by Catherine Cameron, Director of Agulhas Knowledge and OPEN Fellow.
The Blackrock Annual Letter to S&P 500 CEO’s sent some shockwaves through the world of business earlier this year.
The world’s largest investor, with $6.3 trillion under management, BlackRock Chairman and CEO Larry Fink wrote:
‘We are seeing a paradox of high returns and high anxiety. We also see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining. As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. 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. 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. Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change?’
Fink’s letter continues a theme for the last few years, emphasising the need for longer-term thinking and sustainability to support value creation. He went on to reinforce the letter, saying at World Economic Forum, ‘that profits with purpose are vital for long-term survivability and long term profitability.’
He was in the right place at the right time to be making that point. The WEF 13th Global Risks report, titled Fractures, Fears and Failures, makes for compelling reading. The top 5 risks in terms of both likelihood and impact include extreme weather events, natural disasters and failure of climate change mitigation and adaptation. The last 11 years of the risk landscape show a shift from a sea of blue (economic) to a forest of green (environment). Water crises feature strongly too, but are labelled red (societal). The risks and trends interconnections map, shown below, is a tangle of changing climate, degrading environment, rising urbanisation and the rest, coming to the centre in profound social instability, with a risks of conflict, large scale involuntary migration, state collapse or crisis, failure of regional, national or global governance.
Source: Global Risks Report 2018, World Economic Forum
So what to do next – whether you are an individual, a company, or an institution offering MBAs to equip the leaders of tomorrow? Stick with the high returns and park the high anxiety? Keep banking on the high returns like there’s no tomorrow? Or perhaps, it’s time ditch the short-term thinking lover and in the words of Paul Simon, ‘Make a new Plan, Stan.’ Time to go to work to make some profits with purpose, taking on board the One Planet risks that WEF have captured – we are all in this together.
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