Why Social Impact and ESG Matter for Modern CEOs? Long-Term Value Creation in Stakeholder Capitalism

Fortune Media’s Alan Murray says stakeholder capitalism is here to stay

Explore how stakeholder capitalism is transforming business leadership. Discover why today’s CEOs prioritize social impact, employee well-being, and environmental responsibility alongside profits. Learn actionable strategies for integrating ESG, building sustainable value, and fostering trust with all stakeholders.

Ready to future-proof your business? Dive deeper to uncover proven strategies for embracing stakeholder capitalism and building a resilient, socially responsible company that thrives for decades.

Recommendation

Over the past decade, business leaders have increasingly emphasized their companies’ social impact. As Fortune Media CEO Alan Murray tells McKinsey podcast host Raju Narisetti, the “stakeholder capitalism” movement evolved as business leaders recognized that they have to make sure their companies have a positive impact on society. Focusing on short-term profits at the expense of the environment, social well-being, your stakeholders, and your employees is easy, but short-sighted. If you want your company to thrive for decades, Murray urges you to consider its impact on your workforce, stakeholders, society, and the environment.

Take-Aways

• Today’s CEOs focus on employee well-being and social and environmental concerns as well as profit.
• CEOs are now more willing to discuss socially controversial issues.
• Transparent financial metrics benefit businesses.
• Employees and investors are insisting that companies practice sustainability.

Summary

Today’s CEOs focus on employee well-being and social and environmental concerns as well as profit.

Since about 2013 or so, business leaders have become increasingly conscious about leading their companies to achieve social goals that align with the values of their investors, employees, and customers — all while earning a profit. Even the way CEOs speak about their businesses has changed. Now, they tend to modify the word “capitalism” and to cite “conscious capitalism,” “compassionate capitalism,” or “inclusive capitalism.”

“There was a broad sense that companies weren’t doing as much as they needed to, to ensure their positive impact on society. That’s what finally exploded a couple of years ago in this stakeholder capitalism movement.” (Alan Murray)

Chief executives can easily mistreat employees and damage the environment and society to maximize short-term revenues. The damage such CEOs do to their organization and to the greater good might not be so obvious in the short run. Even bad-actor CEOs want their companies to thrive for decades, but, if your corporation contributes massively to climate change, for example, it’s helping to create a world in which it cannot thrive – or even exist – 100 years from now.

Companies that fail to adopt hiring practices that promote inclusivity or to provide their employees with opportunities for advancement are promoting social polarization and inequality, which also are not conducive to their organization’s long-term welfare.

CEOs are now more willing to discuss socially controversial issues.

As recently as the late 1990s and the early 21st century, if you tried to speak to most CEOs about controversial issues – such as racism or LGBTQ rights – that didn’t directly affect their company’s financial position, they would immediately change the topic. Chief executives once avoided addressing politically divisive issues at all costs.

“You’ve seen an explosion of this trend. In some ways the most striking example [is that] Putin invades Ukraine and within 15 days, you had 300 companies who had come out and said, ‘We’re not going to do business anymore’.” (Alan Murray)

In some cases, corporate leaders’ refusal to do business with Vladimir Putin’s Russia came in response to his invasion of Ukraine. Often, companies also imposed sanctions to demonstrate their values to their internal audience of employees, customers, and investors.

The way CEOs will navigate complicated political and cultural conflicts over the long run is not yet clear, but business leaders no longer feel at leisure to remain wholly neutral.

Transparent financial metrics benefit businesses.

The business world has developed common, transparent economic metrics and accounting methods. People can rely on these metrics and methods for trustworthy corporate financial information. However, that does not hold true for the metrics companies use to discuss and disclose their environmental impacts.

“Companies can pretty much claim whatever they want to claim around their sustainability practices and goals.” (Alan Murray)

Since employees, customers, and investors make decisions based, in part, on a company’s values, each business must develop objective, reliable, and transparent sustainability metrics. In the new world of values-based stakeholder capitalism, environmental sustainability is a value on par with revenue and profit.

Financial metrics allow employees, investors, and stakeholders to evaluate a company’s economic viability. Similarly, the right set of environmental sustainability metrics will allow them also to assess a company’s environmental performance.

Employees and investors are insisting that companies practice sustainability.

For those who assume that CEOs and other business leaders are posturing when they say they want to emphasize their companies’ positive impact on the environment and society, that doesn’t appear to be the case. More than 40% of “invested assets” are held by companies that provide an Environmental, Social and Governance (ESG) evaluation reflecting the attention they’ve given to the values investors now weigh into their investment decisions.

“[CEOs are] quickly reaching the point where they face more questions about the non-financial stuff than they do about the financial stuff.” (Alan Murray)

Many CEOs are seeking ethically appropriate strategies even when it comes to taxes. Nearly half of Fortune 500 companies are investing in achieving a “net zero” environmental impact by 2050. When companies institute measurements and systems that make it easier to hold them accountable for achieving their environmental goals, you’ll know their commitment is serious and real. It’s a good sign that some major corporations, such as Walmart and Microsoft, will deal only with suppliers who commit to environmental goals.

About the Speakers

CEO of Fortune Media Alan Murray wrote Tomorrow’s Capitalist: My Search for the Soul of Business. Raju Narisetti leads McKinsey Global Publishing.