 Capitalism and globalization made many people rich. Some of them very much indeed and brought millions of others out of poverty. But at what cost? Inequality? Environmental collapse? The climate emergency? As the leading ideology was to chase profits at all costs, what got left behind? People. Their true well-being and the planet they depend on. What if economies and companies aim for something more than just short-term profits? What if they look more deeply at their role in society and served all their stakeholders? What about stakeholder capitalism? Making a global economy that works for progress, people and planet? This is Stakeholder Capitalism. Hello and welcome to Stakeholder Capitalism, a show by the World Economic Forum exploring how economies can be made to work for progress, people and the planet. I'm Natalie Pierce. And I'm Peter van Ham. If you've been following us along, I know that in each episode, we've been looking at the current mode of capitalism and all its angles. We've been joined by experts around the world who have helped us diagnose the problems and prescribe possible solutions. But now in our final episode, we'll go beyond analysis and theories and get into the nitty gritty. We'll look at how we can implement stakeholder capitalism and what that would look like on the ground in companies. Let's get started. In today's episode off, we are joined first by Emily Bailey. Emily is the project lead of the World Economic Forum's ESG initiative. And there is no one better to talk to about stakeholder capitalism and how we measure and implement it than Emily. Thanks for being with us today, Emily. Great to be here, Natalie. Let's start with the basics. What are ESG metrics and why do they matter for stakeholder capitalism? So ESG metrics are environmental, social, and governance issues. So things like GHG emissions, pay equality, anti-corruption efforts. It's becoming increasingly important alongside the reporting they do on things like their finances and their financial accounting. And why do you think now in today's current context more important now than ever? There is no international standard right now for ESG and non-financial reporting. So this initiative came about because a group of companies said can we actually, as a group of companies across different industries, different geographies, different capabilities of ESG reporting, come together, agree on a basic set of ESG metrics and disclosures that we can all start reporting on. This initiative has been going on the form for two years now, working with over 100 companies. Over 50 who've already integrated the metrics into their reporting materials. So what the companies who are joining the stakeholder capitalism metrics initiative are committing to are including the metrics either in their annual report or their sustainability report. And they do this on a voluntary effort. One company may not take on board all the metrics because not all of those metrics are material to their business. Take, for example, a bank. A bank might not need to report on water consumption because water consumption's not material to their business. The second element is they commit to working with the forum and the coalition of companies on actually helping to push for this global alignment and global convergence. And then the third element is actually working across their networks of their peers, their competitors, companies in their supply chain to actually encourage them to take this on board and join this effort as well. People also say in management that what gets measured also gets managed. So does that play into why companies and managers, CEOs are increasingly acting on this ESG report? Absolutely. So it helps them to also bring their entire organizations on board. It's not just the sustainability team or the finance team that does the reporting. You need your human capital and kind of HR teams on board. You need your operations teams on board. You need every aspect of your business on board. So you see these ESG metrics, let's say, trickle down from the top of a company to various divisions of the company. Trickle up and trickle down because you also have employees demanding that their companies are taking on board these initiatives. They want to see that a company is ESG-friendly, is ESG-mindful, and is actually delivering on what they say they're doing. So it's coming from the bottom and it's also coming from the top. Which of the indicators are kind of significant KPIs? We did a very open consultation process to actually set on the metrics that we use now with investors, companies, academics, NGOs, data providers, stock exchanges, kind of the whole ecosystem of the producers and users of this information. It coincided with the spread of the COVID-19 across the world. At the start of the consultation, we felt a strong emphasis on the importance of the climate crisis and the climate emergency. But as we continued on in the process, the importance of the ESG metrics, so like the pay equality metrics, the workplace health and safety measures, those were becoming increasingly important because everyone wanted to know in the crisis what were companies doing to protect their workforce, what were companies doing to protect their supply chain, what were companies doing to actually make sure that they were being safe operators and safe citizens in a very complex period. All elements of ESG for us are important and urgent, but the COVID pandemic really highlighted that we need to have better reporting on the ESG metrics. Things like inequality, pay equity, these are very telling metrics that could also open a company up to some level of vulnerability when they share these. So this whole effort is voluntary. Other jurisdictions are considering what kind of mandatory reporting requirements they pursue in the near term to increase a company's obligation to report on their ESG performance. So if companies are starting now and doing it on a voluntary basis, you can start to work out the kinks in the system, but in the interim, even right now, companies are finding it helpful because they're being asked by suppliers to be compliant with our compliance process to be part of our supply chain. You have to tell us all these ESG performance metrics. Their financial institutions are saying, well, we can only give you the funding for this and the capital for this if you do ESG performance across these metrics. They need to have good ESG metrics and information at hand and have the reporting up to a certain level because otherwise they will not be able to operate in the global ecosystem. Critics of stakeholder capitalism have pointed out to the idea that this is mostly for show. The companies commit to stakeholders for show. It's not for real. To what extent is the initiative that you're leading on stakeholder capitalism metrics a response to those critics? Sure. So we started this initiative two years ago working with the big four audit and accounting firms because we wanted to have the right rigor and technical expertise to actually make sure that the outputs of our initiative were auditable. We actually wanted to leverage what currently exists in the marketplace to demonstrate that the current metrics and disclosures from institutions like GRI, SASB, and TCFD really actually can underpin what can move us towards a global solution for ESG and non-financial reporting. So this whole effort is voluntary but it's really companies saying and looking at our metrics as a toolkit to actually start to demonstrate their commitment to long-term value creation to demonstrate their commitment to stakeholder capitalism. Thank you, Emily. Our next guest is Jonas Preising. He's the CEO of Manpower Group, one of the largest workforce solutions companies in the world, also a Fortune 500 company. And he's joining us today to talk about why he joined the stakeholder capitalism metrics. Welcome, Jonas. Thank you, Peter. Delighted to be here. Jonas, you are one of the largest workforce solutions companies in the world to get a sense of just how big the company is. Could you tell us how many people you employ every day? We employ more than 500,000 people across our 75 countries where we operate globally, Peter. So we have a very large footprint and lots of people that we employ during the course of the year, approximately 2.5 million people come into contact with us and work with us on various assignments across our various brands. You are one of the companies also that signed up for the stakeholder capitalism metrics of the World Economic Forum. Why was it important for you to do so? As Manpower Group is so actively involved in these labor markets with such big volumes, we can clearly see the effect of the bifurcation of the labor markets between the haves and the have-nots and those who have skills that can participate and look ahead to a bright future and those that are clearly struggling in unskilled or lower-skilled jobs that are changing significantly due to technological evolution, globalization, changing ways of operating within organizations and also their own preferences. So we think it's very important to help bridge this gap that we see continuing after the pandemic and actually accelerating after the pandemic. Can you give us some examples of the key stakeholder capitalism metrics that you monitor and measure? So the area where we think we can have a significant impact is helping bridge the gap, essentially bringing talent pools in that are disproportionately underrepresented in the workforce, in our workforce and making sure that they have the opportunities to participate. So the metrics that we use here at Manpower Group are gender representation across the company, but in particular at leadership levels, and that includes our board of directors, making sure that we have secondary targets in different countries. So here in the US, for instance, people of color representation across the company and at leadership levels is very important. So those are some of the metrics that we use as it relates to making sure that we keep track of the targets that we have and how we can make progress under the S of ESG. What have been the moments of progress where you felt like this is really working? Have you seen improvement in these areas since you've implemented the metrics? When we started our senior leadership representation for women was 22%. And very quickly we made progress and last year we met 38% representation at the senior leadership level and I project we'll get to our target of 40% in 2022. So now we're resetting our leadership representation target to 50% so that we can continue to make progress. But I have to say setting targets is not enough. When we started our progress around gender representation at leadership levels and how important it was, we clearly had a clear idea that it's the right thing to do and yet we didn't see much traction on making progress on this objective. But when we started to tackle this as a business strategy that was being led from the top and started measuring our progress and ensuring that our people were acting in courtings with it, that's when we saw the progress. I really came to the conclusion that it has to do with the sincerity and the commitment of leadership itself and first and foremost, the CEO. Jonas, of course that also means that if you say the importance of leadership may also mean that it's important to have different skills as a leader of a company or as a management team. What are the new skills that you think need are required by leaders of companies? So the first part of course is to ensuring that everyone is aligned strategically, that we all know, understand, believe and act in in courtings with our targets and our values. Because the stakeholder view is that we are here not only to run a very successful business but also to ensure that we contribute to the well-being of the communities in which we operate. I think it's very important to think about this as a business strategy. You have to think about this as a way of enabling and accessing talent that's going to help you become much more diverse in your thinking, which is extremely useful as you're trying to navigate and rapidly changing and disrupt the world. Let's zoom out for a second. What is the ultimate goal of the stakeholder capitalism metrics and what's the kind of world that you are contributing to or that you are hoping to see will emerge from companies adopting them? I think most people, most organizations realize that what we have around climate is not sustainable and that we really need to drive towards a more environmentally sustainable planet. We feel that it is not truly the same situation yet on the S in ESG. So the social aspects are as yet underrepresented, underweighted both from an institutional perspective and from an organizational perspective. But from what we can see, the gaps in the labor markets are real. We may all have been in the same storm during the pandemic, but we clearly were not in the same boat. So different categories of workers experienced a pandemic in very different ways. And frankly, many workers had an extremely tough time and continued to have a difficult time. During the post pandemic or the latter parts of the pandemic. So making them feel that there is a future, that they have an ability to participate for the future of themselves, their children and their friends is going to be vital so that we don't create big fishers in the labor markets which ultimately become big fishers in the country and the societal fabric of each nation. We think that the defining challenge of our time is to bridge these gaps and to build meaningful and sustainable employment for all. And that is the role that we intend to play and be part of a solution to bridge those gaps which we think otherwise could become very, very difficult for many people to navigate. Fair enough. Fewer storms and better ships for all is how I would summarize that. Thank you so much, Jonas, for your time with us. Thank you so much, Pierre and Natalie. Our next guest is Geraldine Machet. She is the CFO and the co-CEO of Royal DSM, a Dutch multinational company that is a leader on stakeholder capitalism. It's a company active in many different markets including health, nutrition and bioscience and posts almost $10 billion in global sales. Welcome, Geraldine. Hello. Geraldine, I was hoping we could start our conversation really with the basics. Peter told us a little bit about Royal DSM. What do you do and particularly, what's kind of your scope and scale? As Royal DSM, we're the world leaders in what makes food actually nutritious, both for humans and for animals. It's a lot of science in not only the making, but also in understanding how bodies work. We are very much a leader in biosciences. We still have an activity in specialty materials that go into cars and mobile phones. That's only about 15% of DSM today. Geraldine, one of the things that strikes me is that DSM used to be known as the Dutch state mines. A company founded very much in the big era of coal. Today, your company is about something entirely different. Could you tell us a little bit more about that transition and how you achieved that? The company was founded in 1902 and used to stand for Dutch state mines. We used to run and own the coal of the country. Then over time, there was a clear view that this was not going to be the future. We evolved much more into chemistry, actually a little bit into petrochemical refining. Again, with a bit of foresight, really looking forward thinking, this is probably not going to be the best place. We transitioned and developed our skill sets in science much more towards the more specialty parts of chemistry. Then very importantly, we pivoted towards life sciences and biotech, which is where we are today. The main thing here really is about trying to future-proof one's activities by thinking well ahead of what are the societal trends, what are the environmental constraints, really seeing how is that going to impact your activities, but also how can you as a company have the biggest possible positive impact with the kind of skill sets and capabilities that we have in-house, not only in terms of output, but also of positive outcomes for society and the environment that we live in. Thanks, Geraldine. We talked previously to Jonas from Manpower Group, who's really an expert in the S of ESG and of course Royal DSM is really focusing on the E in ESG. Can you tell us a little bit more about that? Well, I would say we indeed have started a lot on E. So, for instance, we have the kind of innovations that can tackle challenges that maybe others would not think of doing. One of the biggest sources of methane is actually burping cows, which is a bit of an unusual topic. Now, it turns out that our sciences enabled us to over the last 10 years do a lot of research on this. And there is an ingredient that you can add to the feed of cows that can reduce the methane by at least 30%. And now this is something which is becoming extremely topical. And this is just one example of many of our innovations that have both a very logical value proposition and a very strong environmental proposition as well. But I would like to say that we are also very keen on the S part. We also are very involved in what we would term, you know, the fair transition and livelihoods. So, one of our targets is to actually reach 500,000 smallholder farmers with our activities. Geraldine, you're also one of the companies that supports the stakeholder capitalism metrics a way to measure your ESG impact, if you will, in your company. Tell us a little bit more about why this commitment is important to you and also how other companies might learn from your experience in implementing early these metrics into your company management. We have a very long tradition now of being very much an ESG anchored company. So it started in about 2002, if I'm not mistaken, we issued our first report. It was actually at the time called a 3P report, People, Planet, Profit, where we started to anchor the fact that our ambitions go beyond being profitable and financially sound, but also having very much ambitions on planet and people. Now, fast forward a few years, in 2009, we said, well, that is good, but you need to anchor it in your governance. To do that, we at the supervisory created a sustainability committee since 2010. So more than 10 years ago, we made sure that our variable remuneration systems, so both short-term and long-term, are 50-50 financial performance, non-financial. And this is important because you need to have as much credibility behind these numbers as you do behind financial numbers. And that's why we then also made sure that these numbers are audited by external auditors to the same degree than financials. Now, why is it important? Well, at the end of the day, remuneration is a big, big signal to your organization but also to your stakeholders, including your customers, your suppliers, local authorities, et cetera, as to what it is that you're striving to develop and improve over time. You've described DSM's journey on ESG as a 20-year journey. Now, of course, many companies are just catching up. What are some of the things that they can do that can rapidly start to show results if they start today? I think there's one big advantage if you're starting today and that is that they're starting to be a little bit more convergence as to what is required. So for instance, with the help of the World Economic Forum, there has been an attempt to really shorten the list of KPIs that one should be looking at. And so I would urge a company that is starting now to really look at what are these frameworks and how do you really go for something already that's a little bit better to find. So that is already a big advantage. The other one is to not hesitate to actually speak up and share openly what is your ambition, even if you're not quite there yet on the measuring. What I have found with other companies and peers is that they sometimes try to be overly sophisticated. Simplifying has a lot of advantages. It's 80-20 in terms of perfection. It is starting to walk and then it becomes embedded and it creates the right conversations within your organization. And that is what you're really trying to achieve. I think the best advice I could share in terms of embedding is truly making it tangible for the people within your organization, both visible and tangible, what it means to deliver on these triple P bottom line ambitions. I'm wondering, Geraldine, you've shared a few examples with us, but those very specific KPIs or metrics that have been so important to Royal DSM, what have they been? The way we look at our ESG journey is in three pieces. So first we look at how do you reduce, and that is your footprint. So you need to measure what is your greenhouse gas emissions, your water usage, et cetera, and you improve your footprint. The second one is what we call enable, which is enabling your customers to actually have a positive impact on the environment or socially depending on what they're trying to achieve. And that is really embedding ESG in the core of your activities. And the third pillar for us is advocating, is speaking up. Now, the one that has had the most impact for us is actually that middle category of embedding it in our value proposition for our customers. We have currently a target of 65% of our sales should be market leading in terms of either it's ecological footprint or it's social footprint. Now, when you put this in place, the big advantage is that you're actually embedded in everything that you do, which not only is leading to a good ESG outcome, but is also making you very successful as a company. But of course there's also a cultural journey isn't there. You have to make the transition with the people that work for DSM themselves. How do you make that cultural shift inside your company, both in terms of skills and in terms of mindset? Never underestimate how important it is, what comes from the top in terms of the way that we actually define success. And over the years, we went from, we want to do well and we want to do good. Then we evolved to, we must actually do both. And now we are doing good is actually the only way of doing well and thriving. So from a cultural point of view, if you just come at it completely out of the blue, it can be a challenge. If you build it over time, it's very helpful. Now, embedding it in remuneration is one of the very important things. It creates the conversation at the lower levels in the organization. What I mean by that is the one closest to the ground and closest to the customers. And not just as a corporate narrative, but as a very embedded conversation when we're trying to look at capital allocation, when we're looking at future technologies, when we're looking at, for example, the funnel of innovations. I mentioned Beauvère, which is our methane reducing ingredient for cows. Now, when you start discussing with your organization the kind of innovations that you have in-house and putting as much value on the environmental or social benefit than on the business case, financial business case, then people get extremely passionate. And I have to say that you start feeling the positive vicious circle out of this because you then start attracting talents which are passionate about this. These talents tend to be extremely good at what they do. And then it becomes a positive vicious circle of being a place which is very rewarding to work, which is nice. And then that creates the culture. Geraldine, we've talked in this episode about the importance of convergence around global standards. How important do you think this is? We really welcome the ISSB to the International Sustainable Standards Board being created so that we can move now towards something that has the same comparability as when you use IFRS for financial reporting. This is the standard for non-financial reporting. Not only is it going to enable much more efficient conversations, it's also, I have to say internally, very time-consuming and expensive to try and answer the questions of all of the different frameworks that are out there. We did a count of how many we have to handle. And currently, we're kind of hovering around 600 different kinds of frameworks and questionnaires and ways of collecting information, which often is very similar, but handled in a slightly different way. So absolutely essential. And I think we'll create a lot of efficiency across the capital markets from the corporates, to the investors, to the institutional, to actually civil society, getting much more transparent information and hopefully building trust. Our final question, do you have a call to action for our viewers about how they can follow a similar journey that Royal DSM has to? My call to action is try. Even if you're not feeling that you're going to be fully there straight away, it's really good to keep practicing and attempting. So for example, the TCFD disclosure is on climate change. You may not have the scenarios yet, but if you're able to already cover some of the governance aspects and start looking at your risk map, and then maybe you will get to scenarios. But until you start walking, you're not going to be able to run. So there's a lot of evolution around us. So one is to try. The other one that we found extremely helpful is to actually be part of networks because you can help each other. So one network which has helped us a lot is A4S, Accounting for Sustainability, where for example, CFOs and companies actually get together and share how is it going? Where are the difficulties? How can we leverage each other's expertise? So it's much easier to do it with peers and people around than it is on your own. So team up with others and give it a go. Geraldine, if we want to run, then we have to walk first. If we want to go from a vicious cycle to a virtual cycle, we have to try. Thank you so much for being with us today. This brings us to the end of today's episode and the end of the series of Stakeholder Capitalism. Peter, we've spoke to Emily Bailey, an expert at the World Economic Forum who shared with us what ESG metrics are and why they matter. And we've heard from two case studies, Jonas at Manpower Group, Geraldine at Royal DSM. What are your takeaways from today's conversation? Well, I think first of all, to wrap up this whole series, the big, big, big takeaway is that we're seeing this shift, this paradigm shift from shareholder capitalism to stakeholder capitalism. That means that we no longer see the business of business being just business. It's not just only about short-term profits. Today, companies are about more than that. They're about playing a role in society, doing good as well as doing well. I think that's the first big takeaway. And then from today's episode, it was really about what are the very first steps we can take. And we heard from Jonas and Geraldine that having the right metrics matter. I think that's right, because if you look at companies and their managers, they always say what gets measured gets managed. And of course, these ESG metrics are just about that. They're a way to measure if you're doing more than just making profits. This may be the end of our series, but this is just the beginning for stakeholder capitalism. If you'd like to weigh in on today's conversation or the series as a whole, please tag and write to us on social media and visit the World Economic Forum's website, weforum.org for more. On behalf of Peter and I, we want to thank our audience for joining us. This was Stakeholder Capitalism.