THEORY OF CHANGE

For our society to be sustainable—that is, to provide sustenance and continuity for all people and ecosystems for generations to come—we must first acknowledge that today we are out of balance and need to find a way to change.

Over the past century corporate power has become the most dominant force on the planet. Of the 150 largest economic entities in the world, 87 are corporations—that’s 58 percent. This concentration of resources gives corporations power and influence over their employees, communities, and the governments in which they operate. This lopsided power relationship means that corporations can disregard the impact that their activities have on the rest of society. They can commit human rights abuses and choose to pollute low-income and minority communities near their plants. They can manipulate political power to their financial advantage. They can choose to ignore dire warnings of global catastrophe caused by their activities. If local governments intervene, the corporation can shift their activities to the other side of the globe or alter the government.

According to US Senator Elizabeth Warren (D-Mass.),

Corporate criminals routinely escape meaningful prosecution for their misconduct. In a single year, in case after case, across many sectors of the economy, federal agencies caught big companies breaking the law—defrauding taxpayers, covering up deadly safety problems, even precipitating the financial collapse in 2008—and let them off the hook with barely a slap on the wrist. Often, companies paid meager fines, which some will try to write off as a tax deduction.

What the executives who head corporations cannot do is ignore the people who own their companies. They work for the shareholders. While shareholders indeed have enormous power, most still care primarily about maximizing profit. However, a growing number are choosing to leverage their power to improve the environmental, social, and governance ESG practices of the public companies they hold for the dual purpose of maintaining long-term profitability and positively impacting society and the planet. Once motivated, shareholders can become the single most powerful force for creating positive, lasting change in corporate behavior.

It is critical for corporate leaders to address the impact of their policies and actions. By ignoring this impact they are creating risk for their customers, employees, shareholders, and themselves. Ultimately, companies that measure their success not just in terms of the next quarterly statement, but in years and decades, will be better able to evaluate and reduce their long-term risk. Shareholders have a responsibility to work with corporations to undertake this broader risk analysis, make this information available, and make sure that decisions are made that benefit their own long-term profitability as well as humanity and the planet.