Justin Anastasi, CEO at VentureMax, says ESG and stakeholder capitalism are key considerations for investors and offers advice on how businesses can embrace both.
Organisations can have a significant impact on the environment and society, which is why so many businesses have become super-focused on ESG.
Those who stayed the course with their environmental, social and governance (ESG) strategies despite the challenges faced during COVID-19 – and that many still face today – have come out the other side with their corporate reputations not only intact but improved.
The pandemic super-charged the move towards “inclusive capitalism” or “stakeholder capitalism” as it’s also known. This philosophy is closely linked to ESG and is based on the idea that companies must do more than just provide returns to investors and shareholders. They need to be mindful of and responsive to their impact on society, too.
But what does this actually mean?
It’s pretty simple, it really comes down to providing secure jobs to staff members, rolling out sustainable practices, building long-term relationships, paying fair taxes and reducing the impact they have on the environment.
ESG and stakeholder capitalism are things investors now consider when assessing businesses and opportunities. This is because there is a strong belief that companies which perform well when it comes to ESG are less risky than those that underperform.
Why? Because these businesses are better positioned for the long term and, as we learned with the pandemic (who saw that coming?) they are also better placed to deal with uncertainty or sudden and significant change. Stakeholder capitalism can be a competitive edge – an edge that investors like to see.
So how can a company embrace stakeholder capitalism to make it a more attractive opportunity for investors?
First of all, identify who your stakeholders are and understand what each expects from your company. Stakeholders can be anyone connected to the business, from employees to customers, service providers, board members and shareholders.
Next up, prioritise shareholders in order of impact on the company and make sure their priorities align with those of the organisation. In most cases, employees will be the top priority as without them, the business would grind to a halt. Of course, priorities must still allow the business to perform.
It’s important to reassess regularly. This is not a one-time assessment as the business and the landscape it is operating against are constantly changing, and sometimes in a transformational way – regulatory changes, geopolitical factors, etc.
Stakeholder capitalism works best when it’s embraced at the highest levels of the organisation – so the board and the c-suite – and spread with enthusiasm throughout the entire business. A mission statement is also good to have, one that puts stakeholders at the heart of your values.
Tracking progress is non-negotiable. Change takes time so it’s crucial to ensure that progress is being made as planned. It also helps when it comes to quantifying improvements to things like employee satisfaction and even the impact the business is having on the environment.
Of course, to track progress you’ll need to establish metrics against which it’s possible to monitor your transition to stakeholder capitalism and the roll-out of your ESG projects.
You’ll need to communicate all of this to your stakeholders, from employees to customers, suppliers, investors and so on. It’s important they fully understand your goals, how you’re going to achieve them and, perhaps most importantly, why you are embracing stakeholder capitalism exactly.
This is more important than ever considering what happened post-pandemic with organisations around the world being forced to shut up shop for good. Now, there are always a multitude of reasons for this, and stakeholder capitalism alone would not necessarily have saved them.
But for investors, organisations that have a clear and committed ESG strategy in place and have embraced the philosophy of stakeholder capitalism are simply better placed to meet any unexpected challenges and, on the flip side, seize any opportunities.
This is important when making a long-term investment in any business. There will always be ups and downs (lots of both, usually), but with strong foundations in place, ones that include ESG, the organisation can continue to grow and succeed against even the strongest headwinds.
Sustainable success is the best type of success and that’s why ESG and stakeholder capitalism are factors that investors consider.
The global online gambling industry has always been at the cutting edge and it’s good to see businesses across the sector getting serious about ESG and stakeholder capitalism.
There are some truly great organisations in this space that care deeply about their stakeholders and the wider impact they have on the environment and society.
For VentureMax, these are the companies that we want to be investing in.
