Comment: WBCSD president Peter Bakker explains what’s at the top of his agenda during the critically important final quarter of 2020
The beginning of September traditionally signifies a return to the office and all hands on deck for the remaining months of the year. This year, as we adjust to our “new normal” and its endless amount of video calls, it is nevertheless important to sharpen our focus on what will be a critically important final quarter of 2020.
This will be a crucial time in our collective fight against the global pandemic, which still rages on in much of the world. These next months will also determine how we give meaning to “building forward better” in a post-Covid-19 world. The global pandemic has unmasked our interdependencies, highlighted the stress we place on the environment and in many places greatly increased inequality. As a result, the global landscape is rapidly shifting. Businesses’ approaches to resilience, purpose, society and the environment are all being called into question.
Stakeholder capitalism is not yet real for business. We have no shared definition, the expectations are not clear, there is no roadmap on how to implement it
The disconnect in the financial system between the financial return and the environmental and social impacts calls for a reinvention of capitalism. Since last year’s Business Roundtable statement, a lot of the conversations have been focusing on the shift from shareholder to stakeholder capitalism. But stakeholder capitalism is not yet real for business. We have no shared definition, the expectations of business are not clear, there is no roadmap on how to implement it, and much of the financial system architecture is still focused on (short-term) financial returns.
That being said, there are signs of progress in the stakeholder capitalism debate:
Companies that focus on environmental, social and governance (ESG) factors continue to be perceived as better managed, less risky and are more highly valued, even during this crisis.
Mark Carney, the United Nations special envoy for climate and finance, and LSE Group chief executive David Schwimmer have made it “one of COP26’s core objectives to ensure that every professional financial decision takes the risks and opportunities of climate change into account, supporting the widespread adoption of Task Force on Climate-related Financial Disclosures (TCFD) reporting”.
The UK and Swiss governments and 10 financial institutions, supported by WBCSD, are throwing their weight behind efforts to create a Task Force for Nature-related Financial Disclosures (TNFD) by joining an informal working group that will lead to the creation of a TNFD in 2021. Establishing a reporting framework for the finance sector’s impacts and dependencies on nature is seen as critical for halting biodiversity and ecosystem loss.
And finally, there is now real momentum towards a globally harmonised system for ESG disclosures between all reporting frameworks (the Impact Management Project – IMP) and the establishment of lead ESG indicators (by the World Economic Forum’s International Business Council).
Business, through WBCSD, is taking a leading role in making the building forward for a better capitalism real and rewarding for business in three ways:
In a few weeks, an issue brief on capitalism will be published as part of the refresh of WBCSD’s Vision 2050 project, a landmark 2010 work that laid out a pathway to a world in which nine billion people are able to live well, within planetary boundaries, by mid-century. Achieving this vision calls for transformation across a wide range of key global systems, driving forward radical shifts in how we power our societies, feed ourselves, build the communities in which we live, move around, and consume goods and services. The upcoming issue brief in this series will make the case for the need to reinvent capitalism;
We just launched a ground-breaking collaboration between WBCSD and PRI (Principles for Responsible Investment) that will drive corporate-investor action on sustainable development;
And WBCSD’s Redefining Value programme is offering new projects to support business in understanding and implementing stakeholder capitalism with tools and solutions.
The collaboration between WBCSD and PRI is adding a fundamental piece to the puzzle that will complement the move towards a globally harmonised system for ESG disclosure: how to change
the engagement between business and investors in a way that will integrate sustainability in financial and strategic decision-making.
We will bring leading business and investors together to clarify what sustainability information is needed in the investor-corporate relationship, how businesses and investors can align incentives, decision-making and valuation around sustainability; and lastly explore the institutional changes needed to integrate sustainability into the financial system.
We remain focused on creating a capital market that will recognise that more sustainable business will attract a lower cost of capital and generate more financial capital to lead the
transformations towards a better world.
Peter Bakker is president of the World Business Council for Sustainable Development.