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The Invisible Economy: Family Capitalism

Family businesses take the long view.

Submitted by: John Elkington

Posted: Jul 17, 2011 – 03:00 PM EST

Tags: sustainability, business, family, stewardship

 
Elkington

For me, three things distinguish the sustainability agenda from corporate citizenship, corporate social responsibility or the ‘creating shared value’ approach promoted by companies like Nestlé.

First, there is the focus on intergenerational equity, born of a sense that today’s wealth is often bought at the expense of future generations.  Second, while others are happy with “win-win” solutions, in the sustainability movement we have long pursued “win-win-win” outcomes, across the triple bottom line of economic, social and environmental value added, or destroyed.  Third, sustainability is less about business “doing good” than about deep, disruptive system change.

So how can we help business think longer term?  This question is currently in my mind because we are working on a project spotlighting the intergenerational core of the sustainability agenda.

Several sectors spring to mind as potential models.  They include higher education, pharmaceutical research and development, pension funds, family wealth management, forestry, and the provision of urban infrastructures.  And then there is another sector that tends to think both longer-term than publicly listed companies and intergenerationally: family business.

Too often, we have overlooked family-owned companies just as we have ignored state-owned industries and sovereign wealth funds.  But over the past year I have become increasingly exposed to the family business sector, particularly through events organized by the Institute of Family Business (IFB) in the UK and by the international Family Business Network (FBN) in Singapore.

In the process, I have discovered two things: first, the next generation of family business leaders, at least in the UK, are adopting different styles of leadership, focusing in particular on a better work-life balance than their predecessors and sustainability; and, second, the triple bottom line approach is alive and well in the sector.  It puts in an appearance — framed as the ‘Triple Context’— in a very useful new report by Tomorrow’s Company, a London-based think-tank, called Family Business Stewardship.

This spotlights the fact that over 60 percent of all European companies are family-owned businesses, with an even greater percentage in the USA, Middle East and Asia.  In the UK alone, the family business sector now has a £1 trillion annual turnover.

Successful family businesses can leverage their strong balance sheets and the associated financial muscle to invest in line with the family values “over unconventionally long time horizons.”

Of course there are many problems that go along with family ownership, not least the “family knows best” attitude that can slow or stall innovation, alongside the often deeply damaging politics that can erupt around succession processes — sometimes tearing families part in the process.

As someone whose father was a fighter pilot and whose daughters are in the film industry, I have no direct sense of what it is like to develop and run a multi-generation family business, let alone ensure that sustainability considerations are at the core of strategy and management.  But, given that such organizations make up such a huge slice of our global economy, it surely is time to find out a lot more about them. 

Readers: Do you know of a family business that is committed to sustainability? Share your knowledge on Talkback!

The opinions, beliefs and viewpoints expressed by CSRwire contributors do not necessarily reflect the opinions, beliefs and viewpoints of CSRwire.

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