![]() Larry then moves on to the theme of his 2020 letter – decarbonising the economy: It drives prosperity and creates a more competitive landscape for talent, pushing companies to create better, more innovative environments for their employees – actions that will help them achieve greater profits for their shareholders.” “Workers demanding more from their employers is an essential feature of effective capitalism. No sooner has Larry introduced the idea of Purpose, does he switch to the relationship between a company and its employees. So you might think the Letter is about Purpose, the newly identified North Star of a company. That purpose matters to employees who want to connect with it to customers who want to hear what you stand for and shareholders who need to understand your guiding principle. “Putting your company’s purpose at the foundation of your relationships with your stakeholders is critical to long-term success.” Many have long thought that corporate sustainability or ESG is all about engaging transparently with stakeholders on the things that matter to them. It is not “woke.” It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism. It is not a social or ideological agenda. Stakeholder capitalism is not about politics. Larry’s Letter is all about what he calls stakeholder capitalism. If you haven’t already read Larry’s Letter, I’d like to introduce it to you, connect it to a simple model of ESG that we’ve been using for 20 years, and ask you to have a look at both. Or, as he refers to old views of subservient employees: “That world is gone.” Larry’s letter is not a game changer, but rather announces that the world has changed. His letter is a flag jammed at the top of that pile, saying it will only be used with ESG in mind. As you know, Larry sits on top of Blackrock’s $13 trillion pile of cash. The latest such event is Larry Fink’s 2022 Letter to CEOs. When strategy consulting firms suggested that corporate sustainability was a distraction, Michael Porter wrote a powerful article in the Harvard Business Review saying it must be embedded in strategic thinking. When some argued that considering ESG issues was contrary to a company director’s duty to consider only the company’s shareholders, the legal firm Freshfields confirmed that directors must also consider future shareholders, and so cannot trash the company’s reputation for quick cash today. ![]() And everywhere, the DotCom boom, Climate Change, the GFC, and the Pandemic.Įvery now and again, too, there is a statement of support from an authoritative source. In the UK – the Stern Review and News of the World drama. In Australia – James Hardie, the Banking Royal Commission and Juukan Gorge. An event that nudges thinking towards responsibility and governance. It’s reaching orthodoxy, because of the investment dollars being pushed into it, and now because reporting standards (another family of like beings) are being unified, under the International Sustainability Standards Board.Įvery now and then, these related families gets a burst of energy. In the end ESG is winning as the best name, because it is so neutral. The family keeps bubbling along, arguing amongst itself as to which has the better name, and forgetting they are all basically the same. His letter aligns with the view that a company’s intangibles, ESG and performance act in unison.ĮSG and its siblings – corporate sustainability, CSR, shared value, the triple bottom line etc. ![]() In his 2022 Letter to CEOs, he says ‘stakeholder capitalism’ is the only way to sustainable prosperity, and ESG is how it is achieved. ![]() Larry Fink is head of the world’s largest funds management business, BlackRock. ![]()
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