Deloitte Global CEO Punit Renjen urges business leaders to advocate for stakeholder capitalism
Business leaders must make a stronger case for the idea that stakeholder capitalism is the best way to achieve sustainable growth. As a CEO and stakeholder capitalist I’m encouraged by the progress in promoting stakeholder capitalism I see in my own organization and across the business community. But I also see the need to do more.
There is growing enthusiasm about long-term sustainable growth. Expectations are rising among customers, investors, and employees, not to mention the general public. Many businesses are winning approval by being conscientious about addressing risks and opportunities in environmental, social, and governance areas. Governments around the world are introducing new and more demanding regulatory mandates.
Yet as momentum builds, so does the pushback – from two sides. On one side are those who think companies are not doing nearly enough. On the other are those who fear companies will become so focused on social issues they will fail to produce the profits vital to both economic and social progress.
So as business leaders, we face two risks: losing the support of those who value stakeholder capitalism who think we are doing too little, and validating the doubters who think we are doing too much. I think companies that embrace stakeholder capitalism must tell a persuasive story about what they are doing and accomplishing that will stand up to objections from both directions.
How to do that? I believe Deloitte’s experience with a purpose-driven strategy offers insights that will be helpful to others who are defining or revisiting their purpose statement. All companies are different, and we certainly don’t have all the answers, but while pursuing our purpose-driven strategy we have increased our investment in social value and achieved industry-leading performance at the same time.
Companies that embrace stakeholder capitalism must tell a persuasive story about what they are doing and accomplishing that will stand up to objections from both directions.
The most reliable way of being profitable over the long term is by focusing on something beyond profit, and stakeholders beyond shareholders. That “something” is your purpose. Being “led by purpose” is what stakeholder capitalism is about. And if you do it well, you and your shareholders will thrive.
Of course, addressing multiple stakeholders beyond shareholders creates complexity, and large, global companies are already enormously complex organizations. One analysis showed that the top 100 multinational enterprises on average have more than 500 affiliates in more than 50 countries. That means dealing with a host of differing contexts – not only commercial but legal, regulatory, social, cultural, and environmental.
This is a challenge for Deloitte. Our global organization has 345,000 people working in five businesses, serving clients large and small in six industries, in more than 100 countries and territories.
But this is why the idea of purpose is so powerful. It is an enormous simplification. A well-defined purpose functions as a north star that guides decision making by acting as a constant, vivid reminder of what you have made yourself accountable for. And naming key stakeholders in your purpose captures the essence of stakeholder capitalism.
This does raise the question of what constitutes a good purpose definition. The answer is to strike a balance: broad enough to be relevant to all the interests and situations the company deals with over time, but specific enough to be meaningful both internally and externally. That’s easier said than done, but getting it right is worth the effort.
Our purpose statement was the result of a project I oversaw just before becoming Deloitte Global’s CEO in 2015. Deloitte has always sought to make a substantial contribution beyond providing excellent service to our clients and profits to our shareholders, something embedded in our culture. But we had no overarching articulation of our purpose as such.
Some geographies had purpose statements. The result was a patchwork quilt with a lot of squares missing. Nothing global was developed because of the difficulty of agreeing on a single statement that would resonate across such a large and diversified organization. And any global purpose definition would need to work well in many languages. The challenge was great, but it had to be met.
Over a period of several months we worked toward a single, crisp statement that would cut through all the complexity to capture the essence of who we are and why we exist. Initially there were 20 versions, each with its own champions. We arranged consultations to obtain views from all over the organization, including a survey of 20,000 Deloitte professionals.
At the end of the process we decided the best solution would be a broad statement defining what our purpose is that everyone could sign up to, and allow the many segments of the Deloitte organization to define how it would best be acted upon at any particular time and place.
We committed ourselves to “an impact that matters – for our clients, our people, and the communities where we live and work.”
This was one of three finalists, and choosing among them was hard. Once the decision was made, however, it stuck. We are always checking to be sure it continues to be relevant, and the day will undoubtedly come when we will need a change, but after six years it continues to prove its worth.
I believe our statement of purpose packs a lot of punch for fewer than 20 words.
Impact that matters: Whatever we do has to make a real impact – one that is tangible, measurable, and attributable. It’s fine to aspire to leave the world a better place. But what was actually done here? And how much of it was done? And who did it? In addition, it will ideally be something that would not have happened but for the benefits of our professional expertise.
For our people: Yes, we pay our people well. But we have a duty to put opportunity in front them, too. This is essential for the Millennials and Gen Zs who make up 82% of the Deloitte workforce. Are we giving them the right assignments? Are they getting the right client experiences? Millennials and Gen Zs insist that the pursuit of profit be accompanied by more – whether it is creating innovative services or treating people as individuals and members of a broader society, rather than just as employees. Of course, Deloitte benefits, too, because this is the only way you get the right leadership 10 years down the road.
For communities: We think of communities at three levels – the local community, that broader notion of community we call “society” wherever we are, and the planet, insofar as a project that helps the planet is by definition one that serves the entire world community.
Some additional points about our purpose definition:
Stakeholder identification: We highlighted our clients, people, and communities in the purpose, given that devoting attention to interests beyond those of shareholders is crucial to stakeholder capitalism. Why didn’t we include shareholders – in our case, partners? We decided that if we did right by our clients, our people, and our communities, the numbers would follow. And so they have.
Coverage: By focusing our stakeholder work on things that would not have happened but for our professional expertise, we erased the line that leads people to think they have “real” work and “stakeholder” or CSR or ESG work. We want just to have “work,” so our people and communities are treated just as we treat our clients. This makes our purpose something we can look to for any decision – from the biggest, global ones that drive billions of dollars in revenue to the smallest ones that determine how a practice in a developing country spends a hundred pro bono hours serving the community.
Application: A broad purpose that is to be applied in many different places in many different ways carries an obvious risk: It may result in lots of people doing many things that don’t add up to much. Our answer has been to merge decisions about living our purpose into the strategic planning and operational management processes that drive our commercial activities. How we apply our purpose is decided through consultations among global and local leaders responsible for businesses, industries, geographic areas, individual client accounts, and talent.
Since 2015 our annual revenues have risen from $38 billion to $50 billion. Obviously many factors have played a role, but it is clear to me that the way we have defined and implemented our purpose has made a crucial contribution to our success.
For clients. We have adopted a new approach that emphasizes combining a deeper understanding of the client’s needs with new methods, services, technologies, and enhanced expertise. This includes a growing set of ESG services to our clients, ranging from consulting on decarbonization plans to reviewing ESG metrics to assisting clients with their diversity, equity, and inclusion programs.
In one engagement, for instance, we showed the client that a product it was advertising as “socially responsible” more for marketing value than anything else had an impact on both revenues and brand value far beyond what they imagined. This led them to strengthen their entire social impact and sustainability strategy.
For our people. We have a three-pillar inclusion effort at Deloitte focused on gender balance, supporting mental health, and advancing LGBT+ inclusion. For example, we recently developed a series of films – “Can You See Me?” – to raise awareness of the life experiences of typically disadvantaged groups.
We are also making significant investments in training and education via Deloitte University facilities, now in seven countries, and an extensive e-learning and training library that hosted 5.5 million e-learning sessions in 2020.
For our communities: In addition to our diversity and inclusion services, which we see as helping both our clients and our communities, we introduced our WorldClass program. Through the collaborative efforts of Deloitte people and NGOs, it has provided 11.7 million people worldwide with opportunity-enhancing skills since 2015. Our goal is to impact 100 million futures by 2030.
As communities around the world were struck by COVID, we have provided assistance in many forms. Deloitte India is working with Haryana State to reduce the load on critical care facilities by supporting care for people with mild or moderate cases. This includes setting up virtual health services for at-home patients provided by medical students under supervision, equipping a field hospital, deploying mobile pharmacies, and operating a command center for managing scarce resources including hospital beds, oxygen supply, ambulances, and medical professionals.
Through our WorldClimate initiative we have committed to achieving net-zero carbon emissions worldwide by 2030. For our people we have launched an innovative e-learning program of videos, poems, and quizzes to raise their awareness about the climate impact of the choices they make with respect to what they consume, use, and buy.
Deloitte’s annual donations equal 3% of our net service revenue. This includes the value of our pro bono work, value in kind, donations, and other contributions.
This is Deloitte’s experience with a purpose definition that names several stakeholder groups beyond the owners and encourages a long-term view of performance. It has shown us that keeping the greater good in view can give you license to make bold choices and unleash creativity and renewal.
We’ve been serving clients for more than 175 years, so perhaps it’s natural we would favor the longer-term option. But if there is a disadvantage to having a 175-year+ history, it is that you can fall prey to an overly cautious approach that puts innovation at risk. It was a wonderful surprise that being a purpose-driven organization has spurred us to set rather than follow trends.
Indeed, quite unexpectedly, the purpose statement has created a kind of permanent forum that allows anyone, regardless of seniority, to put up their hand in any meeting to ask whether we should or should not be doing something. Does it comport with our sense of purpose?
Age brings experience, and youth innovation; the two together are a recipe for wisdom; learning from the past while informing the future. They enable long-term sustainable value creation, which is how you last. I can think of no better way to energize stakeholder capitalism, and to ensure that we hand those who will come after us organizations that are even stronger than the ones handed to us.