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  • Writer's pictureStuart Williams

From Conscience To Common Sense

In 25 years of developing the business and investment thesis of “Making A Profit While Making A Difference” I am yet to hear a single negative connotation about that initiative however, all too often I do hear “making a positive impact reduces margins”. It is about time that everyone realized that the latter is far from the case.

There is no doubt that in the late eighties and through the nineties one of the “rallying cries” of passionate people involved in Socially Responsible Investing was that leaders and investors should “vote with their conscious”. This mantra was used because the small number of simulations that actually proved SRI yielded at least market returns (and in some cases higher returns than standard benchmarks) were not globally adopted and, to be fair, many of the proponents of “making a difference” were seen as activists working against “main stream” corporate leaders and investors.

Moving forward almost 30 years the business and investment landscape we face today has changed dramatically. For example:

  • Climate change has become a reality in the minds of many more investors and consumers who are rightly concerned about the quality of life for the future generations of their families

  • The ubiquity of information is making business and investment practices more transparent providing consumers and investors with the ability to make choices that mirror their values

  • We are entering the final laps of leadership based upon the values system of the Baby Boomers

  • The Stone Age did not end because we ran out of stones and some of the worlds largest energy companies are now reevaluating what could prove to be significant stranded assets. This is currently (and will continue to be) driven by the advent of new technologies, the development of which have already created multiple paradigm shifts in all of our ecosystems since the early 90’s

  • The development and support of local living economies is returning and growing rapidly

  • The use of environmental and humanitarian screens as measures to develop risk/return metrics for investments in portfolio companies, real assets and financial instruments is expanding among investment managers

  • The use of environmental and humanitarian screens as measures to determine which products or services clients, customers or consumers buy is proliferating

  • Private family offices, endowments, foundations and even plan sponsors are continuing to shift their capital into what are deemed conforming or compliant investments. Almost $6 Trillion has been shifted since 2009

  • A recent decision by a Fortune 1000 corporation to procure all of their products and services from a fully sustainable supply chain is resulting in 4,000 global corporations and SME's having to adopt a compliant stewardship program. Do the math if 20% of the Fortune 1000 follow suit (as many are doing)

  • Emerging market countries are building their emerging economies on the principles of People, Planet, Prosperity.

  • In the United States there are 80,000,000 Millennials (representing 4.4% of the global Millennial population). They are close to inheriting over $30 Trillion, but more importantly, over 60% of them (more than 48,000,000 soon to be leaders, decision makers, consumers, investors and donors) believe that corporate profit and investment returns need to be values aligned.

I could go on but I think the above is proof that the world is changing and that our emerging leaders, decision makers, investors, consumers and donors etc., will remove the optionality of enhancing the stewardship of the human, environmental and capital assets public and private ecosystems use if they desire patronage and or support.

This paradigm shift is far from a negative because by implementing an enhanced stewardship initiative private and public ecosystems can achieve:

  • Reductions in operational risks & expenses

  • Acquisition of new clients, customers, consumers and incremental revenue sources

  • The future’s highest and most sustainable corporate profits and/or investment returns

  • Enhanced brand equity and value

  • Improved client, customer, consumer loyalty & retention rates

  • Increases in market share

  • Clearer and more rapid identification of investment and product risk, and potential stranded assets

  • Reductions in carbon footprints

  • Increases in rankings on the “best places to work” lists such as Career Bliss and Glass Door

  • Hiring the finest Millennial team members

  • Increased productivity

  • Decreased team turnover

  • An enhanced positive effect on Profit, People and Planet

  • The pessimists will voice their concerns over the costs involved in embracing an enhanced stewardship initiative but here are some facts:

  • Even fortune 1000 corporations can build an entire Stewardship Department inclusive of the addition of an appropriate Chief Stewardship Officer for less than $1.5m per annum

  • Smaller corporations can do the same for less than $400,000 per annum

  • SME’s can outsource the imperatives and lease a CSO for as low as $12,000 per annum.

  • Public and private entities that have already embraced the above know that if done properly the financial, human and environmental ROI’s on the investment are exceptionally high. Furthermore, the initiative has worked so well within some entities that the CSO has become one of the most important positions within the C-Suite and in many instances s/he plays a pivotal role within sales and marketing initiatives.

As a final benefit, embracing enhanced stewardship strategies contributes to the creation of economies and communities where:

  • Regenerative capitalism is embraced because it produces enhanced but equal returns for all stakeholders, including financial;

  • The social fabric of societal ecosystems is revived;

  • Humanitarian and environmental inequalities are eradicated; and

  • Imperative environmental ecosystems are regenerated and stewarded to thrive.

The world is entering what Andy Grove (ex-Chair of Intel) described as a "strategic inflection point" in relation to how its public and private ecosystems contribute to the future of humanity and the planet. Accordingly, the most important strategic decision any executive team will make during the next five years will be whether or not to embrace the initiative of enhancing it ecosystems stewardship of the human, environmental and capital resources it uses to operate on a day to day basis. Those that do will succeed, those that do not will be forced by consumer and investor collaborations to change or go out of business.

Whether driven by a conscience or not, that is total common sense.

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