Conscious Capitalism: The New Norm

Article by Olivia Berkman at Financial Executives International

Image by Daiwei Lu on Unsplash

 

The concept of conscious capital is being echoed around the world. Companies see the importance of social, climate and other non-financial factors as critical for their long-term viability and success. In January of 2020 The World Economic Forum (WEF) released a set of universal environmental, social and governance (ESG) metrics and disclosures to measure stakeholder capitalism in which companies can report regardless of their industry or region. Organized around the pillars of principles of governance, planet, people and prosperity, the WEF identified metrics and disclosures align existing standards, enabling companies to collectively report non-financial disclosures.

Companies are being asked by shareholders and proxy advisors to assertively address stakeholder issues, primarily by articulating a compelling strategy as to how companies are approaching the sustainability of the business from environmental, human capital, and values -based perspectives.

Conscious capital is “doing well by doing good.” It is designed to yield financial gains that will return long-term value to stakeholders.

One global director we interviewed for our recent study, 2021 and Beyond: Global Trends in Stakeholder Incentives, framed this quite well when he said: the best force to change the discussion is for companies to stand up and be counted. It’s not because activist groups are on your case, it’s because it’s the right thing to do.