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Sorting the Pressures: Stakeholder vs. Shareholder Interests

When it comes to company “sustainability”, there’s a lot to consider! Mostly commonly, people are talking about one, two, or three parts of the sustainability triangle – “people, planet, prosperity” – or “social, environmental, economic.” One of the ever-so-important social sustainability components is the concept of stakeholder versus shareholder interests. Do you know the difference?

The term “shareholder” is generally used to refer to the owners of the business. Their primary interest in the business is financial; they expect a return on their investment. A public company must report to its shareholders. Private companies may or may not have to do so, depending on their organizational documents.

A “stakeholder” is anyone who can influence the decisions of a company or be affected in various ways by the actions of the business. Stakeholders include shareholders, as well as employees, customers, suppliers, creditors, trade unions, investors, the government, and the communities in which a business operates. Stakeholder interests include more than just financial returns.  For instance, customer care, ethical sourcing, equitable opportunities, legalities, diversity, and honesty are all stakeholder issues.

The debate about shareholder vs. stakeholder theory is not new, but as corporate social responsibility (CSR) becomes increasingly about how companies are viewed and valued, some argue that sustainability should be the framework for decisions, even those affecting shareholder value. In other words, shareholder value must be repositioned as a goal that is managed in symbiotic relationship with social and environmental goals. The focus on financial gains is no longer sufficient or, for some, prudent, on its own.

A balanced, holistic type of business can and does exist – not just theoretically! In 2007, a new type of company – the benefit corporation – emerged. A benefit corporation is a new corporate form (like an S corporation, or a limited liability company) that is approved legislatively on a state-by-state basis. It uses the power of business to solve social and environmental problems, addressing the full scope of the triple bottom line – “people, planet, and prosperity.” This approach to decision-making is embedded in the organizational framework of the company when it is formed.

Alongside this state-by-state legislative framework, the “Certified BCorp” is a non-governmental certification that has been achieved by over 1,200 businesses across 38 countries! The non-profit B Lab, based nearby in Wayne, PA, is the certifying body that examines a wide array of financial, social, and environmental practices of applicant companies, large and small, to determine if they meet rigorous standards. Sustrana is a proud Certified B Corp. The B Corp Declaration of Interdependence states that the B Corporation is “purpose-driven and creates benefit for all stakeholders, not just shareholders.” ledge that individuals and companies are inter-dependent and depends on what we do now.

It is an honor to demonstrate our dedication to the three prongs of sustainable business through Sustrana’s Certified B Corp status. How is your business balancing its shareholder and stakeholder interests? Need more information about B corporations? Please tell us in the comments below!

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