This month Laurence Fink, CEO of BlackRock, laid down a challenge to the business community. Or, perhaps, it’s more accurate to call it a warning. His message: Make societal progress part of your strategic plan or suffer the consequences.
“Society increasingly is turning to the private sector and asking that companies respond to broader societal challenges,” he wrote a letter to the CEOs of some of the world’s biggest companies. “Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
He went on: “Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.… And ultimately, that company will provide subpar returns to the investors who depend on it to finance their retirement, home purchases, or higher education.”
When Fink speaks, business and the investment community listen: BlackRock is the largest investor in the world, managing more than $6 trillion in investments.
The conversations we’ve long curated with the Techonomy community, and our work around the many ways that tech is transforming society, underscore the urgency of his argument. For one thing, the tech backlash is both real and well-earned. The list of bad behavior by companies, bad will in products and services, monopolistic tendencies among the internet giants, and unintended consequences of engineer-led decisions is well documented. The result: a precipitous loss of trust.
This year’s Edelman Trust Barometer, which tracks sentiment around the world in business, government, NGOs and media, saw a steep decline in the U.S., with a 37-point aggregate drop in trust across all institutions. Led by an overwhelming concern around fake news, trust in “media” dropped to last place largely driven by a decline in trust in the technology platform companies. (Trust in “journalism” increased, while trust in “platforms” decreased.)
Edelman’s research shows a resurgence of trust in experts, specifically CEOs and successful entrepreneurs. (Government officials and regulators fare the worst.) Sixty-four percent of respondents said CEOs should take the lead on change rather than waiting for government action.
Fink’s message is clear: Business has both the motive and the opportunity to step in to the void left by government. As Fink says in his letter: “We also see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining.”
Big business, especially the tech giants, are cash-rich and will have more money than ever with the new U.S. tax law. There is no shortage of ways that business can put that money to work to have a positive impact on society — and not incidentally, to create new market opportunities by doing so.
The United Nations’ Sustainable Development Goals for 2030 (known as the global goals, or the SDGs) are a comprehensive effort to lay out where change is needed. The goals call for taking a global view in all things, and include eliminating poverty, hunger, and gender and economic inequality, as well as providing affordable and clean energy and quality education. More details about all 17 goals can be found here.
In his letter Fink argues that “every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” That concept dovetails with action on the global goals — and the market opportunity includes every industry. The U.N.’s Business and Sustainable Development Commission, for example, cites a potential $12 trillion in market opportunities and 380 million new jobs the global goals can create.
As Fink wrote: “A company’s ability to manage environmental, social, and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth.”
This is not a case of greenwashing away the tech backlash. Rather, it’s a strategic imperative to connect corporate profits with purpose. More than anything else, Fink’s letter underscores this peculiar moment; he captures a global zeitgeist. Only those businesses that chose to ride it will achieve their full potential, he says.
It is an urgent call to action, and it is about time someone with Fink’s clout made it.