As the commercial use of data matures, companies are finding ever more efficient ways to squeeze maximum profit from their customers. Targeted advertising is the tip of the iceberg in terms of data usage, and business intelligence is developing to the point at which companies are finding the optimum ways to meet their consumers' needs and sell their products. This doesn't automatically mean that those products are in the interest of society, though, and problematic companies have been able to succeed off the back of intelligent use of technology and an ability to catch trends at just the right moment.
At the beginning of 2018, Larry Fink, CEO of investment and financial services firm BlackRock, penned an open letter to business leaders. Fink's message, which is some 1750 words long, serves as a manifesto for what he sees as the way forward for brands and ethical business. Sent out to CEOs of the world's largest companies, it details the importance of sustainability, social impact, and diversity in business, and rejects the notion that every brand's goal should be simply to chase profit for profit's sake.
It's difficult not to read the letter as an indirect response to companies like Uber, with its arguably unsustainable growth brought about in part by contentious working practices. The Silicon Valley ride-hailing giant has become a lightning rod for criticism of the Bay Area, and the world is falling out of love with what is, by all accounts, a boys' club of a startup hub. Even if you put aside culture, the companies spawned in Silicon Valley often receive significant backing thanks to little more than hype, as opposed to sound financial projections. It's been described as a bubble, and Fink's letter addresses the need for companies to put together sustainable, properly costed plans for the future.
As the CEO of a company as influential as BlackRock, Fink's words will hold weight, particularly given that the letter explicitly states that the investment firm will view more conscious brands as more viable investments. Fink is arguably the world's single most influential investor, with $6.3 trillion under BlackRock's control - any edicts issued by him are bound to land.
The startup community, in many ways, considers itself part of the solution to society's problems. Where government often hasn't the resources or the impetus to drive technological advancement, the startup community can step in to fulfill the need, impacting everything from transportation to healthcare. And, with the pace of technological change increasing that need, business (particularly in the tech industry) have a crucial societal role to play. "We also see many governments failing to prepare for the future, on issues ranging from retirement and infrastructure to automation and worker retraining," Fink writes. "As a result, society increasingly is turning to the private sector and asking that companies respond to broader societal challenges."
What Fink touches on is more than a personal desire to see companies consider their social impact - it's also sound business advice. Never has the consumer base voted with its wallet quite so much as today. In fact, as many as 60% of consumers say that they would stop buying from a brand if it was found to have 'unethical practices.' Supply chains have been scrutinized, workers' rights are under the microscope, and never has information about a brand's working practices been so readily available. Despite three-quarters of those questioned finding it difficult to determine how ethical a brand actually is, it makes business sense to cater for an aware generation, on top of personal and corporate morality. "Society is demanding that companies, both public and private, serve a social purpose," Fink writes. "To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate."
And, finally, Fink addressed the dire need for greater representation on the boards of the world's biggest companies. "We also will continue to emphasize the importance of a diverse board," he writes. "Boards with a diverse mix of genders, ethnicities, career experiences, and ways of thinking have, as a result, a more diverse and aware mindset. They are less likely to succumb to groupthink or miss new threats to a company’s business model. And they are better able to identify opportunities that promote long-term growth." Fink's point is positive in terms of inclusion and diversity of thought, but it also affects financial performance. According to McKinsey&Company, companies in the top quartile for racial and ethnic diversity are 35% more likely to have financial returns above their respective national industry medians, and those in the top quartile for gender diversity are 15% more likely to have that accolade.
In a sense, Fink's letter is as much about social responsibility as it is about, ultimately, better return on his company's investments. Organizations with sound business models, sustainable practices, and a thought-out strategy are bound to yield better long-term results than those without, and higher levels of diversity have been proven to have a positive financial impact. The startup economy is problematic for a number of reasons, and it is up to business to make significant enough change to bring about the benefits of increased diversity and sustainability. There is growing pressure for business to become more socially responsible, Fink's letter simply articulates from a platform prominent enough to actually see change.