What is stakeholder capitalism?
Stakeholder capitalism isn’t a new idea. It’s a principle that business leaders adopt to define their mission as creating long-term value not only for shareholders, but also for customers, suppliers, employees and communities. What is new, however, is stakeholders coordinating online and using social media to spread their views at scale is. And it’s a growing concern among corporate leaders.
Not necessarily because of what employees, consumers and communities say or share. In fact, their social media commentary, or digital chatter, can provide a valuable two-way dialogue between companies and stakeholder audiences, as well as deliver vital insights to help corporate leaders create long-term business value.
Rather, it’s the speed, variety and rising volumes of digital chatter that have made it harder for corporate leaders to keep up with stakeholder expectations. Whether it’s empowered employees publicly scrutinizing tight-lipped tech companies, or consumers pressuring brands to take action against controversial government legislation, these constituencies are ushering in a new wave of stakeholder capitalism alongside the already influential voices of active shareholders.
This was one of many findings from our recent Corporate Leaders Risk Survey, which asked more than 100 executive leaders about today’s unpredictable corporate risk landscape. The prominent theme across their survey responses: Stakeholder expectations are rising and ignoring them can have material consequences.
Ignoring societal issues has financial consequences
A Wall Street Journal headline from June 2021, titled CEOs ignore societal issues at their own peril, punctuated the undeniable impact that societal issues can have on the C-suite.
The article explains why corporate leaders can face compensation penalties or dismissal if they ignore complaints about diversity efforts, reducing their environmental footprint, or speaking out about politics.
This was consistent with the responses to Resolver’s Corporate Leaders Risk Survey, especially among CEOs, who agree that more risks are increasingly associated with societal issues. Nearly three-in-four CEOs agree that their company’s values as a brand and employer will be tested by these risks. Even more staggering is the recognition among executive leaders that these risks can have a material impact on the bottom line.
In fact, 82 percent of respondents agree societal concerns, including diversity efforts, product portfolio changes, environmental footprints, and political points of view, can no longer be ignored, and doing so can have negative financial consequences.
This was further validated by a Forrester Consulting Total Economic Impact™ study, recently commissioned on behalf of Resolver, which said values-driven consumers, employees, and shareholders are pushing for companies to demonstrate a higher commitment to environmental, social, and governance (ESG) agendas. The study went on to evaluate 75 B2C companies’ annual 10K reports and found that every single one discussed their ESG goals, strategies, impact, and progress, and did so in significant detail.
Faced with an opportunity to create positive change by supporting socially important endeavors, corporate leaders also find their companies exposed to more risks and vulnerability. It’s a new reality of powerful checks and balances governed by stakeholders who will use social media to hold them accountable for irresponsible practices or poor governance.
Employee and consumer expectations exceed those of shareholders
When asked whether shareholder, employees or consumer expectations for their company to take on a greater role in society have risen within the past 12 months, the majority of corporate leaders agreed. However, upon taking a closer look, it was consumer and employee expectations that respondents believed have risen the most.
Today’s values-based consumers are more opinionated, proactive, and vocal than ever. And values-focused employees are more willing to publicly call out their company when its actions appear to conflict with its core values. According to the Forrester study, the proliferation of digital and social touchpoints lets stakeholder vocalizations spread like wildfire, often overpowering corporate messaging.
Cultural and societal relevance has never been more important as organizations begin to realize the potential financial benefits and consequences of failing to acknowledge or address the values of their key stakeholders, not just shareholders.
According to the survey, this stakeholder horizon has expanded to include activists. In fact, 72 percent of corporate leaders surveyed agree demands placed on companies from activist groups will also increase in the next 12 months.
These groups are increasingly exposing significant corporate risks, but their digital chatter is often lost in the noise. According to our survey, CEOs in particular agree that the rising volumes of digital chatter (52%), the increasing variety of channels (54%), and the speed at which digital chatter spreads (62%) is a growing concern. It’s one that requires a new approach for identifying and mitigating risks before they become a crisis.
Adopting an actor-centric approach to risk intelligence
There is growing recognition that companies need to embrace resilience models that prioritize keeping up with risks accelerated by digital chatter. And, corporate leaders are beginning to understand that an actor-centric approach to risk intelligence can provide a critical and competitive early-warning advantage.
In fact, nearly three-quarters of the corporate leaders (72%) surveyed agree that investments in new risk intelligence solutions and technologies will increase within the next 12 months.
Resolver’s Corporate Risk Intelligence solution identifies the concerns of key stakeholder audiences by detecting early signals found in their digital chatter in order to predict potential impacts as early as possible. This prompt detection can deliver crucial time—additional days, if not weeks—to react and respond to stakeholder issues before they become crises.
For organizations struggling to keep up with issues originating or being amplified online by today’s ever-expanded horizon of stakeholders, an actor-centric approach to risk intelligence can meet your urgent need to protect your organization, its reputation and financial condition.
For a free risk consultation, contact us today. And, to learn more about how societal issues, stakeholder capitalism and social media are transforming today’s risk landscape download the entire Corporate Leaders Risk Survey here.
