How can we make businesses better for people and the planet?

Since the first Industrial Revolution, businesses have been on the frontline of technological and social change. There’s no way we’ll create a cohesive, resilient world without them. But to do this we’ll need them to shift their time horizons, look beyond short-term profits, and transform themselves into sustainable and inclusive organizations. What’s a smart company to do?

Stakeholder Capitalism.

Companies should no longer solely maximize profits and enhance shareholder value at the cost of other stakeholder groups. Companies should move towards Stakeholder Capitalism and orient themselves to serve the interest of all their stakeholders such as customers, suppliers, employees, shareholders and local communities. Under this system, a company’s purpose is to create long-term value. This is essential to the long-term success and health of any business and a sensible business decision in addition to being an ethical choice.

Investors can use their shares in a company to influence its behavior, encouraging it to be more heedful of the welfare of all stakeholders. The WEF has updated its “Davos Manifesto”, a set of principles that underpin the event. It now plainly states at the top, “the purpose of a company is to engage all its stakeholders in shared and sustained value creation” and says companies should have zero tolerance for corruption, uphold human rights and pay their fair share of taxes.

The Triple Ps (Planet, People, Prosperity) of the Triple Bottom Line.

It is 25 years ago that John Elkington coined the “Triple Bottom Line”. Up to today it is still gaining popularity and it has become part of everyday business language. Has it?

Announcing its Q1 2020 remarkable results, the Amazon Stock (AMZN) lost 6% because the company re-invested earnings into more Corona-proof health and safety equipment for its employees and warehouses. Evidence that the Stock Market has not yet adopted the Triple Ps and is unable to serve humanity, only itself and shareholder greed.

The Triple Bottom Line (TPL) was supposed to provoke deeper thinking about capitalism and its future. Its goal was “system change” – pushing towards the transformation of capitalism.

It is time to step up – or to get out of the way. TPL was originally intended as a genetic code, a triple helix of change for tomorrow’s capitalism, with a focus on breakthrough change, disruption, asymmetric growth and the scaling of next generation market solutions.

The idea is to track and manage economic, social and environmental value add or destroyed:

1. People: the positive and negative impact an organization has on its most important stakeholders. These include employees, families, customers, suppliers, communities, and any other person influencing or being affected by the organization.
2. Planet: the positive and negative impact an organization has on its natural environment. This includes reducing its carbon footprint, usage of natural resources, toxic materials and so on, but also the active removal of waste, reforestation and restauration of natural harm done.
3. Prosperity: the positive and negative impact an organization has on the local, national and international economy. This includes creating employment, generating innovation, paying taxes, wealth creation and any other economic impact an organization has. 

The Financial System is a “priority global public good”.

Neo-Liberalism is in crisis because it only supports a free market and ignores social regulation or people emancipation, it puts too much pressure on wages, social security, environmental standards, workers’ rights and fiscal policy. But it is a myth to believe that the state can completely retreat from the free market. The state has always intervened in the workings of the market to help investors and every crisis ends up in large investors being protected by public rescue packages while the rest of society is left at the mercy of the brutal laws of supply and demand. This distorted model of the free market economy is nothing other than “socialism for the rich”.

Tax Havens cannot survive!

Countries are in a permanent state of “unrestrained competition” with one another on (de)-regulation. It is a source of great advantage for radical free market forces, but it puts significant pressure on especially a country’s fiscal policy. Tax havens have become a pivot of the unfettered global and financial system. They help people or businesses to get around the rules, laws and regulations of jurisdictions elsewhere. It is estimated that close to 10 trillion US Dollars is held in tax havens. It is “the black hole of world economy”. The international community needs to close down this offshore system and the associated money-laundering, corruption and tax evasion. 

We need to avoid Currency Speculation!

Monetary policy is an important weapon in geo-economic competition. However, the US Dollar is not a stable store of value and we need a stable global reserve currency to make currency speculations impossible. In the meantime, we should develop a tax on international currency transactions to make them uneconomic. They add no value to the world or to humanity.

Corporations and the wealthy need to pay fair taxes. 

Raising taxes has traditionally been at the core of national sovereignty. However, deregulation, globalization and the associated fiscal race to the bottom has accelerated a global tax war. The proportion of total tax revenue in the USA from corporate income taxes has fallen from >30% in 1950’ to <10% today, while that from payroll taxes has shot up from <10% to 40%. We need international tax law cooperation to prevent further erosion of the rates of corporate taxation and to counteract the tax avoidance strategies of international companies. The revenues should be used to ensure that all people are able to meet their basic needs in dignity and to allow governments to improve public service and to prepare better for the risks of this world. Tax evasion is unethical and it contributes to an unfair world.

Governments need to reduce borrowing and Debt-to-Equity ratio for Companies and Banks should be 1 or less. Stock buy-back and Dividend pay-out should be regulated.

The rating agency S&P took a view of government debt in 2019, wrapping together the debt of all nations to arrive at a figure of $53 Trillion. The OECD says this figure is a cause for worry, especially when those same governments have only managed to grow their economies at a snail’s pace over the past 10 years.

And those fears don’t stop at government debt. The OECD has spent the past couple of years warning about the colossal sums that corporations have borrowed, $13.5 Trillion.

And many of the companies borrowing funds don’t need the cash! They are borrowing, not to invest in new equipment, but to pay ever-higher dividends to their shareholders.

Voracious investors want their dividends whether the companies they have put their money into make a bigger profit from year to year or not!

Debt restructuring and regulation at all levels is required to achieve the 2030 Agenda for Sustainable Development. 

We need stronger antitrust regulations.

In spite of the significance of transnational corporations and the strong global interconnection between them, the efforts towards global anti-cartel legislation are making only very slow progress. This is not a marginal issue. We need a global antitrust authority with enforcement powers. 

Fair Pay! (ILO.org)

Wages are amongst the most important conditions of work and a major subject of collective bargaining. The International Labour Organization (ILO) is committed to promoting policies on wages and incomes that ensure a just share of the fruits of progress to all and a minimum living wage for all employed in need of such protection. In order to do so it undertakes research and provides evidence-based policy advice on minimum wages, public sector pay, wage bargaining and gender pay gaps. Since 2008, the ILO publishes the Global Wage Report, one of its flagship reports and an authoritative source of information on wage trends and policies at national and global levels.

Improving wages, reducing income inequalities and promoting decent work opportunities continue to be a challenge if we want to succeed in achieving the UN 2030 Agenda!

Michiel Plazier – Operational Manager at Doppio Espresso – Booking.com made $ 5 billion in profits last year, but is now asking taxpayers to pay their employees’ wages. Two years ago, Hunkemuller paid 150 million euros in dividends to the investment company of billionaire David Rubenstein, but is now unable to pay the rent for their retail properties. In December, Action still paid a 750 million Euro dividend to private equity fund 3i, but in March it was the first group to indicate that it was no longer able to pay its suppliers.

Something is incredibly wrong in our economic system if, in the good times, profits are privatized and end up in the bank accounts of a few billionaires, while in bad times the losses are collectivized and taxpayers have to pay for it. Could the Corona crisis mean the end of the blown neo-liberalism for our generation?

Marc Benioff – Chairman of Salesforce – “Capitalism, as we know, it is dead. We’re going to see a new kind of capitalism – and it won’t be the Milton Friedman capitalism, that is just about making money. The new capitalism is that businesses are here to serve their shareholders, but also their stakeholders – employees, customers, public schools, homeless and the planet.” 

Adriana Batty – Co-Founder at Lyfcycle – As the founder of a business seeking to bridge the gaps between profit, people and planet; I find myself often blurring the lines between “this makes good business sense” and “but it’s the right thing to do”. So, in an effort to properly dedicate the appropriate time and resources to “doing the right thing”, we have established the Lyfcycle Foundation. Through the foundation, we’ll primarily backing grassroots organizations that champion garment workers’ health, wealth and wellbeing. It seems only right to give back to the very communities on which our business is built. And to kick things off properly, we will be committing 5% of all the profits to the foundation from here onwards. It’s the least we can do!