Vestas Wind, the global market leader in manufacturing wind turbines, posted a $185m loss in its second quarter, blaming delays in clean energy projects. Investing is a tricky business under any circumstances. When your retirement plan or the companies future reserves are involved, it has an added dimension of stress because so much rides on it. But if you are an investor or a company who seeks to be responsible, there is another layer of consideration to be taken. For the most part individual investors and corporate investors have treated these a two different sides of investing, even as separate types of concerns with different audiences. But as investors become more informed and companies reposition themselves to be social responsible, there is a demand for a new way of assessing choices.
Most investors, corporate and individual, depend on third parties to certify compliance with certain responsibility criteria. There are organizations for almost every possible cause, skilled at certifying the practices of a business in regard to that cause.—from green supply chains to child labor practices. And of course, when you add them all up, it creates investing trade-off challenges. What can we live with and what is not acceptable? And can we grow our investment by our choices? It is not an easy decision which becomes obvious as companies that seemed primed to lead the new responsibility offerings falter on their returns even though true to their philosophy and mission. What guidelines and systems are there to help?
First an investor or company needs to be clear about what, as a business or investor, it is taking responsibility for. Is it climate change, preventing animal cruelty, promoting human rights or fair trade? Does the investor worry about making trade-offs? I offer here a beginning systemic set of potential responsibilities, which I believe can all be achieved, when business takes on “Responsibility” as a way of doing business rather than a program of best practices in which they select initiatives to pursue. r. Let’s focus today on the responsibility a business has to investors or when it invests coupled with the mission of responsibility.
What is Investor Responsibility: To generate systemic wealth and conscious capitalism. What that means is that wealth creation is the way living systems work. If it has real vitality, every aspect of the system gets healthier. And capitalism should be increasing ethical as well as prosperity producing.
Responsibility in these terms includes:
• The business providing durable returns through conflict free and value-adding (not value-added) offerings. Value-adding means adding meaningful value to the consumer’s life, rather than only getting a good margin on an offering;
• The business advancing the industry’s character because investors suffer when an industry suffers (e.g. all Oil Companies suffered with the BP spill. Each business affects its industry and has a responsibility to its higher order character; and finally
• The business seeking to understand the divergent forces that can affect a business (e.g. monetary policy) and leverage its resources to create the best outcomes not just for itself but for all affected parties. They all prosper in the deals.
These three endeavors have the quality of being good for the businesses long-term viability while they also nourish better social, governance and economic systems. None will work driven by greed, but all work driven by systemic health.
We need new measuring and assessing systems to instill indicators for these aims, and strategic thinking capability based in systems thinking for them to work. We will review one effort in this direction on Wednesday’s blog. R Paul Herman wrote, The HIP Investor which offers an assessing system for determining the degree to which a business is producing responsible results, beyond just its intention and statements indicating effort to do so.