The metrics for how we evaluate a company’s success are changing. From 2010 to 2014, top companies were ranked based on the company’s financial indicators like shareholder value, stock market returns. Fortune Magazine’s “Fortune 500 Companies” celebrated companies who were able to generate the most shareholder value. Other ranking indicators like the Harvard Business Review (HBR), ranked “The Best Performing CEOs in the World” emphasised a CEO’s ability to increase the wealth of their shareholders. In 2014, HBR ranked Jeff Bezos as the number one CEO. However, by 2015, Jeff Bezos had dropped to the 87th ranked CEO. It was clear that the way we measure a CEO’s performance and success had undergone seismic shifts. From a societal impact’s perspective, we are changing the way we evaluate a company’s success, emphasising companies who incorporate Environmental Social and Governance (ESG) dimensions.
The paradigm is shifting from a ‘shareholder supremacy’ approach to a ‘stakeholder supremacy’ approach. With so many new disruptions around the world, we can no longer only focus on the numbers and profits. In order to build a better world, we need to incorporate ESG into the way we approach corporate management.
As a CEO, how well have you led the company in Environmental, Social, and Governance aspects as well as economic development?
A good enterprise is to combine the financial indicators and non-financial indicators. A “B Corp” certified company is a good start.
In my book, Companies of the Future: A Three-step Approach for Sustainable Business, I talk about the “three-step approach” to developing a sustainable business. After interviewing a number of CEOs, I realized that they all have one common value of ensuring their business decisions benefit all stakeholders – customers, employees, environments, and society.
The second step to achieving a sustainable business is to identify your company’s expertise. What are you good at? What is your corporate gene and how is this going to help solve social issues? How can you run an economically successful company and benefit society at the same time?
The last step is to have a comprehensive governance structure. Set the rules and mechanism in place and implement them within your company.
Tencent Case Study
It is very hard to have a “good business”. It is very hard to benefit both economically and socially. However, we can learn from companies that are trying to achieve both.
Tencent is a giant tech company in China. In 2007, they were the first Chinese internet company to set up the first public welfare foundation – Tencent Foundation. Tencent realized that their competitive advantage is CONNECTION – their top apps such as WeChat and QQ have billions of users. At the same time, they also identified that a lack of connection was a big social problem. So, they set up an online donation platform – a platform serving doners, fundraisers and enterprises – to highlight societal issues and marginalized groups of people.
By using their vast network to connect people, they were able to create a donation platform particularly well compared to any other platform.
One example can be seen in a campaign for autistic children. Tencent only needed 5 hours to break the fundraising goal as millions of WeChat users donated. I think this is an excellent example of utilizing a company’s strength to address social issues.
Although WeChat has over 1.2 billion monthly active accounts, it is not the most profitable business for Tencent. In Tencent’s 2016 Financial Report, online gaming contributed almost half (48%) of Tencent’s revenue. The game “Honor of Kings” helped Tencent’s market value exceed USD 340 million.
However, the success of this app led to negative press about children who were addicted to online gaming and numerous parent groups blamed Tencent for the problem. This led to Tencent setting up a strict anti-addiction campaign.
The negative press urged the company to change their vision and mission to “Tech for Good” in 2017 to show the public they were being socially responsible. Working with the police, they used facial recognition technology to help authorities track down lost children who had been abducted. They also developed a game rating system with the government and other institutional players.
In addition, Tencent also launched games that explored social values, including collaboration with museums and heritage organizations. They collaborated with the Forbidden City Museum to create engaging games for children to explore cultural heritage and history.
Igniting Innovation for Impact – – Inspiration for innovation
Creating a company for good is challenging. How can leaders achieve economic success while addressing some of our world’s most pressing issues? Our Igniting Innovation for Impact programme explores these issues and more.
To know more:
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