“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society… We also see many governments failing to prepare for the future … As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges. Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose”
– 2018 Letter to Shareholders from Larry Fink, CEO of BlackRock
BlackRock is the World’s largest Asset Management firm with $7.4 Trillion in assets under management by end of 2019. The expertise of successfully managing such diverse assets across the World makes Larry Fink competent to speak on the shifting expectations of business. Larry Fink’s 2008 letter to his shareholders challenged companies to shift from the Milton Friedman-defined role of solely delivering shareholder returns to a broader consideration of other relevant stakeholders’ interests in order to actualize the company’s long-term full potential. In the same vein, the World Economic Forum (WEF) has emphasized “Stakeholder Capitalism” as a means towards addressing the world’s greatest challenges including climate change, societal division and income inequality. In this new capitalism construct, the purpose of a company will be to engage all its stakeholders in shared value creation. Stakeholders include employees, customers, suppliers, local communities and society at large.
In order to translate this concept into action, WEF is developing a set of core Environmental, Social and Governance (ESG) metrics against which companies can be measured. This can be a game-changer. Expectations of companies will be redefined. Companies will be challenged to embrace genuine corporate citizenship which requires thoughtfully contributing to society in a meaningful and sustainable manner. Society will now be able to measure companies against new social standards. Employees and business partners can then expect a more intrinsic than a transactional relationship.
Diversity has also become a global subject. The Me-Too movement has gained significant steam in the last few years demanding dignity of women including protection against sexual abuse. Companies are now more sensitive to the need for appropriate gender representation in senior management and on Boards of Directors. The killings of George Floyd and Breonna Taylor in the United States (US) had triggered worldwide protests on racial injustice. Companies in the US and almost everywhere else are condemning racism and showing symbolic support to the “Black Lives Matter” movement. Facebook, Twitter and other social media platforms are under increased pressure to better manage hate speech and misinformation on their platforms in the face of the U.S. Presidential elections. Many have argued that some of these actions are more superficial than genuine. However, all these speak to the point that in this new online media-frenzied world, it is now more difficult for companies to isolate themselves from social issues.
All these developments are fundamentally driven by demographic realities and shifts. The newest generation (Gen Z) born in the Internet age is now joining the global workforce. Online social activism led mostly by young people is rebelling against the socio-economic status quo in places like Hong-Kong, Lebanon, North Africa and the US. Young workers in global technology companies like Microsoft, Google and Facebook are challenging management to take business decisions consistent with the ideals and purpose of the company.
To what extent do all the above issues relate to Africa we may ask. Some may argue that all this talk about social consciousness does not apply in Africa. They may say that such concepts like stakeholder capitalism catching on around the world will not apply in Africa. It is difficult to understand why not. Stakeholder capitalism is simply a realization that a business does better ultimately when shareholders as well as other stakeholders like the community, employees, suppliers and the society, as a whole , are supportive of the business. It simply makes sense. With COVID-19 heightening public debts for most governments in Africa, the role of the private sector as an engine of economic growth will become even more pronounced. The proliferation and spread of the Internet will bring social conscious issues to the fore. A growing internet-savvy populace in challenged economies is clearly a recipe for a significantly more socially and politically engaged society. No where has this been more evident lately than in Nigeria, where an effective #EndSARS protest snowballed into alleged killing of some protesters, reported widespread looting and breakdown of law and order in some parts of the country. The tensions have reignited demands for good governance, accountability and electoral reforms. This is not entirely new. In December 2010, anti-Government protests started in Tunisia and spread rapidly due to social media, ended up toppling the Governments of Tunisia, Egypt, Libya and Yemen. This movement became popularly known as the Arab spring. In 2015/2016, students led the Nationwide #FeesMustFall protests in South Africa to protest against increase in fees by South African Universities. The result: No University fee increases in 2016 and Government committing to increased funding for Universities.
Generally, Governments in Africa are not faring well in their primary responsibilities of providing the right enabling environment for businesses to operate optimally. Thus, businesses are grappling to manage and grow their businesses amidst policy consistency, regulatory certainty and weak security infrastructure and systems. Progressively more citizens are looking to the private sector as economic value creators and liberators than Governments but at the same time, Governments have an over-bearing influence over the private sector. As this wave of social consciousness increases, it will not be far-fetched to expect consumers to start pressuring businesses to take a position on topical issues of the day which may not be consistent with the position of Government. While this may be a tight rope for businesses to navigate, the reality remains that Africa cannot be excluded from these new global trends of heightened social consciousness and the changing expectations of business in society.
No more will companies be held to lower standards because they are African. The emerging new world is a more socially-conscious place. The world is now more a global village than ever before. Any aspiring African company of significance must proactively start challenging its leadership, management and operations on what needs to change to prepare them for this new reality. As stakeholder capitalism and social consciousness becomes more entrenched globally, it follows that sooner than later, a socially-conscious operating model will become a more critical pre-requisite for attracting investment and operating successfully in the emerging business environment. This model must be predicated on its purpose which is sincerely embracing why the company exists to serve society more than itself. This sincerity of purpose must be genuine and expressive in the operations of the company. Africa will not be an exception. The words of Larry Fink should be ringing true in board rooms of companies and investor groups.