Article 2

The four big gaps we have to overcome to achieve better 4th Stakeholder balance

1-2 minute read

THE CAPSULE SUMMARY – The four gaps include: overly narrow or diluted impact thinking, second-order business effects, diluting effort vs. focusing on the biggest impacts first, and a lack of transparency and societal impact on what to fix.

2.1  Let’s start with the goal. The ultimate goal of 4th Stakeholder balance is the global maximization of societal good arising from the functioning of industry, coupled with the global minimization of anticipated or unanticipated societal harm arising from the functioning of industry. OK, that’s the wordy version.

2.2  The simpler version: companies need to do as much societal good as possible while doing as little damage as possible. This is easier said than done given their parallel goal is to create a sustainable, profitable business that also delivers for customers and employees—hence the difficulty in achieving or even defining what that ‘balance’ should look like.

2.3  Unfortunately four major gaps still stand in the way of our modern society achieving better balance: 

  • Businesses are thinking too narrowly about their ability to drive positive societal impact

  • They are focusing primarily on controllable first-order business impacts vs. broader second-order business ecosystem effects

  • They are lacking a common denominator metric for social impact

  • There is a major lack of transparency and direct societal feedback in this engine.

2.4  Businesses should strive to create as much societal good as possible, yet today are not pulling the full spectrum of levers possible. In addition, by ignoring their second-order effects they are still creating bad downstream impacts that can be even more damaging than their first-order effects. Because of the lack of common measurement, they can’t prioritize their finite resources against the biggest areas of impact. And the process they use to allocate their resources lacks transparency and actual buy-off from society at large.

2.5 Without addressing these four gaps we’ll never achieve the optimal level of 4th Stakeholder balance. Conversely, if every business were to sign-up to address these gaps we would shift our industrial system much closer to the ideal end-state described above. More good, less bad, and faster progress against the big issues that society cares most about.

2.6  Up next, we will delve into these gaps in more depth but more importantly, we’ll provide a roadmap of specific actions that business leaders can take to overcome them.

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