Sustainability Through Stakeholder Balance

Businesses exist to earn sufficient profits that support the short and long-term financial wealth of its shareholders. Businesses sell all kinds of products and services to achieve that goal, but it’s critical to keep focus on that primary purpose because capitalism works. Products and services must deliver the precise level of quality and timeliness that customers are willing to pay for – nothing more and nothing less – in order to support the primary goal of financial wealth. But can our businesses be sustainable if only the shareholders are winning?

In the pursuit of profits, the business is not alone. It is part of an entire ecosystem that must be considered when making decisions so it can endure for the long term. Each business has different priorities, but all businesses have customers, suppliers, employees, a community, and the environment that hold a stake in its activities. Consumers want to know what companies are doing to take care of all of them, and are buying from the ones that can show they’re doing a good job of it. The companies that do a good job of it are not only profitable in the short term, but they’re sustainable for the long term, attracting investment capital and leaving a legacy that goes beyond the company founders.

Customers

They’re the lifeblood of every company and they’re becoming more sophisticated and demanding all the time. An Aug 5, 2021 press release from the global accounting firm EY says “The latest edition of the EY Future Consumer Index suggests 43% of global consumers want to buy more from organizations that benefit society, even if their products or services cost more. And 64% are prepared to behave differently if it benefits society.” The flip side of this says that 57% of customers don’t want to pay more. Seems like we can add to the old adage that all customers want price, quality and speed … because now they want sustainability too. And we no longer get to deliver just 2 of those. So how are we showing our customers that they’re getting the value, quality and timeliness that they paid for, and that they’re supporting a sustainable company by buying from us?

Suppliers

Walmart, among others, has discovered what happens when we grind our suppliers to the point that they can’t make a reasonable living, in order to pass savings along to customers. That’s a short-term game and is no longer tolerated. Now, suppliers are expected to be partners in our business so they receive fair value for the goods and services they provide to us. Gone are the days when we get away with paying less than market because we’re the biggest, baddest customer they have. We’ve learned through the pandemic that a cheap world-wide supply chain can mean lower prices, but we also need some manufacturing capability at home to support our basic needs, and that may come with a higher price. So how are we showing our customers that our supply chain is treating their stakeholders responsibly, is receiving fair value for the goods and services they produce, and has some local presence to benefit the community?

Employees

Even if there are only one or two employees, the business simply can’t run without them. Some employees are customer-facing, some create value internally, and all provide some essential service, internally or externally, that customers are willing to pay for. These people go home from work to their community and spend their paycheques there. It’s essential that your employees go home with their physical and mental well-being intact, with enough of a paycheque to keep them living above the poverty line, and that they get some form of satisfaction from doing a full day’s work for a fair level of pay. When they’re really lucky, they may even own a share or two in the company they work for, and they have a clear path to achieving their own potential. Maslow has taught us that if we want our employees to be innovative, creative and engaged, we had better be sure we’re meeting their basic needs first. Then we can reap the business rewards of their ideas!

Community

Community investment strategies are great, as long as they come from profits that are in excess of meeting the basic needs of all the business’ stakeholders. Is it still a good thing if a company is donating money in the community while their employees are being paid less than market and shareholder returns aren’t meeting expectations? Of course not. We need balance. The community is an important stakeholder, but if employees don’t have money to spend, no one wins in the long run. What if all the company’s supplies are coming from overseas? What if most of the shareholders are foreign and taking their profits to benefit another community, leaving the environmental and social bill for Canadian taxpayers to deal with? When a business truly benefits the community, taxes can decrease because there is no social cost to that company’s existence – it’s already paying by ensuring that employees are living well, the environment is not being harmed, and local suppliers and consumers are receiving what they need to earn a dignified living.

Environment

Not much needs to be said here because it’s a huge political focus at the moment. Consumers are so incensed at the damage caused by their own use of fossil fuels that they’re redirecting investment money away from the industry, even before we have a reasonable alternative to meet our energy needs! It’s sufficient to say that if a company doesn’t have a solid plan to become carbon neutral within a reasonable period of time they aren’t going to be in business for the long term because their competitors are working on it and will figure it out. And most consumers will be buying from the sustainable company. End of story.

So, balance sounds great, but who’s going to pay for all of this? Everyone may pay a little, and we’ll create some internal value too. Yes, prices may have to increase, but not necessarily. Maybe you’ve been adding something to your products that customers are still paying for but no longer want or need. Maybe the cost of supplies has to go down. Maybe the company’s real estate footprint needs to decrease. Maybe there are some internal inefficiencies that need to be eliminated. Maybe, as in the case with the CEO of Gravity Payments, it’s as simple as the executive taking a decrease in pay. Dick’s Drive-In in Seattle, WA is a fast food restaurant that pays a minimum of $19 per hour to all employees and offers benefits such as health care, child care and scholarships. The most expensive item on their menu is $4.25 and burgers cost $1.89 each.

So, there is a way. Today, your business success may be partially at the expense of the stakeholders you rely on to survive. That’s a short-term strategy at best. In the long-term, it’s possible to perform far beyond current expectations if everyone that interacts with your business is deeply invested in its success. It may require looking at all aspects of your business from a different perspective. It may take planning, hard work and investment. You may even need help to achieve it. The benefits though are staggering. As consumer expectations change, you’re already ahead of the curve and on the way to achieving freedom and abundance.