2023 Stakeholder Capitalism Forecast: The Controversy Will Grow Faster Than Actual Change

Here’s our call for trends for 2023 in the Stakeholder Capitalism movement and the nascent stakeholder management business to support it based on ESM’s 26 years of reporting on a stakeholder approach to engagement across the enterprise through its multiple media over that time.

Stakeholder Capitalism and the industry of experts to help organizations make the shift appears to be at the same stage as the total quality management movement in 1990—just beginning to take shape. By that time, there were only a handful of companies with ISO 9000 quality management certifications; today there are over 1 million worldwide, but it took years.

With Republicans taking over the US House of Representatives, and many committed to battling the Environmental, Social, Governance (ESG) movement, and with House hearings expected, attention will continue to grow on Stakeholder Capitalism, a term used increasingly interchangeably with ESG. The debate is hampered because there is no dictionary definition and because there is a significant difference between the definition developed in recent years by its opponents to the general usage among the field’s many business and academic proponents and practitioners going back nearly 50 years or more. These include the Davos Manifesto in 1973; R. Edward Freeman’s 1984 book: Strategic Management—A Stakeholder Approach, the management practices of total quality management (TQM) developed in the 1970s and 1980s that bake employee voice and gainsharing into a continuous improvement process widely used in factories around the world, and the academic community spanning decades. Click here for a primer on Stakeholder Capitalism created by the Enterprise Engagement Alliance.

The progress of the Stakeholder Capitalism movement in part will be dictated by the outcome of the definition debate. Is the movement a nefarious way for corporations to take over the world in a way that hurts stakeholders as well as shareholders, as its opponents insist, or is it simply better business to enhance returns for investors by creating value for the stakeholders upon whom organizations depend to succeed?

This leads to the question: if when will the concept of Stakeholder Capitalism break through from talk to action? Will 2023 be the year of the of the “S” in ESG, meaning employees, customers, and communities? That I will not predict, as I lived through what was a similar transformation in manufacturing during the 1980s and 1990s with the rise of total quality management (TQM): it was like watching children, nieces, or nephews grow up; at first TQM was just a lot of talk and buzzwords (quality circles, gainsharing, statistical process controls, etc.) and suddenly, after what was really many years, over 1 million companies had ISO 9000 certifications and an enormous field had emerged.

Here’s a quick overview of anticipated trends based on current areas of need or opportunities for value creation in Stakeholder Management and enterprise engagement, the implementation processes for Stakeholder Capitalism.

(For 2022 projections on the field last year, click here. For 2023 projections in the field of Incentives, Rewards, and Recognition, click here.)

The Look Ahead

1. Increased media coverage of ESG and Stakeholder Capitalism will come with more confusion. With public House hearings anticipated on efforts to curtail use of ESG standards in the investment community, there will be an increased debate about a little known field that in fact dates back to the early 1970s with a vibrant academic and business community interested in Stakeholder Management. Given the definition challenge and the perceived stakes, this promises to be a bloody debate.

2. Increased investor, customer, employee, and community pressures in the will advance ESG practices, not just outreach groups, media, or pundits. Despite fierce opposition from the right and left, investors and people of all walks of life are demonstrating an increased interest in organizations considered friendly to people and the environment.

3. The marketplace for stakeholder management services will take time to develop because of a lack of awareness and expertise. Because the practical application of a stakeholder approach to management is taught at best at only a high level in but a few business schools, and is largely not practiced, most CEOs not only lack an understanding of the concept but have almost no idea of how to implement it at the practical level. Almost all the leading consulting firms to various degrees silo their services rather than offer a stakeholder approach, nor have practices that help aligned multiple engagement tactices, and there are very slim pickings for experts in the implementation of a stakeholder approach.

4. The brand of Shareholder Capitalism will take continued hits symbolized by the eventual failure of Elon Musk’s reign of terror at Twitter. Yes, I’ll go out on a limb and predict that Musk abandons Twitter sooner rather than later. Loans will get called, Musk will walk away with enormous write-offs, battle-scathed but still wealthy, and someone else will take over the company for pennies on the dollar. The Tesla brand will be hurt because of growing competition and because its customer demographics do not favor long-term support for a CEO with Musk’s personality but isn’t likely to go away, or any time soon at least. SpaceX likely will thrive because it leads in a literally booming business that mostly doesn’t do business with consumers.

5. The European Union Corporate Sustainability Reporting Directive will have a growing impact in the US. While the business media has largely overlooked this news so far, the new rules have significant potential impact, based on the attention being paid to the news by the US legal community. The new stakeholder disclosure requirements could have even more impact on US companies than the GDPR (General Data Protection Regulation), which affects any US company with 250 or more employees that holds data of citizens or companies in European Union countries. This is because the new EU stakeholder disclosure directive will require most US companies that do business with EU member companies to disclose details on how they and their supply chain and distribution partners manage their workforces, and on how they manage their customers, distribution partners and communities. Disclosure requirements include employee turnover and demographics.

6. Continued transformation in human resources toward value creation. While the process will have required almost an entire generation to unfold, the growing focus on the value of human capital and analytics will create new opportunities for business-minded human resources executives with a stakeholder management approach, such as the Organizational Guidance System developed by HR innovator Dave Ulrich and his colleague Norm Smallwood, or other business operating systems. This gradually will lead to a more strategic and systematic approach to engaging employees aligned with the needs of customers and other stakeholders that will favor interventions that produce results, rather than bright shiny objectives utilized with little analysis.

7. The marketing world appears mostly unaware of its inevitable future role in stakeholder management and brand engagement, but that will begin to change. For the most part, the marketing world appears to view its role in ESG limited to how to incorporate “green” or corporate social responsibility into marketing messages. This inevitably will change because of the important role played by branding and communications in any form of people management, but it will take years because it’s not in the training or DNA of most people in marketing to look internally and focus on a 360-degree view of brands as outlined in the EEA’s Brand Engagement 360 report.

8. The march to Enterprise Engagement technology. Forget “tech stacks.” With the growing availability of simple, low-cost enterprise engagement technologies that seamlessly connect communications; referrals; surveys, feedback, and suggestions; learning and professional development; peer-to-peer and manager-to-peer recognition; DEI enhancement efforts, safety, and wellness, there is no reason for most organizations to deal with “tech stacks.” The technology exists today to align all the levers of employee engagement on a single platform for a fraction of the cost of customer relationship management and a clear ROI in terms of enhanced retention, referrals, productivity, quality, employee experiences, and more, not to mention more objective performance review tools.

9. Experiences count more than ever. The pandemic proved the enduring allure of shopping, with all signals pointing to a peak in the rapid shift to online shopping. Many of the outdoor activities, such as hiking, cycling, golf and driving ranges have backed off their peaks during the shutdowns but have remained more popular than before the pandemic. That said, there are fewer pile-ups at the driving ranges and parks now that shopping and entertainment is back, and there is every indication that in-person shopping and entertainment will return in direct proportion to feelings of safety.

10. Work at Home is here to say. Good luck to those companies or cities who hope to bring back the command-and-control model, because in most cases the best outcome will either be quiet-quitting or the need to pay more to attract and retain talent. Generally speaking, the pandemic indeed has made people more reflective about life choices, and spending 10 hours or more commuting is not top on the list of life favorites. This will lead to more strategic use of office of time and an enormous need for changing the composition of urban downtowns to greater mixed use.

11. Humility will slowly emerge as the new CEO paradigm. The Jack Welch, Elon Musk models have taken a hit; the nation is generally ready for a kinder gentler, more humble form of management, such as leaders at companies like Coleen Wegman of Wegmans, Garry Ridge, CEO Emeritus, WD-40, Texas Roadhouse, the late Kent Taylor, Dan Schulman, Paypal CEO, who are quietly clear about their principals, goals, objectives so that both shareholders and other stakeholders can determine whether they wish to be a part of it.

12. Moving to an endemic phase. With multiple diseases flaring up, it appears we are moving to a state in which individuals will make their own decisions about vaccines, use of masks, travel, etc. It will be left to the states and localities to determine what to do in cases of hospital overload, with local mask mandates still occurring. It appears that the best stance for most businesses is to make sure their employees and other stakeholders have all the tools necessary to accommodate their personal need for safety, which could include caring for newborns or sickly loved ones, while respecting the need to respect personal choice.

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