Business

The $28 Trillion Question: Can we deliver on more than just wealth?

Special Report: Women demand firms of the future are more socially-conscious

Women will be one of the most powerful drivers of future business behaviour over the next 25 years – but their expectations are far higher than those of men.

Female customers, clients, and investors are already showing strong signals that they want their money to work for society as well as themselves.

While male investors demonstrate less of a social conscience, 65% percent of women judge an investment’s success based on social, political, or environmental outcomes, according to a 2013 report from the US Trust.

Just two-thirds of the number – 42% of men – place the same emphasis on social outcomes.

This economic power is growing and firms can’t afford to miss out on their custom. The result will mean firms of the future will have to change their business models to make money and do well for society if they want a slice of the estimated $28trn that US women will inherit by 2043[1].

Meanwhile, similar attitudes are already being displayed by the millennial generation, who are also asking businesses to do more than just maximise profits. They have made it clear – if firms don’t behave in sustainable ways that benefit society – millennials will take their business elsewhere.

Recent figures show under-35’s are twice as likely as other ages groups to sell an investment in a company they perceive to be unsustainable[2]. Furthermore, the influence of the millennials also looks set to grow, as this generation could command as much as $24trn of private wealth by 2020[3] and $32trn of gross income by 2030[4].

Businesses already give considerable thought to how they can work in ways that don’t just make money, but also generate positive outcomes for society and the environment. However, these changes reveal the importance of firms of stepping back from executive “strategising” to put time into listening to customers. Those who adopt this practice will hear more about the need for firms to generate monetary profits and produce positive outcomes for society – and if businesses keep listening to these same customers, they can also learn key lessons on how to become more impactful businesses.

Millennial entrepreneurs are already using fresh types of operating models so their businesses can generate both profits and positive social returns. For example, they’re abandoning foundation structures for their charitable works and embracing limited liability partnerships. In a partnership, you have the flexibility to make profit-generating investments and do good things for society and the environment.

If a firm uses this more flexible way of benefiting wider society, it’s easier for businesses to integrate successful sustainability projects into day-to-day operations. With a charitable foundation, good works and a firm’s “bread and butter”, the business can often be at arm’s length…or even working against one another.

A final area where firms should be focusing on is when they engage with their shareholders. Growing numbers of investors don’t just want businesses to become more sustainable – they’re using their voting power to push firms to adopt sustainability goals. Investors are particularly keen for firms to follow the world’s most ambitious objectives, the UN Sustainable Development Goals.

Businesses will prove to be listening to their customers as they demand both financial profits and positive outcomes for society. Firms are learning from those same customers about how to embed profit and social purpose in everything they do, while corporations of all sizes are making changes that benefit customers, shareholders, and society at large.

The $28 trillion question is whether they can do enough to satisfy this new, more discerning, society.

This is the first of three articles exploring how corporations could boost profits and social purpose by the WM Chief Investment Office. This new “business with impact” approach, is addressed in a recent white paper.

 

[1] Center on Wealth and Philanthropy, Boston College; May 28, 2014 “A Golden Age of Philanthropy Still Beckons: National Wealth Transfer and Potential for Philanthropy Technical Report” [reference link]

[2] Morgan Stanley Institute for Sustainable Investing (2015) Sustainable Signals: The Individual Investor Perspective

[3] Deloitte (2015) Insights Magazine.

[4] Bank of America Merrill Lynch (2016) New Kids on the Block – Millennials and Centennials Primer