Written by: Usha Menon (Usha Menon Management Consultancy)
In the current era of economic evolution, the foundations of capitalism are quivering. Milton Friedman's doctrine - that the only social responsibility of business is to increase profits - is being scrutinized under the weight of escalating wealth disparities, environmental decay, and societal upheaval. The conventional pursuit of ‘shareholder supremacy’ is faltering, paving the way for a transformative approach to business dynamics focused on ‘stakeholder capitalism’.
The Changing Tide
The corporate sector is witnessing a shift towards stakeholder-focused capitalism, embedding purpose into the business of generating profit. With a vision to make business a force for good, B Lab, a nonprofit, was founded in 2006. According to B Lab, Certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. Shareholders hold B Corps accountable for their profit and their success in contributing to the greater good.
This mission has cultivated a community of business professionals fervently committed to sustainability. The B Corp community attains additional impact standards in five stakeholder areas: employees, community, customers, environment, and governance. B Corps verify their positive social and environmental impact through the B Impact Assessment and re-certify every three years, ensuring stakeholders know they are using business as a force for good.
The B Corps movement is accelerating a global culture shift to redefine success in business and build a more inclusive and sustainable economy. The surge in stakeholder demand for sustainable products and ethical business practices has propelled B Corps from niche players to mainstream contenders. Presently, their numbers are small relative to traditional corporations, however the trend is promising. With at least 1,800 companies certified globally last year, the total is now more than 9,400 companies, as at the end 2024. Prof. Wong Poh Kam, Director and a Founding Member of B Lab Singapore, envisions “the mainstreaming of a stakeholder model of governance. In the current environment, Directors should consider the first-mover advantage in their industry, with an early risk, early benefit mindset.”
The only way to institutionalize this holistic approach that considers employees, consumers, governments, investors, suppliers, its ecological footprint, and communities as stakeholders, into the genetic code of a company is to embed it in its governance structures. “This ensures it is in the DNA of the company, so that generations of leaders uphold the obligation, not just to shareholders, but to society as a whole” believes Daniel Long, Chief Executive Officer of Olive Tree Estates Limited, Singapore’s first publicly-listed B Corp. The name of his company signifies that Olive trees contributes to economic development, sequesters carbon and adds considerable ecological value.
Purposeful Profit - B the Change
The consequences of neglect or indifference have grown increasingly costly. Traditional enterprises face escalating environmental expenses related to energy, water, and waste, potentially extending to carbon-related expenditures. Additionally, they confront heightened risks concerning reputation, employee involvement, and the recruitment of highly skilled personnel.
In the dynamic landscape of modern economies, especially in Singapore, where technology and services dominate, the valuation of intangible assets emerges as a pivotal factor shaping business success. Post-COVID-19, savvy boards and executives recognize the imperative of leveraging and enhancing intangible assets, understanding that neglecting this aspect could jeopardize the company's competitiveness and growth prospects.
For Benjamin Chua, Founder and CEO of Speco, which has developed proprietary technology for clean commercial premises, “the B Corp Certification has been instrumental in securing global partnerships as it is a gold standard for sustainable business. It clearly communicates our commitment to excellence, sustainability, and ethics, aligning with like-minded organizations worldwide who understand and value what we stand for.”
Impact and conventional investors now demand transparency and responsibility. Mandatory Environmental, Social, and Governance (ESG) disclosures and reporting require Boards of Directors to oversee the company's ESG performance and ensure accurate and transparent reporting. This includes understanding current industry standards, benchmarking, and aligning the company's reporting practices.
“At Tolaram, our commitment to responsible stewardship extends beyond our business practices to how we manage our investments. Certifying Maitri Asset Management, our Multi-Family Office, as a B Corp enabled us to learn from the process and strengthen our approach against global best practices,” says Aisha Soofi, Head of Tolaram’s Family Office Governance.
The Role of the Board - Transitioning from the Best in the World to the Best for the World
Boards of Directors are pivotal in steering companies towards sustainable trajectories, ensuring holistic growth and ethical governance. The nexus between financial prosperity, sustainability, and corporate responsibility is indelible, propelling companies towards a new paradigm of success. Embracing transparency, responsibility, and purpose-driven strategies is no longer a choice but an imperative for future-proofing businesses.
Keeping with the times, boards need to embed sustainable practices within the company's culture and operations. Sustainable growth and holistic returns should be a conscious and resolute choice. It is no longer a matter of why, but a matter of when. Daniel Long states, “The only reason you would do this is because you are committed to good.”
With Singapore Exchange Regulation hardcoding the Independent Directors (ID) tenure, now is the time for IDs to step up and provide the level of objectivity, independent of major shareholders and management, to open discussions on shifting paradigms related to transparency, responsibility, and inspiring a sense of purpose and accountability.
A McKinsey analysis shows that companies that achieve better growth and profitability than their peers while improving sustainability and ESG outgrow their peers and exceed them in shareholder returns. These “triple outperformers” delivered two percentage points of annual Total Shareholder Return (TSR) above companies that only outperformed on financial metrics (and seven percentage points above the rest of the dataset). The 2023 Corporate Governance and ESG Survey by professional services firm AON found that while 58% of companies in Asia-Pacific say that ESG is critical to their long-term success, only 29% have developed KPIs for ESG performance. The B Impact Assessment can help measure, manage, and improve positive impact performance for the environment, communities, customers, suppliers, employees, and shareholders.
In the race to attract informed consumers, employees, investors, and the public, empty slogans and greenwashing campaigns are no longer viable options. Hence, publicly traded businesses are joining the B Corp movement to differentiate themselves from their competitors. Even with the extra ethical considerations B Corps have, the rapid growth of these NYSE, NASDAQ companies and elsewhere, is a testament that B Corp Certification can be a gain for both the planet and the business. SGX is well- regulated, and the time seems right to have lively discourses with its members on walking the talk of being the ‘best for the world’. Embracing this ethos is not just a strategic move but a moral obligation in shaping a more equitable and sustainable future for generations to come.
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