Jan Peter Balkenende, Professor Emeritus at Erasmus School of Law/Erasmus School of Economics and Professor Karen Maas, academic director of Impact Centre Erasmus, were invited by Economische Statistische Berichten (ESB) to discuss whether companies contribute enough to broad welfare (5 January, 2024).
Long term value creation
Professor Maas stresses that long-term value creation looks beyond making profit. Yet, she also acknowledges the importance of business profitability in achieving broad welfare goals. The crux is, according to Maas, that businesses tend to do too much without taking a step back to think about what they do and do not want to do. Balkenende underlines this: ‘There is a difference between doing things right and doing the right things’.
How then to translate a broad prosperity mission statement into practice? By translating the mission statement into policy, strategy, targets and responsibilities, the academic director reacts. She notices businesses are trying to do this more and more, yet money continues to play an important role. Hence, it is important to explain funders why and how social goals contribute to the company.
Tension between long term value creation and short-term Anglo-Saxon thinking
Professor Emeritus Balkenende is foreman of the Dutch Sustainable Growth Coalition, which is a group of 8 big international companies working together for sustainable growth. According to the Professor Emeritus, the main mechanism through which this coalition aims to realise shared value and broad welfare is by trying to recalibrate business models. That is, the coalition tries to enable companies to structurally ask themselves questions like: what is necessary to create a sustainable business model? What can we do to help achieve the sustainable development goals?
For a long time, Balkenende noticed a tension between long-term goals related to broad welfare and the short-term Anglo-Saxon focus on making profits every quarter. Fortunately, he notices that more and more companies are realizing that sustainability is not just an expense, but something on which they can capitalise. He examines a case where Germany was too late with investing in electric cars, which enabled South-Korea and China to take the lead and earn significant profits.
Broad welfare by what you do, but also by how you do it
Contribution to broad welfare can be achieved by what a company does and/or how a company does it, Maas stresses. The former relates to the goods or services a company provides, the latter to the processes by which a company produces its goods or services. For example, a gas supplier will face difficulties in changing what it does to achieve broad welfare. Yet it can adapt its processes in such a way to contribute to broad welfare.
- Professor
- Professor
- More information
For more on the interview, listen to the item by Economische Statistische Berichten (5 January, 2024) here.