The foundations of business are changing rapidly, creating new risks and new opportunities for companies across the globe. The COVID-19 pandemic has laid bare fundamental truths: that human and natural systems are inextricable, interdependent and increasingly fragile and, that risks can emerge rapidly and evolve dynamically. Within these systems, technology acts as both an accelerant and enabler—as well as a disrupter to business models. Environmental, social and governance (ESG) concerns are now widely recognised as core risks to business resiliency, market stability and global economic well-being (See figure below)[i].
Many companies, as a result, are at an inflection point. Their social licence to operate can no longer be taken for granted but must be earned and maintained with every action, every day. Long-term resilience and the company’s ability to create enduring value is directly linked to how it aligns its purpose and values with the expectations of society. The purpose of business, in many respects, is being redefined as enterprises move to embrace stakeholder capitalism, acknowledging the importance of delivering value to all stakeholders—including employees, suppliers, communities and the natural environment, along with shareholders[ii]. This is a chance to make responsible choices and build in principles of equity and sustainability into a new business-as-usual.
To help make sense of this new paradigm, we have unified some of the leading thinking on this topic into a framework that organisations can use to initiate a conversation with boards, strengthen existing approaches and assess readiness for mandatory ESG reporting.
The core of this framework incorporates the four considerations identified by the World Economic Forum International Business Council’s (WEF-IBC) project on stakeholder capitalism: principles of governance, planet, people and prosperity (the 4Ps).[iii]
Conclusion: A way forward
We have provided a roadmap for embedding considerations of planet, people and prosperity into the core of the company, setting out a journey toward integrated thinking and integrated reporting. The time to act is now. Communities, employees, customers, regulators and investors increasingly expect and demand that companies align their purpose and values with the expectations of society—and reward those making authentic, transparent commitments and delivering on those promises. While we are on a path toward mandatory ESG reporting, this should not be seen as just a compliance exercise. It’s about changing the way a company earns its social licence to operate and authentically reporting on that; a transformative journey that demands transparency and accountability. Making a commitment to embark on the journey is a critical first step.
[i] World Economic Forum Global Risks Report 2021: Global Risks Report 2021 - Reports - World Economic Forum (weforum.org)
[ii] Business Roundtable, “One Year Later: Purpose of a Corporation,” accessed August 3, 2021.
[iii] World Economic Forum (prepared in collaboration with Deloitte, EY, KPMG, and PwC), Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation, September 2020.
[iv] Task Force on Climate-related Financial Disclosures, “TCFD Recommendations,” accessed August 3, 2021.
[v] Jeff Weirens, et al., “Building credible climate commitments,” Deloitte Insights, June 14, 2021.
[vi] International Financial Reporting Standards Foundation, “IFRS Foundation Trustees announce working group to accelerate convergence in global sustainability reporting standards focused on enterprise value,” press release, March 22, 2021.