Traditionally, businesses have focused on three key stakeholders: employees, customers, and shareholders.
However, as societal challenges continue to grow in complexity, it’s clear that businesses must expand their focus to include a fourth, often overlooked stakeholder: society itself.
This shift in perspective is exactly what Victor Cho, a seasoned CEO advisor and board member, advocates for in the latest episode of The Conscious Capitalists podcast. In conversation with Raj Sisodia and Timothy Henry, he delves into how businesses can operationalize societal impact as an integral part of their strategy, rather than treating it as an afterthought.
Here’s what we learned from Victor Cho on integrating society as a core stakeholder:
1. The first step is to recognize a fourth stakeholder
Victor Cho’s journey from a three-stakeholder mindset to recognizing society as a crucial fourth stakeholder didn’t happen overnight. It was a gradual realization that came as he experienced firsthand the external pressures on businesses that go beyond the immediate needs of employees, customers, and shareholders.
The shift begins with understanding that businesses operate within a broader ecosystem that includes the communities and environments they impact. Recognizing society as a stakeholder means acknowledging that business decisions reverberate beyond the boardroom, affecting the wider world in profound ways.
2. Businesses need an Operational Playbook
One of the biggest challenges Victor identified is the lack of a clear operational framework for addressing societal impact. Unlike traditional stakeholders, where metrics and processes are well-defined, society as a stakeholder requires new ways of thinking and measuring success.
Conscious businesses should think about developing new playbooks and metrics similar to the Net Promoter Score (NPS) to allow companies to not only do more good but also systematically reduce their negative impacts on society.
3. Move beyond Corporate Social Responsibility
Recognizing society as a stakeholder is not just about philanthropy or corporate social responsibility—it’s about rethinking the fundamental purpose of business. Companies should aim to maximize the positive impact they can have through their core operations, not just through peripheral initiatives.
4. Treading carefully with AI
As AI becomes increasingly integrated into business operations, it offers both opportunities and challenges in terms of societal impact. While AI can drive efficiency and innovation, it also poses risks, particularly if businesses fail to consider the second-order effects of their AI implementations.
For instance, while AI can optimize customer service and reduce costs, it might also displace a significant portion of the workforce. Victor encourages leaders to think critically about these trade-offs and prioritize actions that amplify positive societal outcomes while minimizing harm.
If you’re a business leader committed to conscious capitalism, integrating society as a stakeholder is not just an option—it’s a necessity. By expanding your focus and adopting a framework that balances profit with purpose, you can ensure your business thrives while contributing to a better world.
In the episode, Victor provides more actionable insights and real-world examples that can help leaders take the first steps toward integrating societal impact.