The Altruistic Corporation: Reinventing companies by serving the common good and thriving as a result
Isaac Getz and Laurent Marbacher
Working paper ESCP Business School
Adam Smith posited that by pursuing its economic self-interest, business creates social value. The data backs him up: from 1820 to 2001, per capita income rose twentyfold in the industrialized West (only sixfold in the rest of the world).[ii] This has meant that for the first time in human history, a significant portion of humankind could escape from living at mere subsistence level. Unfortunately—and increasingly—these benefits also come with collateral damage to our societies. There have been attempts to mitigate this damage for as long as modern business has existed,[iii] culminating in today’s approaches ranging from Corporate Social Responsibility (CSR) to the Triple Bottom Line (TBL) and Conscious Capitalism, all trying to generate both economic and social value simultaneously. But as John Elkington, the inventor of TBL, wrote recently: “Whereas CEOs… move heaven and earth to ensure that they hit their profit targets, the same is very rarely true of their people and planet targets. Clearly, the Triple Bottom Line has failed to bury the single bottom line paradigm.”[iv] The latest of these attempts, the Business Roundtable “Statement on the Purpose of a Corporation”[v] in which 181 of the top CEOs in the US committed to satisfy all their stakeholders, still does not show how this can be achieved simultaneously.
And what if the solution to social value generation by businesses lay in not pursuing profits at all? What if, as a result—and in a complete reversal of the sequence according to Adam Smith—such businesses outperformed their competitors economically? And what if it was a bank—among all the possible businesses—that was actually to put this into practice?
Here is the talk that has been recorded for the THE NEXTGEN ENTREPRISE Summit 2020 in November that year.
The talk details the concept of the altruistic enterprise and illustrates it with the example of Handeslbanken, a leading Swedish bank.
Chronique publiée le 4 Décembre sur AGENDA, le blog du World Economic Forum
Professor Klaus Schwab, the founder of the World Economic Forum, has called for the abandonment of both “shareholder capitalism” and “state capitalism”, which have proven to be incapable of meeting the world’s challenges. He suggests that a “stakeholder capitalism” – a term he coined in the early 1970s – would enable a “Great Reset” of the global economy.
In recent decades, a series of approaches that adhere to the model of stakeholder capitalism have been proposed for companies, such as the Triple Bottom Line (TBL), B Corp, Benefit Corporation, and most recently, the Business RoundTable declaration on the purpose of the corporation or McKinsey’s 5Ps. This is a sign that society’s expectations towards business are rising and that companies are increasingly aware of them. The bad news is that the number of different approaches is confusing. For a leader who sincerely wants to adopt stakeholder capitalism, the transformational path to making it actually work is not clear.
In mid-March, COVID-19 locked down most of Europe and Asia. For Sterimed, a 900-employee maker of high-end sterile medical packaging, this development brought mixed news. The sudden 40 percent increase in demand for its products was welcome, but ramping up production within its French plants posed a real challenge. One element was particularly thorny: Procuring protective masks for workers was impossible in France.
Because it refused to endanger its employees, Sterimed needed masks. Having sold its products to China for years, it quickly realized that one of its Chinese clients was indeed producing protective masks and could send several boxes of free samples, which didn’t infringe on China’s ban on the commercial export of masks. Sterimed ended up with more masks than it needed, and CEO Thibaut Hyvernat immediately thought he could pass them on. “I started calling my friends who run businesses and began sharing some of the spare masks,” he told us. Then, something struck him: “Instead of helping several dozen friends, I could help 20 million friends!”
Here is an Op-Ed we have published in the British daily CITY A.M. on how some–altrusitically-minded– companies act during the COVID-19 crisis.
Coronavirus: Businesses must seize the chance to be altruistic
Isaac Getz and Laurent Marbacher
We recently interviewed the Manufacturing Director of a large company who told us that in response to the COVID-19 pandemic he had gathered all his suppliers and told them frankly: “We’ll face this together. We share everything.”
This leader could easily have placed the entire burden of plummeting demand on the shoulders of suppliers by drastically lowering orders. Many companies are doing this globally. Instead he chose to share the load, by lowering external orders and his own production equally – something those suppliers will not forget.
At this time of unprecedented turbulence, the instinct for businesses may be to preserve their own interests, cutting off suppliers and cancelling purchasing contracts – however this won’t help them once the crisis is over.
Companies such as the above do far better during times of trouble, since some of their partners may already help them. More importantly, when the storm is over, they are surrounded by real partners – who remember their acts and are ready to help them – instead of being alone and on their knees.