The EU could do Something Essential: Change the Business' Operating System | Katie Hill | TEDxVarese

Summary

This talk explores the urgent need to transform business from a shareholder-centric model to one that prioritizes social and environmental impact. The speaker highlights the proposed 'duty of care' by the European Union, which would require business leaders to consider the long-term effects of their decisions on all stakeholders. The talk addresses resistance to this change and calls for active participation from entrepreneurs, policymakers, academics, and individuals to shape a sustainable future. By embracing this new operating model, businesses can foster a more equitable and responsible economy for future generations.

Takeaways

• 😀 Business transformation is necessary, shifting from analog to digital and from the horse and cart to electric vehicles.
• 😀 The traditional focus on maximizing shareholder returns, as proposed by Milton Friedman, has led to significant societal and environmental issues.
• 😀 Only 100 companies are responsible for 70% of carbon emissions since 1988, highlighting the importance of business transformation.
• 😀 The European Union is proposing a 'duty of care' that would obligate business leaders to consider the long-term impacts of their decisions on society and the environment.
• 😀 This 'duty of care' would shift business focus from short-term profit to long-term societal and environmental well-being.
• 😀 The resistance to the duty of care is based on three main arguments: it should be voluntary, it will harm competitiveness, and it exceeds the EU's role in corporate law.
• 😀 Evidence from the 3 million businesses already adopting sustainability practices shows that they outperform competitors, with strong revenue and workforce growth.
• 😀 The 'duty of care' is essential because we can't wait for all businesses to adopt sustainability practices voluntarily, especially with the urgency of global issues like climate change.
• 😀 The European Union has a responsibility to establish overarching principles for a level playing field in the single market, ensuring businesses across member states adhere to similar guidelines.
• 😀 Entrepreneurs, business leaders, policymakers, researchers, and individuals all have critical roles in influencing the economy towards sustainability and impact-driven business practices.

Q & A

What is the central idea presented in the video script?

The central idea is the need for a fundamental transformation in business practices, shifting from a focus on maximizing shareholder returns to a model that prioritizes long-term societal and environmental impacts, referred to as 'impact primacy.' This transformation could be catalyzed by the European Union's proposal of a 'duty of care' for companies.

What is the concept of 'duty of care' as proposed by the European Union?

The 'duty of care' concept would require company directors and management to consider the broader, long-term effects of their business decisions on all stakeholders—beyond just immediate financial returns. This includes evaluating the impact of operations on society, the environment, and future generations.

How does the speaker view the current business model of shareholder primacy?

The speaker critiques the shareholder primacy model, introduced by Milton Friedman in 1970, arguing that it has contributed to societal and environmental problems, such as climate change. The model has led businesses to focus solely on maximizing profits for shareholders, neglecting the wider impact on society and the planet.

Why does the speaker argue against making the 'duty of care' voluntary?

The speaker argues that making the 'duty of care' voluntary would be insufficient and too slow. With urgent global challenges, such as the need to meet the Paris Agreement and address societal injustices, waiting for businesses to voluntarily adopt the duty of care would delay necessary progress. A mandatory approach is seen as essential.

What is the economic argument against the 'duty of care,' and how does the speaker address it?

The economic argument against the 'duty of care' is that it could make businesses in the European Union less competitive compared to companies in countries without such obligations. The speaker counters this by pointing out that businesses that have already adopted sustainability practices are outperforming their competitors, with higher revenue growth, better workforce retention, and lower capital costs.

How does the speaker justify the European Union's role in shaping corporate law?

The speaker justifies the EU's role by emphasizing the need for a level playing field within the single market. The EU has the responsibility to create overarching principles, such as the duty of care, that all member states should follow. This ensures that business practices align with the European Green Deal and contribute to the broader goals of sustainability.

What is the significance of the '3 million businesses' mentioned in the script?

The '3 million businesses' refer to the companies in Europe that are already voluntarily operating with a 'duty of care' approach to sustainability and social responsibility. The speaker highlights their success as evidence that adopting such practices can lead to positive business outcomes, like growth and competitive advantage, and urges other businesses to follow their example.

What role do policymakers play in this process, according to the speaker?

Policymakers are crucial in influencing legislative outcomes and shaping the regulatory environment. The speaker encourages them to use the evidence from businesses already adopting the duty of care to support and advocate for its broader implementation across the EU, particularly in the negotiations in Brussels.

How can academics and researchers contribute to this movement?

Academics and researchers can contribute by providing evidence and data that demonstrate the benefits of sustainable business practices, both for the environment and the economy. Their insights can help inform policy decisions and encourage businesses to adopt responsible practices.

What does the speaker mean by 'business is not predetermined'?

The speaker is emphasizing that business practices are not fixed or unchangeable. Rather, they are a societal creation that can be reshaped to better align with the values of sustainability, social responsibility, and long-term well-being. This highlights the importance of collective action in shaping the future of business.