The License that Matters: Capitalism’s Evolving Contract With Society

By Russ Stoddard / Jan 23, 2018

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If you make and sell food in unsanitary conditions, the government may revoke your license. From breweries to barbers, the concept of licensure isn’t a new one for businesses small and large.

But what about the tacit social contract under which companies operate? I’m referring to an unspoken operating agreement that impacts neighbors who live near a manufacturing plant, the employees who decide where they will invest their time and talent, the cities and states that incentivize development, and even the regular folks who make daily decisions on where to spend their dollars.  

Larry Fink Blackrock

Last week, BlackRock CEO Larry Fink—whose firm has more than $6 trillion under management—dropped a big purpose bomb on the marketplace. In his annual letter to CEOs, he exhorted companies to not only deliver financially, but to operate with a social purpose. A certain passage in his letter caught my eye:

“Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders,” Fink wrote.

Amid all the reaction, praise and skepticism surrounding Fink’s new mandate, no one’s really been talking about this societal license. What will happen to those that do not begin to serve a higher social purpose and give back to stakeholders beyond shareholders?

Because without this license, a company loses its long-term viability.

And how do companies lose this license? Most likely, it’s not by governmental fiat, but by becoming irrelevant over time—cast aside by consumers, communities, concerned citizens, and other critical stakeholders.

Fink is a calculating guy whose job is to analyze risk. It’s clear from his letter that he understands social impact isn’t a “nice to have,” but a must-have that reduces corporate risk—a license, if you will.

I think Fink is doing more than reading the tea leaves. His guidance is informed by hard data and an intuitive sense for the market that’s made him one of the world’s major financial players.

He analyzes it; I live it. For the past 27 years, I’ve been helping to build the social enterprise movement and waiting for a letter like this.

Triple Bottom Line Fmt

Adhering to a “triple bottom line” where our planet, people, and profit are valued outcomes is simply the best way to ensure a business’s long-term success. My company, Oliver Russell, a public benefit corporation, is living proof of that. We’ve been contributing to our community, creating an award-winning workplace, minimizing environmental impacts, and delivering profitable financial returns since 1991.

While Fink and I operate in vastly different worlds, we understand the need for corporate social purpose, and we both believe in something that’s invisible to many—a societal license to operate as a business.

Which brings me to this: Is your company living up to the tenets of its license? Or are you just another risky business?

Thumbnails People Russ Stoddard

Russ Stoddard

Russ started Oliver Russell in 1991. He’s committed his career (nearly 30 years) to social responsibility, first inside the corporate world and then as an entrepreneur who’s started four companies and five nonprofit causes. Russ is the author of "Rise Up - How to Build a Socially Conscious Business," and his creative work has been honored with local, regional, and national creative awards. These days, Russ focuses on brand strategy for clients, spreading the Certified B Corp love, and connecting kindred spirits to multiply social impact.