskilling the workforce is not a job for a specific sector or entity. We all have a job to do to ensure that everyone has the skills they need to contribute to a sustainable future for people and planet.
Absa Group is a Strategic Partner Associate of the World Economic Forum. The Group has a deep commitment to Africa’s success, and the principles of the 2020 Davos Manifesto will feed into our strategy as we work to change Africa’s development trajectories and bring our shared futures and Africa’s possibilities to life.