“It’s impossible to be profitable in the long-term while ‘massacring’ stakeholders”

Leaders League. For CEOs, does conscious capitalism mean having a long-term vision?

Martin Richer. It’s easy to cut some spending in the short term, especially as far as CSR or research and development are concerned, as a way to increase profit margins. But I also believe that there is no business which wins in a world which is losing. That’s where this idea of the ‘ecosystem’ comes from. It’s impossible to be profitable in the long-term while ‘massacring’ stakeholders. I think that capitalism is intelligent enough to constantly regenerate and adapt to societal challenges. Indeed, the recent rise of CSR shows that the market economy knows how to adapt itself.

Should the state force businesses to adopt more ethical practices?

I think that evolution requires persuasion. A new law does not automatically change behaviour. For example, in 2003 legislation made it necessary for all French businesses to have a risk document. This document has to be updated each year. However, only half of businesses are currently equipped with one. Paradoxically, we are aware that a law can change mentalities on a number of ethical questions. As far as equality is concerned, the Copé-Zimmermann law has shaken things up within boards of directors, which are now made up of 39% women. Executive and management committees, which are not affected by the law, remain largely composed of men only.

Would you say soft law facilitates long term changes in behavior?

Absolutely. With Terra Nova, we recommend a clever combination of regulation and incentive. Somewhere between reputational risk – naming and shaming – and change-management, knowing that this tends to evolve with the law.

The Pacte Law project has recently been taking shape, is it going in this direction?

Yes, I believe so. Changing the French civil code is a positive thing. It is certainly a symbolic measure, but a very important one. At the same time, the idea of a ‘raison d'être,’ which is enshrined in the report driven by Nicole Notat and Jean-Dominique Senard, and which will be reused a priori in the Pacte Law, allows the manager to act in a gentle manner. It will be a valuable tool at a company’s disposal.

Meaning?

With the raison d'être, the board of directors should think about the way in which the company contributes to finding solutions to social and environmental problems. This way of thinking will now be part of the daily life of the business. It must be allowed to flourish, it must be mastered, it must be applied throughout the managerial chain and it must be used as a tool for cohesion. The raison d'être echoes responsible management and eventually becomes a factor in innovation and, therefore, excellence.

Is there not something a little pie-in-the-sky behind the concept of conscious capitalism?

I don’t think that the aim is a capitalism that’s conscious, but one that’s responsible. Businesses should get involved and justify themselves to their stakeholders. The raison d'être will force them to ask themselves about their social value. What is their purpose? Would the world be a different place without them? Before, we only pointed out the negative impacts of businesses. From now on, we are going to be looking at their positive impact in particular. 

Interview by Capucine Coquand

(Translation: Eloise Lake)