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Reconsidering the Purpose of Business

From Our CEO

Pioneering Supply Chain Integrity

Reconsidering the Purpose of Business

By ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE

In 1776, Scottish economist Adam Smith asserted that the essential function of a business was to generate profit and increase shareholder wealth. Also known as the Father of Capitalism, Smith identified profitability as a corporation’s defining quality.

Two centuries later, Father of Modern Management Peter Drucker contended, “There is only one valid definition of business purpose: to create a customer.”

These two fathers might be surprised to see what their successors have to say on the issue today. Nearly 200 CEOs, representing every sector of the economy, recently conceived a significant philosophical shift in a corporation’s purpose. These members of the Business Roundtable (BRT) believe companies should uphold a fundamental commitment to all stakeholders by

  • delivering value to customers and meeting or exceeding their expectations
  • giving employees fair compensation, benefits, training and education, as well as fostering diversity and inclusion
  • dealing ethically with suppliers and working only with businesses that align with the company mission
  • supporting local communities and protecting the environment through sustainable practices
  • generating long-term value for shareholders, continuing to innovate and maintaining transparency.

David Gelles and David Yaffe-Bellany write in The New York Times that reconsidering the role of business in society has a lot do to with an “increasingly skeptical public.” Corporations today face rising dissatisfaction over the minimum wage and income inequality in general, climate change, harmful and life-threatening side effects of dangerous products, and poor working conditions. Also, in this incredibly tight labor market, more and more young professionals are insisting that employers do more than provide a decent salary.

“As consumers and employees hold companies to higher ethical standards, big brands increasingly have to defend their positions on worker pay, guns, immigration, President Trump and more,” the authors note, adding that Wall Street will need to embrace the BRT’s idealism for these leaders to keep their promises: “Until investors start measuring companies by their social impact instead of their quarterly returns, systemic change may prove elusive.”

The BRT includes CEOs from Amazon, Apple, General Motors, Pepsi, Target, UPS and Walmart. These leaders did not provide specifics on how they will reach the new ideals they presented — and some news outlets are calling them out for the omission — but several BRT members did say the group will soon explain how they plan to realize these goals.

Just five minutes

Here at ASCM, we are also raising the bar in order to help supply chains across the globe support ethical standards, ensure suppliers align with company values, demonstrate transparency and achieve competitive success. With the ASCM Enterprise Certification, we offer supply chain organizations a concrete, demonstrated way to blaze a trail through the new world of responsible business.

Get started today with the Enterprise Certification Self-Assessment, a simple five-minute questionnaire that enables you to evaluate your supply chain maturity in comparison with the three program pillars of economic, ecological, and ethical supply chain. It is possible to achieve the BRT’s worthy aims. The first step is supply chain excellence.

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