Nicole Notat is the president of Vigeo-Eiris, a multinational consultancy specializing in sustainable development, and the co-author of a report on the social purpose of companies, whose fourteen findings the French government have used as the basis of its Pacte law, designed to stimulate growth and transformation in companies. Here she examines the overarching ambition of her report – to rethink the place and the role of companies within society.
Leaders League. What was the main aim of your report?
Nicole Notat. To begin, I have to stress that it doesn’t call into question the fact that a company makes profits. This is obviously necessary to make payouts to shareholders, to invest in R&D, create value and, in the end, redistribute this value. What the report does do, however, is to insist on the need for a company to make this profit in a way that does not focus exclusively on providing returns to shareholders but also takes into account the interests of its entire ecosystem. Our report clearly argues for companies to study the impact of their actions on the different stakeholders. Without doing so, they put themselves in danger by tarnishing their image, thus becoming less attractive to talent, clients and investors etc. On the other hand, by taking into account the interests of people other than shareholders, a firm opens up new opportunities.
How to facilitate the emergence of long-termism in capitalism?
Article 173 of the Pacte law deals with ecological and energy transition, and what it means is that, for the first time, investors will be obliged to reveal whether or not they have extra financial motivations for making an investment. The simple act of pushing investors to reveal the criteria for their investments will have a leverage effect on their conscience and practices. Concerning the companies themselves, for us it’s not about telling them how to behave – that would be interference – we simply want them to consider social and environmental issues when formulating their strategy and to take practical measure to mitigate risk and create opportunities. For their part investors have a legitimate right to seek returns and liquidity. It’s for this reason that we need to be wary of any binary approach that systematically pits the long term and the short term, but rather create the impetus for the more sustainable vision to hold sway.
As to non-financial performance indicators, do they have a part to play in the transformation of companies?
For at least a dozen years now, and some say much longer than that, extra-financial analysis has seen massive growth. This shows the use in having organizations capable of supplying information relating to sustainable development. For their, issuers are very sensitive about their extra-financial grade. And more and more, we are seeing investors making these indicators a focal point, which is proof of their financial importance. If the ESG (environmental, social and governance) lever is backed political and international institutions, it will naturally change the relationship between companies and investors.
To finish on a philosophical note: What is capitalism’s raison d’être?
There are certain of capitalism’s practices that have been deviant, when the financialisation of the economy has known troubling spikes. But to speak of single form of capitalism would not do justice to its diverse reality. Responding to this question would involve pointing out the heterogeneity of capitalism practices, some of them abusive. That would require some serious thought.
Interview by Pierre-Etienne Lorenceau and Caroline Castets
(Translation: Simon McGeady)