It could be one of the more depressing things we have read this year (and that is no small feat in 2019!). Then again, it could turn out to be the most uplifting. That’s up to the 181 CEOs, members of Business Roundtable (BRT), who released their new “Statement on the Purpose of a Corporation” this week.
Business Roundtable is a group of nearly 200 CEOs representing the largest U.S. companies. They advocate for business-friendly policies and now, it seems, are attempting to redefine the mission of corporations. No longer will they only prioritize the value they create for their shareholders. Instead, they have outlined five commitments to “all” of their stakeholders to show a new, more inclusive and sustainable face of business.
Fortune called it “breaking news.” It earned positive coverage from media outlets ranging from the Washington Post to the Wall Street Journal. But while the sentiments sounded nice, they also sounded rather stale.
Perhaps we have been in this field too long to get starry-eyed about the latest announcement. One of us worked in the corporate world for more than 25 years—10 in corporate sustainability—before leading WRI’s Business Center. The other has been researching corporate responsibility trends for a dozen years, publishing research on ideas such as corporate climate change leadership, responsible lobbying and sustainability SWOTS.
Here’s our take:
BRT’s Statement of Purpose is the corporate social responsibility plan of an earlier generation. Many of the companies whose CEOs featured prominently in the announcement—including chief executives at IBM, GM, Cummins and JP Morgan Chasei—have talked about commitments to stakeholders for decades.
BRT released a report titled “Enhancing Our Commitment to a Sustainable Future” nearly 10 years ago. Year after year, BRT’s member CEOs have made statements about their sustainability accomplishments and what they’ve done to meet the needs of a wide range of “stakeholders”—from employees to customers to suppliers to the communities where they operate.
So what is new about this latest announcement? What is bolder and bigger? Let’s face it: We are in urgent need of transformative, disruptive change at a global level. We don’t need just more of the same—we need innovative, sustainable business models. We need companies to set science- and context-based sustainability targets. We need bold corporate action. And the best some of the largest corporations can offer is a plan that was considered cutting-edge in the 1990s? It is equivalent to Apple announcing a new portable cassette player. And let’s not pretend it delivers anything other than maximum shareholder value. That is not a bad thing in itself, but it is disingenuous to suggest otherwise. Each of the five points are carefully calibrated to deliver shareholder returns.
The only way this statement won’t be just another lofty pronouncement is if CEOs bolster the announcement and back up their aspirations with big actions. That is why WRI works with business in the first place. Corporations are powerful. They can bring change at scale. And WRI must play a role as a critical friend to those business leaders to make sure they are effecting positive change.
In that spirit, we propose three crucial additions to the five commitments that BRT members outlined in their new Statement of Purpose:
- Delivering customers environmentally and socially sustainable products and services that help society pursue a fulfilling future. This means embracing circular economy models, such as designing for longevity and reuse, and being willing to rebalance product portfolios away from unchecked consumption and damaging products toward full sustainability. Never again would we hear, “Well, it’s our job to sell whatever our customers tell us they want to buy, irrespective of the consequences.”
- Using corporate brands and political influence to support systemic changes that ensure equitable opportunities for all. This means lobbying for climate-positive legislation and increasing corporate transparency; driving change to move trade associations from lowest common denominator to highest common factor; and using brand and advertising to lead customers from unsustainable to sustainable behaviors.
- Acknowledging that the resources upon which businesses depend are limited, and business models that thrive within the available resources of the planet are needed. This means setting and acting on emissions-reduction and other sustainability targets that are science-based and meet the needs of all human society, not just those within the corporate world.
Without these additions, the statement is hollow, and claims that it is new and bold will only reinforce distrust of corporations. With them, businesses can prove they really are acting in the interest of all stakeholders—not just their shareholders.
i GM, IBM and JP Morgan Chase have provided financial support to WRI. None of these companies had input on the content of this blog post.
Editor's Note: The authors amended this blog post in response to a Twitter comment, replacing a gender- and age-loaded term with an alternative.