Keynote Listener: Theresa Lankes

NGO Power as a Key Driver for Fair Fashion A corporate lawyer’s perspective

by Theresa Lankes, Keynote Listener (Solution Stage: NGO Power and Fair Fashion) at the 8thInternational Conference on Sustainability & Responsibility in Cologne

What is the greatest mystery of sustainability? Although we know what is right, we do not adjust our behaviour accordingly. We all know that fair fashion saves lives, but it has yet to reach its tipping point into mainstream.

#8ICSR Solution Stage: NGO Power and Fair Fashion

Kalpona Akter, CEO of the Bangladesh Center for Worker Solidarity, and Khin Nilar Soe, Vice General Secretary of the Industrial Workers Federation of Myanmar, shared their experiences as textile workers. Since the collapse of the Rana Plaza factory building in Bangladesh killed more than 1130 textile workers, dehumanising working conditions in Asian textile factories form part of collective knowledge in Western societies.

If consumers in the Global North know about this, why don’t they buy more fair and organic clothes? Zara Berberyan has dedicated her Ph.D. thesis at Hamburg School of Business Administration (HSBA) to analysing this gap between walk and talk. She presented product and consumer-related factors for ethical fashion consumption.

Offering consumers fair fashion requires socially and environmentally sustainable supply-chains. To this end, the platform amfori by Business Social Compliance Initiative, German Partnership for Sustainable Textiles (Textilbündnis) and Fair Wear Foundation (FWF) take different approaches. Monika Eigenstetter, Professor for Work and Organizational Psychology at the University of Applied Sciences Niederrhein, used a checklist on the strategic decision-making determinants for small and middle-sized enterprises at amfori and FWF. Whilst the overall results seemed fairly similar, a far greater percentage of FWF members participated and their grievance mechanisms scored better.

Solution Stage: NGO Power and Fair Fashion stayed true to its name by offering the following approaches for fair fashion:

  • A key driver for change is You, the consumer, according to Kalpona Akter and Khin Nilar Soe. All of us in the Global North have far greater leverage than we credit ourselves with: Buying organic and fair clothes, lobbying our favourite brands, politicians at home and in sourcing countries, supporting organisations like Femnet and ECCHR are a few ideas I would like to add to their call for action.
  • Textilbündnis and FWF offer an important space between non-governmental organisations and companies for establishing sustainable supply chains. They are, however, no substitute for effective campaigns which use blaming and shaming techniques explained Sina Marx, Coordinator for Femnet e.V.
  • Zero workers died in factory fires since the establishment of the Bangladesh Accord on Fire and Building Safety, a drop in numbers from several hundred per year. The effectiveness of this legally binding agreement between brands and trade unions underlines, in Kalpona Akter’s opinion, the need for binding human rights due diligence in textile supply-chains.
  • A central argument against raising wages in the textile sector is the fear that suppliers will then outsource. Action Collaboration and Transformation (ACT) is an international cooperation between big brands, retailers and suppliers as well as the international trade union IndustriALL to achieve living wages for workers promoting, amongst others, freedom of association and collective bargaining in key textile sourcing countries.
  • Further suggestions included: Prohibiting politicians from owning textile factories to avoid the current conflicts of interest among one third of Bangladeshi parliamentarians, and mounting political pressure on the state of Myanmar to subject investors to rules.

Non-governmental organisations (NGOs) play a key role in all of these approaches. The exchange between two academics, an NGO representative and two trade unionists was facilitated by Sarah Jastram, Professor for International Business Ethics and Sustainability at HSBA and co-publisher of Sustainable Fashion – Governance and New Management Approaches.

In the Q&A session, I asked Kalpona Akter about her opinion on the civil suit against textile company KiK by four Pakistani nationals in the Higher Regional Court of Dortmund, Germany. My presentation at A Sustainable Supply Chain at #8ICSR’s Expert Insight sessions had analysed its impact on CSR in Germany. Kalpona Akter found this precedent encouraging for survivors to bring more cases in the future and to continue fighting for a binding law on human rights due diligence. This Solution Stage showed that it may take more than court cases for fair fashion to tip into mainstream – but NGOs will continue leveraging their power as a key driver for fair fashion.

A current example for the need of new governance and management approaches is the struggle for the Bangladesh Accord. Although successful for workers’ rights, it may not be able to continue its work after 30 November 2018 due to a restraining order. With this order, the High Court in Bangladesh prohibits the Accord’s inspectors to work after this date. Around one third of politicians in Bangladesh own textile companies. They are said to have significantly objected to the Accord and its continuation.

On 25 November 2018, four days before the public hearing in the Ali Enterprises’ case in Dortmund, KiK’s Head of Corporate Responsibility, Ansgar Lohmann, expressed support for the Accord in Handelsblatt, a major German business newspaper: “If the Accord were to leave Bangaldesh, this would be a major setback”. If nothing more, the stance taken by this textile company is evidence for the NGO power to influence public discourse in the Global North.

Robert G. Eccles: Honoree and Award Winner of the Lifetime Achievement CSR Award 2018

Robert G. Eccles: Honoree and Award Winner of the Lifetime Achievement CSR Award 2018

The MIT Center for Transportation & Logistics selected Robert G. Eccles as the winner of the ‘PROSE Award for Excellence in Business, Finance & Management ‘For Professional and Scholarly Excellence’’, Trust Across America named him ‘Top 100 Thought Leader in Trustworthy Business Behavior’ and Ethisphere Institute profiled him twice as one of the ‘100 Most Influential People in Business Ethics’. At the 8thInternational Conference on Sustainability and Responsibility, he was now awarded with the ‘Lifetime Achievement CSR Award 2018’.

The focus of his work

Eccles describes himself as ‘dedicated weight lifter’, ‘sustainability advocate’ and ‘capital market activist’ in the social networks on LinkedIn and Twitter. His vision is to enhance corporate reporting as well as integrated reporting and to improve the integration of environmental, social and governance factors(ESG factors) by both, investment decisions of investors and strategic decisions of companies. His research is based on a significant need for integrated reporting and sustainability with a focus on the role of business within society from the perspective of companies and investors. Examining current issues on sustainable development, in order to support and achieve materiality, corporate and investor transparency in the long term,he is recognized as foremost academic expert by Veritas Financial Analytics, LLC.

Eccle’s background and career

Robert Eccles studied Humanities and Science simultaneously with Mathematics at the Massachusetts Institute of Technology before achieving a Master degree in Sociology from Harvard University. At the same university he obtained a Doctor of Philosophy in Sociology. The former Professor at Harvard Business School is currently working as Visiting Professor of Management Practice at the Saïd Business School at the University of Oxford.

Presiding in a multitude of cases, Eccles is perceived as leading authority showing companies and investors how to develop and implement sustainable strategies. Since 2011 he is the Founding Chairman of SASB – Sustainability Accounting Standards Board – an independent non-profit organisation with its mission to create sustainability accounting standards through information disclosure to investors by broad, balanced stakeholder participation and evidence-based research.In addition, Eccles is Chairman at the advisory service firm KKS Advisors LLC which supports its customers in generating innovative solution approaches to establish more business models and communities with a sustainable core. Furthermore, Eccles is one of the founders of IIRC – International Integrated Reporting Council – and a steering member of this global coalition among the parties involved withregulations, investments and accounting with the aim to implement integrated reporting through sustainable value creation and an encouraging communication about it. Besides, Eccles is Non-Executive Chairman of Arabesque Asset Management. Omar Selim, Arabesque Partners founder and CEO, emphasises that Eccle’s work fits their ‘focus on research and sustainability as key drivers to generate value for […] investors, shareholders and the capital markets more broadly’. From Eccles point of view Arabesque is a driving force for a sustainable society. Time for a change has come, there is a need for capital markets to promote such a sustainable society. Lately, Eccles joined MISUM – Mistra Center for Sustainable Markets – as Board Member of the research center for cross-disciplinesand multi-stakeholders.


Robert Eccles most recent book written together with Michael P. Krzus and published in 2014 by John Wiley & Sons, carries the title ‘The Integrated Reporting Movement: Meaning, Momentum, Motives, and Materiality’ and includes the suggestion of an annual “Statement of Significant Audiences and Materiality” by the board of directors and the concept of a “Sustainable Value Matrix” tool which enables managers to convert the statement into their decisions. Eccles did extensive research on integrated reporting and wrote the three following books on this subject: One Report: Integrated Reporting for a Sustainable Strategy (co-authors: Michael P. Krzus, Don Tapscott), Building Public Trust: The Future of Corporate Reporting (co-author: Samuel A. DiPiazza, Jr.) and The Value Reporting Revolution: Moving Beyond the Earnings Game (co-authors Robert H. Herz, E. Mary Keegan and David M.H. Phillips).

Personal conviction

Based on the firm belief ‘A sustainable strategy is how a company creates value over the long term’, Eccles advocates for integrated reporting and ESG factors to measure sustainability and to put it in practice, especially regarding companies’ future performance. In addition, he holds the view that not only the social but also the environmental performance is crucial for returns and has to be scrutinized in the long run. In order to meet the SDGs – Sustainable Development Goals – which are adopted by all Member States of the United Nations, it requires more than the involvement of the public sector. Also the private sector has to go through a process of change and to implement sustainable approaches. Otherwise, it will not be possible to achieve the SDGs.

At ‘The 8th International Conference on Sustainability and Responsibility: Responsible Leadership in Times of Transformation’ Robert G. Eccles was announced as honouree of the Lifetime Achievement CSR Award 2018 at Flora Cologne on 14thof November 2018. Georg Kell, founding director of the UN Global Compact held his laudation. Being pioneer in ESG & Integrated Reporting, Robert G. Eccles was honoured for his effort in leveraging capital markets for sustainable development by integrating ESG factors into resource allocation decisions of companies and investors.

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About Georg Kell – Keynote Speaker at the 8ICSR

Georg Kell: ESG Financial Analyst and Designer of the Global Sustainability Agenda

Since 2011, Ethisphere Institute annually counts the German national amongst the ‚100 Most Influential People in Business Ethics‘, Fergal Byrne calls him a „key figure at the heart of the development of today’s sustainability agenda“. When Georg Kell worked on Kofi Annans renown speech “A Global Compact“ almost 20 years ago, he didn’t yet know that what was originally meant as a wake-up call and appeal to the experts, executives and politicians of the World Economic Forum in Davos, would turn into the world’s largest and most influential corporate sustainability initiative of our time under his leadership. Today, Kell sees the Global Compact’s biggest impact in having reshaped global views and mindsets on CSR. He says the biggest transformative power of the sustainability agenda is now finally awakening through a change of thinking in the financial world. It’s about time. 

Pioneer of the Modern CSR Agenda

Kell studied engineering and economics at TU in Berlin, where he then started his career at Fraunhofer Institute for product technology and innovation. He earned his PhD at St. Thomas Aquinas College in New York City. After having worked as a financial analyst in various African and Asian countries, he joined the United Nations in 1987.

The UN Global Compact (UNGC), led by Kell until 2015 has today been adopted by over 9,500 companies in over 160 countries to anchor CSR and to discuss a socially and environmentally sound globalization. During his time at the United Nations, Kell established the UNGC as a cross-sector forum for sustainable practices and policies. The platform significantly contributes to not only implementing CSR within corporations, but also to continuously develop, disclose and share the concept. Besides the UNGC, Kell moreover supervised the conception and implementation of parallel initiatives, such as the Principles for Responsible Investment (PRI), the Principles for Responsible Management Education (PRME) as well as the Sustainable Stock Exchange (SSE) Initiative.

The United Nations Global Compact is the worldwide largest and most important initiative for responsible business practice. Based on 10 universal principles and the Sustainable Development Goals (SDGs), it pursues the vision of an inclusive and sustainable global economy for the good of all people, communities and markets, today and in the future. (UNGC)

Moreover, Kell is Chairman of Arabesque, an ESG Quant fund manager that uses self-learning quantitative models and big data to assess the performance and sustainability of globally listed companies. Its investment technology processes over 100 billion data points to select an investment universe of equities with the aim of delivering superior returns, integrating Environmental, Social, and Governance (ESG) information with quantitative strategies. This offers long term returns and a significant reduction of portfolio risks.

System Change and the Power of Ideas

Only when companies take over ESG factors into their strategy and operations and realize that it pays to create sustainable solutions instead of being a root cause of global problems, a sustainable transformation can be successful. Responsible leadership, he says in an interview with the UN News Center, means “connecting all the dots (for) you know your own future financial success depends on the success of the market where you invest”. In the interplay of global stakeholders, business plays a key role when it comes to the rewriting of old paradigms in this regard. For Kell, the systemic transformation of markets is at the center of a successful sustainability agenda. The bis challenge and the real test lies in the reality that institutions and political systems are only changing slowly. Business must operate in frameworks which are, in the face of digitalization, technological development, planetary boundaries and complex, changing government structures outdated. So, the path to transformation is still oftentimes a chaotic and not always forward-oriented one. He for example calls out Germany’s subsidies of diesel consumption to be a “perverse outdated industrial policy”. We do not have a pre-drawn map to navigate the transformation we’re facing, but for Kell there’s no arguing: “we have to move from an industrial era model to a future-fit model”. Therefore, it needs courageous visionaries and leaders who, in the presence of an unknown future, do not fear to follow ambitious goals. We should not forget: Out of an inspirational speech – with the right vision and leadership – can emerge a network of over 9,500 corporations which is able to shape the awareness of an entire generation: “The strongest power humanity has is idea power”, says Kell.

Wake-up Call of the Financial World and the Acceleration of the Sustainability Agenda

Kell sees the true transformational power to move towards a sustainable system in the distribution of financial capital. In Fergal Byrne’s Podcast „The Sustainability Agenda“ , he calls 2018 to be the year of alignment between sustainable investment and responsible business practices. As one of the most inert players, the broad financial world has, in their obsession with short-term profits, tried to escape the ESG debate. Only a study in 2015, showing a positive correlation between ESG performance and long-term stock evaluation trigger a rethinking according to Kell: The wake-up call. In this development Kell sees the next big “boost” of the sustainability agenda. The PRI is growing fast, a variety of other initiatives is developing and with new financial products a new generation is realizing they can personally invest according with their values. The financial world is catching up in regard to the sustainability agenda and, thanks to quick technological developments, in a way that might have it overtake and significantly shape it: “Once finance speaks and relocates capital, then the sustainability issue really goes to scale and will be accelerated and hopefully policy makers will also realize about time to adjust the framework conditions”. Ultimately, we will need political leadership and a regulatory playing field that allows us to operate beyond the boarders of an industrial system.

At the moment, Kell is very much invested into the question of how to make the alignment between sustainable investing and corporate good practices happen in practice, and how to create transmission mechanism most effectively to bring it to scale as rapidly as possible. Because: We’re running out of time.

On November 14th 2018, Georg Kell will speak at the “8th International Conference on Sustainability and Responsibility: Responsible Leadership in Times of Transformation”. He will hold a laudatory for Robert G. Eccles, ESG & Integrated Reporting Pioneer and currently visiting Professor at the Saïd Business School at the University of Oxford, who will be awarded with the „Lifetime CSR Achievement Award 2018”. Join us and buy a ticket at: 


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Interview with Archie B. Carroll – has CSR become mainstream?

Archie Carroll served for 40 years on the faculty of the Terry College of Business, University of Georgia. He held the Robert W. Scherer Chair of Corporate Public Affairs Management, and served as Professor, Department Head, and Associate Dean. He has received numerous awards and recognitions over the years for his teaching, research and service.

Dr. Carroll has published over 100 articles in leading management journals and over 20 books including multiple editions of several. He is senior co-author of Business & Society: Ethics, Sustainability and Stakeholder Management, (2018), 10th edition, with Jill Brown (Bentley University) and the late Ann K. Buchholtz – one of the leading books in the field. He is co-author of Corporate Responsibility: The American Experience (2012), Cambridge University Press which won the Best Book Award at the 2014 Academy of Management—Social Issues in Management meeting in Philadelphia, PA.

Dr. Archie Carroll coined the understanding of CSR with his concept of the CSR Pyramid in the 1990’s. In this interview Carroll talks about the validity of this concept in times of transformation and uncertainty, CSR in the U.S., and whether CSR has become mainstream.


1) You have had a long and illustrious career as a passionate advocate for CSR in a nation, both government and business, that seems to turn a blind eye to the very real monetary benefits of practicing meaningful CSR, or even acknowledging climate change. Why do you think that the US struggles with these concepts when compared to other developed nations?

It is implicit in that question that both business and government “seems” to turn a blind eye to the monetary benefits of practicing meaningful CSR. To some extent, this is a valid observation but it is becoming clearer with each passing year and decade that these institutions are perceiving effective CSR to be in their best long-term interests, including their economic interests. In the 50 year career that I’ve been monitoring CSR, it has steadily grown in interest among both the public and business. In the U.S., CSR has been typically viewed to be a responsibility of business, not government, though government has addressed many of these same issues. This varies widely by country and company, of course, so it’s dangerous to generalize.

Many variables are at work affecting firms’ CSR. In fact, in our recent article on “The Institutionalization of Corporate Social Reporting,” Business and Society 2017, Vol. 56(8), Kareem Shabana, Ann Buchholtz, and I discuss the independent variables that affect both firms’ CSR and their reporting to include hazardous industry membership, participation in controversial business issues, stakeholder concerns, media coverage, advertising intensity, organizational slack, and firm size to be critical variables. Each of these variables brings influence to bear on how companies are perceiving and responding to CSR.

Regarding the “acknowledgment of climate change,” many of these same factors are at work. Both the acceptance of CSR and the acknowledgement of climate change can represent significant expenditures and significant changes and thus there is at work a resistance to change on the part of various executives and boards. Though much resistance still exists, I sense companies are increasingly coming to see that climate change is an issue that needs to move from its radar screen to its business processes. At the same time these companies are struggling with technology and global competition so there are many pieces to the puzzle on the table.

When you say the U.S. struggles with these concepts compared to other developed nations, this is a discussion that could have no end. I don’t sense the U.S. struggles with CSR more than many developed nations. As for climate change, that may be truer. The American citizenry is often divided on the causes and remedies of climate change.

Concerning CSR, I think the important work by Dirk Matten and Jeremy Moon regarding the differences between CSR in the U.S. and Europe apply here. If CSR is more “implicit” than “explicit” due to the nature of the socio-economic structure of the country, differences are to be expected. Back on the subject of climate change, I think some of these same variables may be at work along with the fact that many of the European countries are much smaller than the U. S. and thus their sense of urgency regarding climate change may be reflective of these factors.

2) What changes would you make to the CSR Pyramid during these times of significant transformation and increasing uncertainty?

We constantly seem to be in times of transformation and uncertainty. I guess what you are asking is whether the CSR Pyramid is still valid given the environment in which we live. In primarily capitalistic economies I do believe the CSR pyramid is still valid. In business-driven economies wherein private ownership is still the dominant form of ownership, the foundational importance of the economic responsibility of business is still the building block of business’s responsibility to society – to provide goods and services that society needs and to provide profits sufficient to ensure survival and growth (sustainability) and to reward its investors. Inasmuch as a legal infrastructure is essential to a growing and prospering country, I do think the legal responsibilities provide the codification of right and wrong that permit institutions to flourish. The ethical component of my CSR Pyramid suggests that just obeying the laws and regulations are not enough, one must practice sound ethics as well. Ethical expectations typically exceed the requirements of law and also address other issues for which there are no laws or laws lag. And, as for philanthropy, this is still viewed as an expected responsibility by most of societies’ stakeholders.

When I originally conceived of this four-part construct of CSR, I was thinking mostly of the U.S. That was between the late 1970s and the early 1990s before the explosion in the global economy and competition. I’m aware that a few other researchers have concluded that the pyramid sequence of responsibilities is different in some countries, I do believe the pyramid remains valid in most free-enterprise economies as a descriptor of the relative importance of the responsibilities. I receive emails from academics in China, Japan, Malaysia and many European countries saying they use the CSR Pyramid in their teaching. That is somewhat comforting.

Changes? In my later teaching and thinking about CSR using the Pyramid, I have always drawn a broad arrow down through the four categories, from top to bottom, to depict that ethics, broadly conceived, shapes and informs each of the four categories. Even the choice of capitalism as an economic system, for example, is an ethical choice that countries and societies make. And, it is obvious how ethics underpins law and philanthropy. So, for sure, a concern for ethics cuts through the entire pyramid. In addition, I often sketch out the tensions that occur between and among the four CSR components.

As for how to change the pyramid to accommodate transformations and increasing uncertainties, I’m not sure. In my mind, the pyramid is implicitly a dynamic model though its not easy to depict that in a single diagrammatical format. Maybe a series of pyramids moving from left to right illustrating how the factors may change over time might capture some of it.

3) Do you feel as though that mainstream business has finally come around to the notion that one can make a profit and have a positive societal impact at the same time? Or do we still have a way to go in this regard?

If you listen to business executives and observe their practices, it is apparent that CSR has become a mainstream responsibility among most medium-to large business organizations. I do believe most of them have accepted the “business case for CSR.” CSR arises in many different forms and degrees, however. Among these are firms I would call “CSR Exemplar Firms,” in addition to the “mainstream adopters.” In addition, we are observing social entrepreneurship and social intrapreneurship catching on and spreading. The rise of B-Corps is evident as is the rise of small business CSR. The Conscious Capitalism movement is another example though it shares many of the same attributes as CSR Exemplar firms.

4) Do you see CSR and Sustainability as being distinct factors that companies need to consider, or do they belong inherently to a holistic and balanced corporate strategy?

In my mind, CSR and Sustainability are more overlapping and interrelated than distinct factors companies need to consider. I understand that some sustainability experts argue that CSR is too old fashioned or static, but I think it is assumed by most of us who have been working in this area that CSR has both a short-term and a long-term perspective and that both are important. Often academics have different views on this than do practitioners.

To be sure, the early writings on CSR did not speak as much as they should have about the concern for future generations and that is a key point in sustainability, but the broader view of sustainability that encompasses social, economic and environmental (the triple bottom line) spheres is very much overlapping with CSR. If you examine the highest ranked CSR and highest ranked Sustainability companies in the world today, you will find they are significantly the same companies.

Your question also addresses whether they belong in an inherently holistic and balanced corporate strategy, and I would say that they definitely do. CSR and Sustainability must be carefully crafted and integrated into corporate strategy to be effective.

Archie B. Carroll
Professor Emeritus
Terry College of Business
University of Georgia

For Further Information about Dr. Archie B. Carroll: 

Interview with John Elkington – why his triple bottom line has to be reexamined

John Elkington is an author, entrepreneur and world authority on corporate responsibility and sustainable development. He is also the Founding Partner, Chairman, and Chief Pollinator at Volans, as well as co-founder, now Honorary Chairman, of SustainAbility and of Environmental Data Services.

In this interview Mr. Elkington talks about his reexamination of the phrase “triple bottom line”, implementing CSR and sustainability into strategies and operations, and the future of the business world.




1) Why did you feel that after 25 years a fundamental reexamination of your triple bottom line theory was warranted? What has changed in your mind?

Since the 1990s, the sustainability sector has grown rapidly, though at around $1 billion in annual revenues globally it is no giant. Still, market research suggests that future markets for its products and services could be huge — with the U.N. Sustainable Development Goals forecast to generate market opportunities of over $12 trillion a year by 2030 (and that’s considered a conservative estimate).

But success or failure on sustainability goals cannot be measured only in terms of profit and loss. It must also be measured in terms of the wellbeing of billions of people and the health of our planet, and the sustainability sector’s record in moving the needle on those goals has been decidedly mixed. While there have been successes, our climate, water resources, oceans, forests, soils and biodiversity are all increasingly threatened. It is time to either step up — or to get out of the way.

As I wrote in the Harvard Business Review:

Fundamentally, we have a hard-wired cultural problem in business, finance and markets. Whereas CEOs, CFOs, and other corporate leaders move heaven and earth to ensure that they hit their profit targets, the same is very rarely true of their people and planet targets. Clearly, the Triple Bottom Line has failed to bury the single bottom line paradigm.

Critically, too, TBL’s stated goal from the outset was system change — pushing toward the transformation of capitalism. It was never supposed to be just an accounting system. It was originally intended as a genetic code, a triple helix of change for tomorrow’s capitalism, with a focus was on breakthrough change, disruption, asymmetric growth (with unsustainable sectors actively sidelined), and the scaling of next-generation market solutions.

To be fair, some companies did move in this direction, among them Denmark’s Novo Nordisk (which rechartered itself around the TBL in 2004), Anglo-Dutch Unilever, and Germany’s Covestro. The latter company’s recently retired CEO, Patrick Thomas, has stressed that the proper use of the TBL involves, at minimum, progress on two dimensions while the third remains unaffected. It is time for this interpretation to become the default setting not just for a handful of leading businesses, but for all business leaders.

I see a bright ray of hope coming from the high-energy world of B Corporations. There’s a lot of momentum there; around 2,500 businesses worldwide are now certified as B Corps. All are configured around the TBL — dedicated to be not just “best in the world,” but “best for the world.” Major companies like Brazil’s Natura and Danone’s North American operation are now B Corps, with other multinational corporations considering how to follow suit.

To truly shift the needle, however, we need a new wave of TBL innovation and deployment. But even though my company, Volans, consults with companies on TBL implementation, frankly, I’m not sure it’s going to be enough. Indeed, none of these sustainability frameworks will be enough, as long as they lack the suitable pace and scale — the necessary radical intent — needed to stop us all overshooting our planetary boundaries.

Hence the need for a “recall.” I hope that in another 25 years we can look back and point to this as the moment started working toward a triple helix for value creation, a genetic code for tomorrow’s capitalism, spurring the regeneration of our economies, societies, and biosphere.

*For some background on the recall process itself, see here:

2) Following up on that question, do you feel that we have reached an inflection point regarding the acceptance of CSR and sustainability as viable strategic approaches by mainstream business in 2018, given Larry Fink’s open letter to CEOs, or are we not quite there yet?

BlackRock are a passive investor, which means that they are not going to rock the corporate boat that much. Welcome, but not quite the manifesto for changing capitalism that some have seen it to be.

3) Given the fact that most managers and executives, at least in the West, have been long taught to believe that there is a fundamental trade-off between profit and social responsibility, how should they best go about holistically incorporating CSR and sustainability into their strategic and operational thinking?

In the same way that we encouraged them to pay attention to what NGOs were saying a few decades ago and then more recently to what social innovators, social entrepreneurs and impact investors are doing, they now need to pay a lot more attention to what exponential innovators, entrepreneurs and investors (from Elon Musk to Josh Tetrick) are now doing to disrupt one sector after another. More sustainable outcomes are not guaranteed on these trajectories, indeed far from it, but the combination of disruption with new values is a powerful one.

4) It is, understandably, a herculean task to fundamentally reexamine the entire way in which one does business, in which specific areas do you foresee businesses having trouble with the integration of these concepts?

There is much talk currently of corporate purpose, which is all well and good. But I’m skeptical. If Patagonia talks about purpose, I know what I’m dealing with; if ExxonMobil does, it’s a different matter entirely.

Business leaders need to lobby much more actively for the sort of market incentives that will push and pull their industries in the right directions – and at the right scale and pace.

5) In your opinion, what does the future of business look like? Will companies still be able to get away with negatively impacting society in favor of profit and growth? Or will investors begin to realize that such rabid short termism is ultimately unsustainable, and begin to reward companies that prioritize long term growth, and thus sustainability, over quarterly returns, or I am giving wall street too much credit?

Some companies will always get away with murder – because we haven’t yet woken up to what they’re doing, because we don’t (yet) have enough political leverage on them, or because we don’t care.

But major brands are finding it increasingly hard to hide – and, indeed, their younger employees are bringing a very different value set to work.

Wall Street will struggle to take all of this on board for quite some time yet, but I do see the Larry Fink CEO letter as an encouraging sign that our change agenda is finally starting to percolate at the top of some pretty major financial institutions.

Interview with Prof. Dr. Elisabeth Fröhlich – President of CBS International Business School

Prof. Dr. Elisabeth Fröhlich is the president of the CBS International Business School and a professor for supply chain management.

In this interview, Prof. Dr. Elisabeth Fröhlich describes how CBS is working to become a leader in the realm of sustainable education and research. Furthermore, she explains why the CBS was chosen as one of the two venues for the 5th Responsible Management Education Research Conference as well as the 8th International Conference on Sustainability and Responsibility.

1) Why will CBS be hosting the 5thResponsible Management Education Research Conference as well as the 8thInternational Conference on Sustainability and Responsibility?

The CBS has proven in recent years, under the guidance of my colleague Prof. Dr. René Schmidpeter, the co-director of the Center for Advanced Sustainable Management (CASM) here at CBS, that we are leaders when it comes to sustainable education and research. We are one of the few universities that have implemented and accredited a so-called integrated sustainability curriculum. Our vision for 2017, which was adopted last year, declares that employability and lifelong learning are a top priority for CBS.

We develop competent and responsible decision-makers who take their roles in society very seriously and work to find innovative solutions to the economic problems of our time. CBS can be considered to be a pioneer in the development of new methods for management education, which is why we are proud to announce that we will be hosting the 5thResponsible Management Education Research Conference as well as the 8thInternational Conference on Sustainability and Responsibility.

2) What do you promise guests that visit the conference?

I can promise our guests that they will meet “like-minded people” and that together we will work to develop innovative approaches for sustainable management to ensure that we can find answers to the most important questions of our time. During the conferences, no topic and no region will be neglected – for me personally, this global exchange is incredibly important and future-oriented.

With CASM, we have created a national platform where this exchange can take place to further innovation and change. The conference should also serve to help develop new ideas for study and teaching programs. PRME focuses very intensively on the question of how we can successfully implement sustainability in teaching and how we can “prove” this success. Our guests will hear from some of the best practice examples and can take inspiration to develop management education approaches.

It is also very important to me that we encourage companies to invest more into their employees as well as their management team. Especially when we think about CSR in the context of digitalization, companies will also face the challenge of how to make their top management level “fit” for this change.

My personal highlight of this conference is to discuss our ideas and visions with top-class, international experts from business, science, society and politics.

3) What do you personally look forward to the most? 

For me personally, the biggest challenge in the context of CSR is the intercultural component. I’ve participated in several international CSR conferences myself and learned a lot from the lectures and panels. Especially in my field of research “sustainable management of global supply chains” the intercultural dimension plays a crucial role. As a German company, I cannot just enforce my own understanding of sustainability on the supplier. I have to understand sustainability first and then I can work together with my supplier to find approaches on how to best enforce sustainability standards.

To realize and to discuss the necessary transparency in the global supply chain, such as new technologies and blockchain developments, can help to overcome these challenges. I am very excited about these opportunities and I hope to take one step further in the right direction here.

I am looking forward to engaging in discussions with our international experts from on the issues that challenge our current business models – and I am convinced that CBS is making an important contribution to this discussion.

Interview with Prof. Danica Purg – Dean and President of IEDC Bled School of Management, President of CEEMAN

Professor Danica Purg is the President of the IEDC-Bled School of Management, Slovenia, and the President of CEEMAN, the international association for management development in dynamic societies, which brings together 225 management development institutions from 54 countries. She is also leading the European Leadership Centre (ELC). [1]

In this interview, Danica Purg describes her views on trends such as digitalization, sustainability, and CSR. She also discusses the concept of responsible leadership and the role of business schools in reshaping the next generation of leaders. 



1) Growing up in the former Yugoslavia you have experienced a significant amount of change in your life, including the fall of Communism and the break-up of Yugoslavia, offering you a unique perspective compared to many western academics. How would you say this experience has influenced your views on trends like digitalization, sustainability, and CSR?

Although it must be already a part of my DNA not to be afraid of challenges and the big political and social changes during the first decades of my life it helped me to think of solutions and to grasp opportunities. Even the establishment of IEDC, a “modern” business school, in the time of (self-management) socialism has been a “disruptive” initiative. The time of anomalies in the late 80s’ and beginning of 90s’ inspired me to introduce ethics in the curricula of the School. Out of that the attention for CSR and sustainability was a logical consequence. I was convinced that only the best faculty could help CEE to close the managerial gap. By attracting the best professors I positioned myself in the frontline of innovative methods of teaching and learning. I see digitalization as opportunity to reach more people to improve own performance.

2) What do you think are the biggest opportunities or challenges that we face in the fields of sustainability, digitalization, and CSR?

The biggest challenge is to change the mind-set of people, in order to be able to live in the era of fast changes (what we call “disruptive” today, will be “normal” in the future), to be able to make “automatically” the right decisions for people and the globe. The biggest opportunity lies in the area of information and communication.

3) What are some of the unique attributes that you believe managers need to have? And how do these attributes this manifest itself in their businesses and their business culture?

Managers of the future are mentors, coaches, creating the conditions for others (people, robots) to perform. They need the necessary technical and functional skills, but focus will be on analytical and emotional qualities. Managers of the complex future are people who are able to build their behaviours and decisions on intuition and their senses. They will perform in horizontal organizations with self- management teams in continuously changing organizations with innovations as an “embedded” characteristic.

4) Leadership as a concept has changed a lot in the past decades, shifting towards the term “responsible leadership”. What does responsible leadership mean for you?

Responsible leadership means for me awareness that every decision has consequences for the environment, for people you lead and for yourself. It also means that you are acting transparently and you are ready to explain your vision and acts and are open to critics and ready to change.

5) Building upon the leadership concept, where do you see the role of business schools in reshaping the next generation of leaders?

Business schools have the responsibility to assist in developing leaders with the above-mentioned mind-set and skills. We are not able to “ensure”, but we can do our best to deliver not only the “toolkit”, but also the “mind-set” to be a responsible leader.

6) What do you think are the most important metrics for defining success?

Success for me is a sustainable and responsible activity (movement, product, service) on the basis of the long-term mission and vision. It can be measured by the level of satisfaction of your stakeholders (employees, customers, financers, relevant groups of citizens).


Microfinance’s Viability as a Social Impact and Poverty Alleviation Tool

There is some debate regarding the actual impact of microfinance. One example of this can be seen if one simply compares the “escape from poverty rate” of borrowers and non-borrowers. In this case, one fails to consider the self-selection of borrowers, i.e. those with entrepreneurial tendencies will have a higher propensity towards borrowing (Chowdhury, 2009). This will naturally have a tremendous effect on the measurement of a fund’s impact. In addition, if one considers the “escape from poverty rate” to be the single meaningful measure of a fund’s success, one would be ignoring the other tenets of economic development, and thus disregarding some of economic development’s larger goals.

Poverty alleviation should have other positive corollary effects on society, namely an increase in the number of children enrolled in school, increase in public health metrics, etc. However, there is a number of contrasting research to be found in this area. In example, an extensive study found that 62% of school-aged sons from Grameen Bank borrowers attended school, compared to just 34% of non-borrowers (The Economist, 2009). In comparison, a 2009 study, by Banerjee, Duflo, Glennerster and Kinnan, determined that microfinance had no impact on current measures of health, education, or a woman’s decision-making in the slums of the Indian city of Hyderabad. Proponents argue that, given microfinance’s relatively short history and a lack of understanding of banks and financial services amongst target groups, one can only truly evaluate the success of microfinance in its most developed markets, where potential borrowers are familiar with the concept and loans of microfinance institutions are a ubiquitous part of the economy. In Bangladesh, the world’s most developed microfinance market, a study found that microcredit was responsible for 40% of the total poverty reduction in rural areas, and had positive corollary effects as it reduced moderate poverty at a rate of 1% annually, and extreme poverty at a rate of 1.3% (Khandker, 2003). Again, many economists and scholars find these numbers to be misleading, and believe that those involved in microfinance have dramatically oversold it as an anti-poverty tool. A 2006 World Bank Study found that Bangladeshi women, who received microcredit only experienced an annual income increase of 8 Taka (Bangladeshi currency) for every $100 borrowed, which represents a $0.03 per day increase in income. Consequently, a 1.5% increase in income for someone surviving on only $2 a day is seemingly insignificant (Khandker, 2006 and Roodman & Quershi, 2006).

The consensus amongst economists appears to be that microcredit and microfinance have potential as tools for development, but cannot considered to be a method that can replace the state’s important role in economic development (Chowdhury, 2009). Microfinance funds need to reassess their business models, as they should attempt to find successful microenterprises and microentrepreneurs and provide them with access to capital, as they are shown to be more successful than the very poor in properly utilizing their loans (Easterly, 2006). Additionally, microfinance funds cannot operate in a vacuum and must be cognizant of macro and microeconomic factors when investing (Chowdhury, 2009). Therefore, an examination of the four main issues regarding microfinance is required to gain a better grasp of the field.

Observations and Recommendations:

The problems surrounding microfinance seem to be a combination of several factors. Microfinance institutions fail to adequately assess and understand target markets, the prioritization of financial sustainability over social impact, the fact that borrowers are self-selecting, and funds generally fail to consider macroeconomic variables.

While microfinance institutions’ intentions are noble, they often fail to properly research and understand their target markets before beginning lending activities. Often, they fail to understand that microcredit only functions in areas with a well-functioning and growing domestic market, as without the requisite consumer base, there is no room for expansion (Pollin & Feffer, 2007). Simply having access to capital is useless, if there is no infrastructure in place, i.e roads, to support entrepreneurs and business activates. And because the majority of microfinance funds prioritize financial sustainability over social impact, they normally approve a number of loans that are far in excess of what the local economy can support, in order to diversify their investment (Bateman & Chang, 2009). While this practice is financially sound in developed economies, the same does not hold true in developing countries. By providing loans to such a great number of people, the fund floods the local economy with a plethora of in-efficient microenterprises, which must engage in cost-cutting measures to remain competitive. These cost-cutting measures usually hinder the development of, and take away, market share from more efficient local small and medium enterprises (SMEs), which, in the long-run, have much greater potential as a poverty-reduction tool (Bateman & Chang, 2009).

An example of this phenomenon can be found in a scheme to provide rural Bosnians with a microloan so that they can purchase a cow. The increase in the supply of milk contributed to a significant decline in the overall price. The combination of an oversupply with a price decrease, diminished the market share and income of larger local dairy farms, which in turn effected their ability to purchase and invest in new equipment, stock, and labor (Agripolicy, 2006). Consequently, this measure had an overall negative effect on development. It is quite clear that this fundamental misunderstanding of scale economics has the potential to destroy entire industries.

Therefore, funds need to reassess their lending policies and perhaps work with the local government, instead of bypassing it, to determine areas where microfinancing has the capacity to produce social impact. Funds would do well to focus on successful microenterprises that exist within the “informal economies” in developing countries. To this effect, Bateman & Chang argue that the economic development achieved by all nations throughout history, both in the 1800s and in the last couple of decades, was a product of government coordination, in monetary and fiscal policy, investment, and in some cases by state led capitalism –see the “tiger economies” (2009 and Witt, 2012). Providing established entrepreneurs with capital, after a critical assessment of the local market’s growth potential, would allow these SMEs to expand, and in the process, employ more people and bring more trade to the area (Ditcher, 2006). Utilizing such an approach also decreases the possibility that the loans are used for “consumption smoothing”, a process where the loans are not put to their intended purpose, but towards things like tuition fees, healthcare costs, and weddings (Bunting, 2011).

Concluding Thoughts:

Microfinance certainly has the potential to have an meaningful impact on economic development, especially in areas that are underserved by the current development programs operated by governmental and international organizations. The onset of the digital age will help solve a lot of the problems currently facing Microfinance and part two of the series will concentrate on how Fintech can redefined the industry, whilst simultaneously increasing Microfinance’s potential impact.

About the Author

Haden Garth Cosman is a master’s student in International Business – Strategic Management and Consulting at the CBS International Business School. In his current role at CASM, he is primarily responsible for the management and support of research and other assorted publications. He completed his bachelor’s in International Political Economy, with a focus on Economic Development, and German Language at Fordham University in New York, and has professional experience in the finance and consulting sectors on both sides of the Atlantic.


Agripolicy. (2006). Structure and Competitiveness of the Milk and Dairy Supply Chain in Bosnia and Herzegovina (Rep.). CEEC Agri Policy Project.

Bateman, M., & Chang, H. (2009). The Microfinance Illusion. SSRN Electronic Journal. doi:10.2139/ssrn.2385174

Bunting, M. (2011, March 09). Is microfinance a neoliberal fairytale?| Madeleine Bunting. The Guardian. Retrieved May 06, 2018, from

Chowdhury, A. (2009, December). Microfinance as a Poverty Reduction Tool – A Critical Assessment (Working paper No. 89). Retrieved May 10, 2018, from United Nations Department of Economic and Social Affairs website:

Ditcher, T. (2006). Hype and Hope: The Worrisome State of the Microcredit Movement. United States Agency International Development.

Duflo, E., Banerjee, A., Glennerster, R., & Kinnan, C. (2015). The Miracle of Microfinance? Evidence from a Randomized Evaluation. American Economic Journal: Applied Economics, 7(1), 22-53. doi:10.3386/w18950

Easterly, W. R. (2007). The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Oxford: Oxford University Press.

Khandker, S. (2003). Micro-Finance and Poverty: Evidence Using Panel Data from Bangladesh. Policy Research Working Papers. doi:10.1596/1813-9450-2945

Khandker, S. (2005). Microfinance and Poverty: Evidence Using Panel Data from Bangladesh. The World Bank Economic Review, 19(2), 263-286. doi:10.1093/wber/lhi008

A Partial Marvel. (2009, June 16). The Economist. Retrieved May 10, 2018, from

Perkins, A. (2008, June 03). A Short History of Microfinance. The Guardian. Retrieved May 01, 2018, from

Pollin, R., & Feffer, J. (2007, June 21). Microcredit: False Hopes and Real Possibilities: Is microcredit the solution to global poverty? Yes and no…. [Web log post]. Retrieved May 09, 2018, from

Pollin, R., Feffer, J., & Daley-Harris, S. (2007, June 21). Debate on Microcredit: Sam Daley-Harris argues for improving microfinance so that it lives up to its potential. Robert Pollin counters that microfinance must be embedded in a larger development program. [Web log post]. Retrieved May 09, 2018, from

Roodman, D., & Qureshi, U. (2006). Microfinance as Business (Working paper). Washington, DC: Center for Global Development.

Witt, M. A. (n.d.). South Korea: Plutocratic State-led Capitalism Reconfiguring. In The Oxford Handbook of Asian Business Systems (pp. 216-237). Oxford: Oxford University Press. Retrieved May 10, 2018, from

Gesellschaftliche Herausforderungen als unternehmerische Chance – Ein Corporate Social Responsibility Ansatz

Aktuell wird das Marktumfeld von vielen unterschiedlichen gesellschaftlichen Herausforderungen geprägt. Zu diesen Herausforderungen zählen wir die Marktvolatilität, die sich aus Themen rund um demografische Änderungen und eine Volatilität in Angebot und Nachfrage zusammen setzt. Des Weiteren, stellt sich für viele Unternehmen heutzutage die Frage nach dem Zusammenhang zwischen Profit und Gesellschaftlicher Verantwung [1]. „Profit vs. Gesellschaftliche Verantwortung“ steht hier für die Auseinandersetzung zwischen Rekordprofiten und sozialen Problemen. Immer mehr Unternehmen setzen sich mit Ihrer Rolle in der Gesellschaft auseinander und versuchen nicht nur eine Profit Maximierung zu erreichen sondern auch gesellschaftlichen Nutzen zu erzielen. Ebenfalls zu den gängigen Herausforderungen im Marktumfeld zählen die verfügbaren natürlichen Ressourcen, wie beispielsweise fossile Brennstoffe oder Frischwasser. Die Globale Wertschöpfung fördert zudem Interdependenzen und Disruptionen im Marktumfeld. All diese Herausforderungen wirken sich auch auf unternehmerischen Entscheidungen aus. Diese Entscheidung werden oft aufgrund bestimmter Treiber getroffen wie beispielsweise die Industrie 4.0 oder der steigende soziale Druck auf Unternehmen. Diese Herausforderungen und Treiber führen uns zu der Kernfrage: „Wie können Unternehmen Wert schaffen?“ und „Wie können wir gesellschaftliche Herausforderungen lösen?“ [2].

Diese Fragestellung leitet uns zu einer Neupositionierung der Unternehmen in der heutigen Gesellschaft. Unternehmen sind ein wichtiger Bestandteil der Gesellschaft, sozusagen Bürger der Gesellschaft. Dadurch wird Ihnen eine explizite Verantwortung übertragen. Eine Neuausrichtung des Managements im Unternehmen führt daher oft zu einem Corporate Social Responsibility Ansatz [3]. Doch wofür steht Corporate Social Responsibility? Und wodurch wird Social Responsibility geprägt?

Die EU-Kommission definiert CSR als “die Verantwortung von Unternehmen für Ihre Auswirkungen auf die Gesellschaft”[4].

Mit CSR können Unternehmen sowohl Ihrer sozialen Verantwortung im vollem Umfang gerecht werden als auch neue Märkte erschließen, sinnvolle Innovation voranbringen und Prozesse optimieren. Wir sehen vermehrt, dass CSR gemeinsam mit Globalisierung, Innovation und Digitalisierung gedacht wird. Um CSR holistisch voranzutreiben benötigt es daher auch verantwortungsvolle Führungskräfte.

Verbinden wir dieses nun mit unseren globalen Herausforderungen, dann sehen wir, dass ein verantwortungsvolles wirtschaften auch neue Chancen bringt. Zu der Verantwortung, die Unternehmen übernehmen gehören beispielsweise die Mitarbeiterförderung, die Ressourcenschonung oder das Engagement für die Gesellschaft [5].

Der Bereich der Nachhaltigkeit muss somit neu überdacht werden. Für Unternehmen bedeutet CSR nicht, dass zwischen gesellschaftlichem Nutzen und eigenem Interesse entschieden werden muss. CSR bedeutet, dass Unternehmen durch gesellschaftlichen und ökonomischen Nutzen Profit erzielen können. Dies ist eine Verzahnung von finanziellem, sozialem und ökologischem Erfolg und zwar langfristig. CSR ist somit eine Mischung aus dem „Business Case“ und dem „Social Case“. Es ist weder reine Philanthropie, der „Social Case“ noch ist es eine ausschließliche Gewinnmaximierung, der „Business Case“. In Wahrheit liegt Corporate Social Responsibility genau zwischen diesen zwei Polen [6].


Autor: Prof. Dr. René Schmidpeter



[1] Schmidpeter (2014). Gesellschaftliche Herausforderungen als unternehmerische Chance – neue Managementansätze und Perspektiven erfolgreich umsetzen. Verfügbar unter:

[2] in Anlehnung an Michael Dheur (2013). CSR und Value Chain Management, Management – Reihe CSR.

[3] Schmidpeter (2012). Verantwortung Zukunft, FAZ Institut für Management.

[4] Europäische Kommission (2012). Definition CSR.

[5] Unternehmensbarometer DIHK (2012).

[6] in Anlehnung an Schmidpeter (2012). Verantwortung Zukunft, FAZ Institut für Management.

Are Sustainability and CSR Practices Here to Stay in American Business?

“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society.“ – Larry Fink, CEO of BlackRock Inc.

Changes in economic, social, and environmental factors have altered market conditions to such a degree that enterprises that are unwilling to integrate meaningful CSR (Corporate Social Responsibility) and Sustainability practices into their core corporate strategy will simply die off[1].

Since the 1970s, CSR and Sustainability have been relegated to the fringes of American business thought. In large part stemming from the considerable influence of Milton Friedman and the Chicago School’s doctrine, which asserted that the sole metric of a company’s social responsibility should be profit maximization and the creation of shareholder value[2]. More recently, academia and business have come to consider the Friedman Doctrine as outdated and lacking the necessary nuance to properly understand social responsibility of business[3]. Thus, enterprises have begun to move away from concentrating solely on profit maximization. The shift in the philosophy surrounding governance and the responsibility of enterprises is the direct result of substantial shifts in economic (globalization and digitalization), environmental (climate change and resource scarcity), and social factors (changes in generational consumer preferences). It is abundantly clear that failing to seriously consider these increasingly crucial factors will degrade an enterprise’s value by eroding its social license to operate[4]. For the most part, society has placed the responsibility for the integration of CSR and Sustainability programs on the shoulders of managers in industry, and investors have been slow to understand its importance, and therefore have not rewarded enterprises that implement meaningful CSR and Sustainability strategies. This is beginning to change with the rise of impact investing, which is based upon two fundamental principles, “accumulating wealth by any means followed by a turn to philanthropy in search of impact is not an efficient way to create overall value for society” and “there are investment opportunities that create both strong financial and impact returns without requiring a tradeoff”[5]. Impact investing and SRI (Socially Responsible Investing) has been increasing steadily the past decade, but those principles have been adopted to a greater degree in the venture capital and private equity space[6] than capital markets and institutional investors.

2018 is the inflection point in which CSR and Sustainability have finally entered the lexicon of the uppermost tier of American finance. As Larry Fink, CEO of BlackRock, the world’s largest asset manager, called on CEOs to fundamentally reexamine their companies’ value proposition, “Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate”[7]. His open letter represents a fundamental break from the conventional finance philosophy and represents a call to action to the American finance elite, who are well-schooled in the self-correcting nature of Adam Smith’s invisible hand and the Friedman doctrine.

Why is this important? While the notion of impact investing has existed for the past several decades, it was mostly considered to be the domain of small and middle market private funds, NGOs, and non-profits, and it traditionally delivered below market returns[8]. It was not considered to be of interest to large financial players that are driven by returns, not social impact.

However, given the fact that there has been a considerable amount of academic research that has demonstrated that there is, in fact, a positive correlation between performance on ESG matrices and overall financial returns[9], investors have begun to take notice. After the 2008 financial crisis, business leaders have started to recognize the dangers of short-sighted strategies driven by an obsession with quarterly results, which have been only reinforced by the West’s seeming fixation on short-term success[10]. By serving all stakeholders, instead of only shareholders, enterprises can gain competitive advantages by approaching their strategy in a holistic manner that puts the long-term sustainability of their business over short-term profit maximization[11]. An even more telling example and one that ties directly into Larry Fink’s words is that the average holding period of a stock was just 22 seconds in 2014, compared to four years after the end of the second world war[12]. However, enterprises that prioritize the long-term viability and health of their business tend to get penalized in the short-term by markets, thus making the paradox of short and long-term strategy even more difficult to navigate. There is an obsession with hot money[13] and high-frequency trading that has significantly altered the structure of the market, creating levels of volatility that result in levels of uncertainty that affect the strategic decision-making of companies. This “short-termism” is not only being driven by human tendencies, but also by the proliferation of short-term passive investment vehicles, which has altered the structure of the market. ETFs (Electronically Traded Funds), whose algorithms fail to consider “real world” factors other than financial information. By only interpreting financial statements and not possessing the ability to consider unpredictable real-world events, companies are penalized for activities that active investors would not penalize.

One might ask how this tie into sustainability and more importantly Larry Fink’s letter? Essentially, investors are beginning to look for companies that successfully balance the paradox of short and long-term thinking and strategy, as companies that think further out into the future strategically perform better[14]. However, markets are significantly trailing business in their understanding of the strategic importance for companies in engaging in meaningful CSR and Sustainability practices. Therefore, it has become almost self-evident to leaders in that they need to adjust their business model and operations to remain competitive in the long run. But what has not shifted is the way that most investors evaluate companies, they are still primarily concerned with short-term performance, and are reluctant to hold stocks for extended periods of time. This creates a tremendous problem for CEOs, as they are being pulled in two different directions simultaneously. They need to ensure that they address long-term strategic concerns, whilst putting up acceptable quarterly returns for investors. One can see how this presents a problem for companies, as it is a chicken and egg problem, allocate resources for CSR and sustainability activities, or continue to focus on short-term results and continue to please investors.

The only way to solve this problem is to fundamentally change investor behavior, and business needs to convince investors to hold stocks for increasing periods of time, which would provide the necessary stability for companies to implement strategies that ensure their long-term competitiveness. This really underscores the importance of Larry Fink’s letter, because he is giving industry leaders the license to reexamine and readjust their business models to adapt to the coming changes.

We see this as being a pivotal moment in the acceptance of Sustainability and CSR as legitimate strategic concepts in the American business psyche. And while it represents a significant step in the right direction, the flood is coming and those who do not fundamentally rethink their businesses will be left off the ark.

About the Authors

Prof. Dr. René Schmidpeter holds the Dr. Juergen Meyer Endowed Chair of International Business Ethics and Corporate Social Responsibility at CBS International Business School (CBS), Germany. He is also a professor at the Nanjing University of Finance and Economics and an Adjunct Professor at Murdoch University in Perth, Australia. He is a series editor for Springer’s CSR, Sustainability, Ethics and Governance books, a section editor of the Encyclopedia of Corporate Social Responsibility (ECSR) and an editor of the Dictionary of Corporate Social Responsibility (DCSR) as well as Editor-inChief of the International Journal of CSR (Springer).

Haden Garth Cosman is a master’s student in International Business – Strategic Management and Consulting at the CBS International Business School. In his current role at CASM, he is primarily responsible for the management and support of research and other assorted publications. He completed his bachelor’s in International Political Economy, with a focus on Economic Development, and German Language at Fordham University in New York, and has professional experience in the finance and consulting sectors on both sides of the Atlantic.

[1] See Definition of Strategic Drift and Katz, D., & Kahn, R. L. (1966). The social psychology of organizations. New York: Wiley.

[2] Friedman, M. (1970). “The Social Responsibility of Business is to Increase its Profits”. The New York Times.

[3] McKinsey Global Institute. (2009). Valuing Corporate Social Responsibility: McKinsey Global Survey Results; McKinsey Global Institute. (2011).The Business of Sustainability: McKinsey Global Survey Results.

[4] Heuskel, D., Lewis, T., & Reeves, M. (2010). “Social Advantage”. The Boston Consulting Group Publications.

[5] Seegull, F. (2018). “From Milton Friedman to Larry Fink—The Rise of Impact Investing”. Harvard Business School Social Enterprise Impact Insights.

[6] EY Global Private Equity Advisory (2017), “Profit and Purpose: Impact Investing Goes Mainstream”. EY Private Equity Hot Topics.

[7] Fink, L (2018). “A Sense of Purpose”. BlackRock, INC.

[8] EY Global Private Equity Advisory (2017), “Profit and Purpose: Impact Investing Goes Mainstream”. EY Private Equity Hot Topics.

[9] Bassen, A., Busch, T., & Friede, G., (2015). “ESG and financial performance: aggregated evidence from more than 2000 empirical studies”. Journal of Sustainable Finance & Investment.

[10] Barton, D. (2011). “Capitalism for the Long Term”. Harvard Business Review.

[11] Gordon, M. (2014): Ira Sohn Investment Conference Presentation.

[12] Gordon, M. (2014). Ira Sohn Investment Conference Presentation.

[13] Constable, S. (2018). “What is Hot Money”. Wall Street Journal.

[14] Barton, D., Manyika, J., & Williamson, K, S. “Finally, Evidence that Managing for Pays Off”. Harvard Business Review.