Many businesses recognise that to be successful, they must behave responsibly. Despite the corporate misdemeanours you read about in the headlines, more companies than ever are taking their impact on society and the environment seriously, realising it is part of their licence to operate in our connected and challenging world.
A current hurdle preventing business from doing more lies with the investor community – the owners of companies whose shares can be traded via stock exchanges. The global stock and bond market is eight and a half times the size of the total US economy – so these guys can be pretty influential when they want to be!
Unfortunately a 2014 study of business leaders revealed the short term attitudes of investors as a key barrier to pursuing more ‘sustainable business’ practices – business that meet the wider needs of society, today and tomorrow. For a company pursuing a big re-training programme for its staff, or designing eco-friendly products, positive financial impacts may not be felt immediately.
Many large investors, ironically often pension funds investing for the long-term, are not giving enough weight to both the broader and longer-term behaviours that create and protect the company’s ability to grow and remain successful.
One reason is that investors have a ‘Fiduciary Duty’ of care to maximise returns for their savers like you and me. They are often very short-term and narrow in their definition of value creation. However a recent study from Harvard shows sustainable businesses actually outperformed their peers over an 18 year period.
So what’s the issue? It is not as if investors are maliciously ignoring these wider factors which define a business. I have learnt from discussions with companies and investors that despite the will, there is a lack of common understanding between the two sides about the ‘value’ of doing business responsibly – often using different language, or not understanding its relevance to the business strategy.
In response to this conundrum, since the start of 2015 a dozen major UK businesses have come together as a Business in the Community-led working group, learning from investors and other experts on how to best persuade financiers that sustainable business pays off. They have learnt that it is vital to talk about sustainable business in language which investors understand – mainly how it supports growth of the business, cost reduction and risk management. These firms are putting this learning into action currently, and Business in the Community will share their experiences later in the summer to help others.
At the same time, businesses need to encourage a more long-term dimension to their discussions with investors. This morning (16th June 2015) Business in the Community has convened a practical breakfast briefing, hosted by Saker Nusseibeh CEO of Hermes Investment Management who is outspoken about the need to think long-term.
Featuring responsible business champions such as Adrian Ringrose, CEO of Interserve plc, senior business leaders will discuss the moral and business imperative, as well as best practice for engaging with investors. Business in the Community is calling on business leaders to step up and forge a broader dialogue with their largest shareholders — helping them to see ‘value’ in terms beyond quarterly sales. The sustainability of our economy and society depends on it.
Charlotte leads work at Business in the Community supporting businesses work more effectively with their investors on the value of responsible business. For the past 4 years she has been a Corporate Adviser in Business in the Community’s Membership Team, supporting over 40 blue-chip Business in the Community’s member companies to become more responsible across a range of social and environmental matters.
For more information about Business in the Community and this work and how to get involved, contact firstname.lastname@example.org