Companies recognise the importance of balancing the interests of different stakeholders in order to build and sustain trust
The global financial crisis has already shown just how important trust is, and how easily it can be damaged. But in a world that’s changing beyond all recognition, the very purpose of business – not just its practices – will come into question.
Popular demand for greater organisational transparency is rising. The pressure on the environment is also mounting as the global population grows and becomes more urbanised. And social inequalities are creating discord in some countries.
Meanwhile, social networking has made it much easier for people to air their complaints – a trend that will increase as large swathes of the populace become wealthier and better educated. Some consumers may also decide to get their message across by becoming choosier about how they spend their discretionary income.
Rising consumer expectations will, in turn, give other stakeholders more power. Consumers increasingly care about the impact of business on their local communities, and governments and investors are motivated by what voters want.
What does this mean for your business?
Most executives already recognise that business has social as well as financial responsibilities. They believe it’s important to balance the interests of different stakeholders, rather than focusing solely on investors, employees and customers. But there’s a big gap between what they aspire to do and what they actually do.
Many companies only measure their financial performance, for example. Similarly, they define risk solely in terms of incidents that could upset their finances. That won’t suffice in the future. All organisations will have to factor broader, non-financial considerations into their business decisions.
They will have to measure the full impact of all their activities: not just the fiscal and economic effects, but the social and environmental effects, too. This will enable management to understand the trade-offs between different strategies and make the best decisions for every stakeholder. Making the right decisions and reporting the results will also help companies earn more trust, more custom and thus more profit.
Global Editor in Chief, PwC US