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November 30, 2021

What is Stakeholder Capitalism and Why is it so Relevant Today?

Photo by Karolina Grabowska on Pexels.

The stakeholder’s capitalism trend started in the 1960s in Central Europe, when corporate leaders made efforts to ensure that business success created benefit for all its employees and the communities it affected. This was particularly effective in Germany, where there was a concerted effort to bring all stakeholders together. Through this approach, corporate leaders did not only try maximizing profit and shareholders returns but focused also on creating positive externalities for the society at large.  This model lost steam in the 80’s and 90’s but has made a progressive comeback since early 2000 pushed by more climate and youth activism.

Behind this comeback, there are several recent crises and shocks, including the 2007 financial meltdown, the progressive climate deterioration, and the most recent Covid 19 Pandemic. These crises accelerated, (thank you to global activism) the debate about the labor, climate and economic challenges affecting us all, providing the opportunity for government, corporation, civil society, and communities to work together towards the solutions of these challenges and towards a more equitable future.  The best outcomes of these efforts would be for all actors in society to reach an agreement that bypasses the short-term self-interest approach that have led us into these crises.

The most important characteristic of stakeholder capitalism is its cross-cutting nature as it touches all stakeholders of our system and has global interconnection. Corporations, societies, and the environment are more closely interlinked than ever and a climate event for instance, would compound societal risk by causing asset destruction, price raise and health deterioration. This interconnectedness also explains the recent investment growth in Environmental Social and Governance (ESG), which often becomes the entry point for corporations and capital markets to become more focused in sustainable development.

To ensure that communities, and the planet are protected and prosper, governments, civil society, businesses, and international organizations (particularly International Financial Institutions), must find effective ways to work together and bring their comparative advantage to fruition. While this is easier said than done, it is the only way society can promote shared prosperity, while reducing climate risk, and economic and societal shocks.

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Andrea Zanon  |  Contribution: 13,170