News and Views

The year ahead in sustainable business: Dissecting Larry Fink’s 2022 letter to CEOs

Janna Irons
February 2, 2022
News and Views

The year ahead in sustainable business: Dissecting Larry Fink’s 2022 letter to CEOs

At the beginning of each year, Larry Fink’s annual letter to CEOs grabs the attention of heads of businesses across America. Fink commands the helm of BlackRock, the largest asset management firm in the word — and as such, his words carry enough weight to set the tone for business in the year to come. From his most recent letter, we distilled five key themes that will be critical for business success in 2022.

1. Stakeholder capitalism: Defined as “the idea that a company should create value for all its stakeholders in order to deliver long-term value for its shareholders,” stakeholder capitalism will continue to drive business in 2022. In a pandemic-changed world, Fink emphasizes that what investors, employees, and consumers want — and expect — is evolving rapidly. To remain competitive, companies must tune into those evolving needs, innovate accordingly, and expand decision-making processes to consider value creation for all stakeholders.

Takeaway: Leading companies should weave themes of innovation, adaptation, and shared value creation into their narratives in order to meet the shifting needs of their stakeholders.

2. Taking a stand: At a time when COVID-19 has weakened public trust in traditional institutions and worsened polarization in the U.S., businesses have a renewed opportunity — and obligation — to lead. Today, “employees are increasingly looking to their employer as the most trusted, competent, and ethical source of information — more so than government, the media, and NGOs.” As companies find themselves trusted as arbiters of truth, it’s essential that stakeholders know where they stand on “societal issues intrinsic to [their] long-term success.” When a company dares to take a stand on material issues, it amplifies impact by raising awareness, sparking conversation, and inspiring action. 

Takeaway: Meeting the moment demands courage. Companies that take a stand on key issues that are material to their business will be best positioned to lead, grow, and thrive. 

3. Employee engagement: The past few years have fundamentally changed how many of us relate to work. As Fink writes, “no relationship has been changed more by the pandemic than the one between employers and employees.” In what’s been dubbed the Great Resignation, millions of Americans are quitting their jobs, often in search of better work environments. Fortunately, when workers demand more from their employers — more flexibility, more autonomy, more time — they “[drive] prosperity, [create] a more competitive landscape for talent, [and push] companies to create better and more innovative environments for their employees — actions that will help them achieve greater profits for their shareholders.” And research shows that companies who nurture their employees are rewarded with less turnover and higher returns, even through the pandemic.

Takeaway: Building an engaged work culture will be paramount as we reimagine the role of work in our lives, and the role of companies in solving global problems. 

4. Purpose: The key to achieving long-term business success lies in centering purpose at the foundation of a company’s relationships with all its stakeholders. When employees understand and connect with a company’s purpose, “they can be [its] staunchest advocates.” When shareholders engage with a company’s purpose, they are more likely to back the business through ups and downs. To customers, purpose signals value — and an increasing share of consumers are seeking out businesses whose values they share. In short, “it’s never been more essential for CEOs to have a consistent voice, a clear purpose, a coherent strategy, and a long-term view. Your company’s purpose is its north star in this tumultuous environment.” 

Takeaway: Connecting your business to your purpose and engaging stakeholders around purpose will be essential for business health in 2022. 

5. Climate: As we move into 2022, momentum towards a net-zero world shows no signs of slowing down. Inevitably, “every company and every industry” will be affected by this transition; the key question is “will you lead, or will you be led?” Companies that act on climate will be rewarded by getting ahead of oncoming regulations; winning the favor of investors, consumers, and employees; and positioning themselves as a climate leader. To this end, Fink asks that companies set specific targets and strategic plans to reduce emissions, which will be critical both to the survival of the planet and to the “long-term economic interests of [their] shareholders.” He also encourages companies to report to the Task Force on Climate-related Financial Disclosures (TCFD)

Takeaway: Climate action has always been important, but this year, it’s essential. With regulations from the SEC on the horizon, we expect a new level of rigor from the reporting landscape — with TCFD at its forefront — in 2022.

We know — it’s a lot. It’s possible that the demands on business have never been higher; at the same time, however, the opportunities for businesses to lead have never been greater. Whether you’re here to begin your company’s ESG journey, up-level its sustainability strategy, engage audiences with compelling and authentic communication, or any mix of the above, we’re here to help

The year ahead in sustainable business: Dissecting Larry Fink’s 2022 letter to CEOs
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