Bringing real value to society
In the end of summer, both The Economist and The New York Times headlined articles declaring that big business now are moving from shareholder maximization and towards a broader social responsibility. This following of a statement by the American Business Roundtable (representing CEO’s of some of the largest businesses in the world), redefining the purpose of public companies. The purpose, the world business leaders said, should no longer be the maximization of shareholder value, but to serve both its shareholders and stakeholders.
Only a month later, Sasja Beslik (formely Head of Sustainable Finance at Nordea and one of Sweden’s most prominent experts on CSR, now Head of Sustainable finance Dev at J. Safra Sarasin) took the stage at a banking conference in Stockholm. In his keynote speech, Beslik argued that what banks really need to establish today is a social contract. The idea of the social contract can be traced back to antique societies, but the phrase was made famous by 18th century philosophers Jean-Jaques Rousseau in his book “The Social Contract”. Evidently it is, safe to say, not a new idea. While Rousseau’s original writing mainly focused on the individual and the state, as when the individual surrenders some of her rights in exchange for state protection, Beslik and his peers are talking about a social contract for businesses.
But what does this social contract really mean for business? Is it enough with a well-written and eloquently formulated CSR policy to be announced in a press release? Probably not. Taking responsibility as a business goes far beyond CSR. One of the leading scholars on Business Ethics and CSR, Harvard Business School Professor Nien-He Hsieh, argues that companies, particularly multinational enterprises should take a broader social responsibility when governments fail to do so. In other words, it is about bringing real value to society in a wider sense. And it does not hurt if it is long-term.
For the finance sector supporting responsible and sustainable investments to combat climate change is one way of bringing real value to society. But societal value also entails many other things, that has been done for a long time in the sector. In fact, the entire business model of the finance sector is built on providing societal value; through financing the real economy and enabling local growth and development, accelerating innovation and insuring people and companies against risks in an uncertain future. It is also done by providing quality financial advice and inclusive financial services that helps narrowing the income gap and reduce inequality. Creative insurance solutions, such as Index Insurance, has shown promising results in lifting rural smallholder farmers out of poverty and help secure long-term stability. In addition, banks and insurance companies provide quality work and employment for many men and women each day.
However, there are of course still gaps to be filled. The finance sector and its employees have immense power to accelerate the transformation towards long-term sustainable development. Investing in employees and enabling training and lifelong learning in the digital era is another way the finance sector can provide value to society. Support efforts against money laundering and tax evasion are also key, especially for tax-dependent welfare states. Efforts are already being made by many Nordic banks and insurance companies to bring value to society. Several Nordic banks just recently signed the UN principles for Responsible Banking to mention one example. By continuing this commitment to responsibility, the Finance sector can, to paraphrase the American Business Roundtable, deliver value to all stakeholder; shareholder, employees and society.