Jag Sheth, in his conversation with London Business School’s Rajesh Chandy, recently and in his article, ‘What Can Business Do To Combat Coronavirus’, said “the purpose of business is more than business.”
Companies need to focus on making money by serving the society they exist in. Sheth foresees a world where capital is more benevolent and enlightened. This will lead to more companies being privately owned and looking after their stakeholders to a greater extent, in a move against their recent obsession with shareholder value creation. Otherwise, the wave of populism which swept the political landscape across the globe will also attack the business community.
Sheth believes the crisis caused by COVID-19 “will be a reckoning” for companies that do not prioritise society, and they will have to change in line with the approach he outlined in his 2007 book ‘Firms of Endearment’. In this, he cites proof that companies that are stakeholder-oriented, employee orientation, supplier orientation, community orientation and customer orientation outperformed in the market over a 15-year period.
Instead of prioritising investors, companies need to reverse this shift and think about how they interact with the community they are based in, become more human rather than commercial, and consider how they can make the situation a win-win for all stakeholders.
Companies have Better Reach to Poor than Governments
The shape of the global marketplace will change as a direct consequence of COVID-19 and Sheth thinks firms in emerging markets can play an outsized role. He cites examples of multinational organizations that conduct business in emerging markets having extraordinary reach through their networks of agents who keep them in close contact with local communities and overcome infrastructure challenges.
Since businesses in emerging markets are better equipped to reach and market to hard-to-serve places than Governments, they have a critical responsibility when it comes to confronting the challenges of COVID-19 through accessing customers in rural areas. Businesses should allocate resources to doing this, as accessing the informal economies of people below the UN or IMF’s definition of poverty, there is a $5 trillion opportunity for companies that can reach low income consumers across the globe.