June 2021 White Paper
When a company says that they are focusing on “creating value” what specifically do they mean? This report aims to help organizations of any size or structure to not only understand what value means to each of the seven key stakeholders in business (including (1) the firm, (2) its shareholders, (3) customers, (4) employees, (5) partners, (6) society and (7) the environment), but also what specific policies and practices they need to set in place to create the highest possible levels of value for these stakeholders.
We call this approach “Ethical Capitalism” which goes one step beyond stakeholder capitalism to provide a clear set of goals towards which firms of any size, or within any industry can aim to collectively achieve. We base this idea on the longstanding business practices from Japan, pioneered by Ishida Baigan (1685-1744), the Ohmi merchants of Shiga Prefecture and their Sanpo Yoshi or “three goods” approach to business (good for the buyer, good for the seller, good for society) and emphasized by Shibusawa Eiichi, often called the father of capitalism in Japan, with his concept of Gapponshugi which is the integration of capital, labor and talent to provide value to society.
While global efforts related to stakeholder capitalism have provided a critical first step in moving away from a shareholder-first mindset, the contents of this report synthesize many of the world’s top ESG reporting and disclosure frameworks to arrive at a set of clear, objective, transparent and measurable goals that we hope can help align sustainability and value creation efforts globally around common themes. Our analysis shows that in many instances, current ESG and sustainability reporting measures allow for value washing, where a company can label its activities as “creating value” or “sustainable” when in fact they do not. Without a set of clear goals that can be objectively measured, are transparent and have some level of variability, efforts related to stakeholder capitalism will continue to sound good, but lack the true power of focused action to propel business (and all of human society) to a more sustainable future. This report aims to help business leaders take tangible steps to achieve a common set of sustainability goals and in doing so, create much-needed alignment across all stakeholders listed above.