Chief moral philosopher 2

Earlier this week I wrote that having a role like a chief moral philosopher is a good thing, but it could be costly. Delta Airlines, as an example, took a stand for the values they believed in, which cost them a tax break worth $40 million.

However, there’s some evidence to suggest that running a values-based, ethics-focused company could actually improve financial performance.

But first, as I wrote last time, it’s important to note that younger generations want companies to focus on values and purpose in their business processes. It’s critical for leaders to address this growing issue.

The 2019 Deloitte Millennials Leadership Survey showed that many young workers believe companies should, among other things, enhance the livelihoods of its people and improve society through job creation and environmental protection.

A company that has a role dedicated to these organizational goals ultimately attracts more talent and remains more competitive over time.

Of course, it’s not easy to attribute organizational performance strictly to ethics and values. There are some similar factors that show increased performance, though, that can be traced back to a culture of values-based decision making.

One starting place is ESG initiatives, which stands for environmental, social, and governance. These practices focus on creating a more sustainable business model. Whole stock indices and investment profiles have been formed to help investors put their money toward these sustainable businesses, often called value investing or impact investing. This kind of thinking has led Christians to form their own initiatives like Faith Driven Investor and the Christian Economic Forum.

But do these companies actually perform better?

MSCI, a New York–based finance firm, believes they do. In a study in The Journal of Portfolio Management, analysts argued that companies with high ESG ratings increase their value in several important ways: They are ultimately more competitive, leading to better cash flows and higher dividend payouts, and they lower their long-term risk, leading to lower loss of capital and higher valuations.

The analysts conclude, “The research suggests that changes in a company’s ESG characteristics may be a useful financial indicator. ESG ratings may also be suitable for integration into policy benchmarks and financial analyses.”

This is certainly an ongoing field of study, and it has many critics, but it’s a step in the right direction. Analyzing companies in this way provides a useful link between a company’s leadership—its purpose, values, and ethical decision making—and its long-term performance.

I’ll close with the conscious capitalist credo, a mission toward which every business should strive.

We believe that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity. Free enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived. It is one of the most compelling ideas we humans have ever had. But we can aspire to even more.

Thanks for reading.