Toward Stakeholder Capitalism (CFOs)
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Toward Stakeholder Capitalism (CFOs)

December 06, 2021 | Report

What the Shift Means for Chief Financial Officers

The concept of stakeholder capitalism is not new. Its origins reach back at least to the early years of the Great Depression. Where the business community is seeing change is in increased pressure for businesses to engage more publicly and act more transparently as social media platforms amplify the voices of diverse stakeholders, and investors place greater focus on stakeholder issues ranging from diversity, equity & inclusion, to sustainability, to employee well-being and workforce management, to community impact.

While many organizations have talked about the current shift toward stakeholder capitalism, The Conference Board has uniquely focused on what it means, in practice, for CEOs and the C-suite. During 2021, The Conference Board held a series of roundtable sessions with CEOs and chief financial, legal, human resources, government relations, communications, marketing, and technology officers focusing on 1) whether the shift toward stakeholder capitalism is significant and durable, and 2) what it means for their roles, the organizations they lead, and the composition and functioning of the C-suite. The discussions were held under the Chatham House Rule, with participants free to use the information received but barred from identifying speakers or their affiliation.

Here is what CFOs told us:

What Is Changing

Chief financial officers see the shift as durable (and many say inevitable) because the voices of diverse stakeholders—owners, employees, customers, community members, and especially investors—are driving it. Investment decisions and capital allocation are now more multidimensional and complex as environmental, social & governance (ESG) issues factor more prominently in decisions. Given the complexity of involving multiple stakeholders, better communication and more meaningful collaboration is taking place across the C-suite in many companies. CFOs see developing trust and building better personal relationships, both within the organization and with external stakeholders—especially investors—as the keys to success.

The consensus: while shareholder success is often tracked in financial metrics, stakeholder success is harder to assess. However, a strong ESG-related performance based on credible metrics that are material to a company’s business strategy can attract new capital and, in some circumstances, allow firms to qualify for differential lending rates based on superior ESG performance. It is clear that appreciation will come from capital markets if you move toward a stakeholder versus shareholder focus.

“Let me be honest here: four years ago, we didn’t talk much about ESG at the board level. Now we talk about it at every meeting. Before it was ‘this ESG stuff is a bunch of malarkey.’ Now it is a central focus point.”

What the Transition Means for Chief Financial Officers

Major institutional investors, especially large index funds, are looking for boards and managementto be in the driver’s seat when it comes to developing, implementing, and communicating their plans to address ESG-related issues. CFOs have a crucial role to play in plotting a credible financial course. The commitment to a stakeholder focus requires having a clear vision of what it means for your business, the implications for business models and strategy, and how to invest and operationalize your vision for maximum impact. This focus calls for greater CFO involvement in a broad coordinator role and combining financial with nonfinancial data to meet stakeholder demands. However, the investor community is not monolithic, and there will be tension between those seeking to address social issues as part of a long-term strategy and those who want to focus on short-term returns.

“ESG is growing in significance. We talk about billions of dollars going into ESG funds, but it is still a small percentage of overall capital. But now we are seeing managers of traditional funds starting to talk about ESG for the first time. It is becoming more and more mainstream in capital markets.”

Capital allocation now requires a broader vision of risks and opportunities to meet business goals that factor in multiple stakeholder expectations. It wasn’t so long ago that CFOs dealt almost exclusively with the financial dimensions of cost-benefit analysis for any problem presented to them. The shift introduces additional layers of risks that CFOs must be cognizant of, including political risk, public perception risk, employee/customer risk, and competing pressures based on customer attitudes. To better understand enterprise risk, CFOs need to become more knowledgeable in areas outside their core expertise. Participants say they are starting to measure the impact of ESG strategies along the value chain and, despite the measurement challenges, they are seeing good returns. One participant says the company is running different scenarios and models to determine returns based on investment strategies related to ESG and ones not related to it.

“We are still using our normal tools for capital allocation, but there is a big change in that we also ensure that the normal tools don’t alone drive the decisions. Qualitative factors are now also involved.”

“We are moving to more of a scenario approach. Your returns change and your investment allocation may change as you address alternative scenarios. For example, when it comes to CO2 emission, we do the calculations twice, one with a carbon price and one without a price. It changes things for sure.”

“There most probably will be a shift from short-term results to longer-term ambitions, and keeping this balance right is essential.”

Investors, boards, and other stakeholders are demanding more granularity in the data supporting ESG strategies and impacts. Meeting thedemand for nonfinancial data to supplement traditional financials and blend them into a meaningful story is one of the biggest challenges our roundtable participants say they face. While data collection is below C-suite leaders’ pay grade, the ultimate responsibility for its credibility (that it is investor grade, legally compliant, and independently verified) lies with them, participants say. Previously, much of the data that may now be required had not been tracked with great rigor, so quality control is essential to avoid reputational and credibility damage.

“For many years, it was a ‘check the box’ exercise. Now these issues are seeing more visibility in the boardroom, and you need more granularity in your data for credibility. Top lines aren’t enough. The board wants details. CFOs need to be well versed on what the data means. Before, public affairs may have taken the type of questions boards are posing. It’s just getting more granular at the board level.”

Measurement and target setting around ESG goals are becoming more deliberate and intentional. In consultation with the CEO and other C-suite members, CFOs play a critical role in deciding how the firm will measure progress and hold itself accountable for achieving ESG-related goals. However, companies must be selective in choosing their goals since failure to achieve them can result in additional investor scrutiny, reputational harm, disengagement of the workforce, and potentially more regulation. In many cases, investors are not satisfied with how businesses are reporting, disclosing, and measuring their strategic approach to sustainability and ESG-related issues. ESG rating firms are proliferating, so be strategic about which rating organizations you engage with and how. The biggest problem companies have with ESG rating firms is the time and resources required to respond to information requests. Focus on a few, comply with a few others, and don’t worry about the rest. This approach requires an internal process and fortitude.


Deciding Which Frameworks Work Best for Your Company

There are more than 100 different reporting frameworks and standards intended to guide corporations in reporting on their sustainability efforts. While a corporation’s sustainability or corporate social responsibility departments were often largely responsible for choosing which reporting framework(s) to employ, today the decision is more consequential and merits CEO, CFO, and board attention.

Here are five questions to help determine what sustainability frameworks best meet the needs of the company:

  1. Is your company subject to any reporting requirements? While companies are not yet required to use a particular framework in the US, this is not necessarily the case in other regions.
  2. What are you aiming to achieve with the framework? Sustainability reporting is a tool for communicating information to stakeholders, but it can—and should—be much more than that. Ensure there is alignment between the framework, your company’s sustainability strategy, and your sustainability disclosures.
  3. What frameworks are most relevant for your industry? Some frameworks are designed to capture information relevant to specific sectors or industries. For example, a key feature of the Sustainability Accounting Standards Board (SASB) framework is its focus on industry-specific standards—the framework includes standards for 77 industries.
  4. Does the framework address your company’s most material issues? Even if a framework is relevant to your industry in general, it may not be a good fit with your company or its strategy. In sustainability reporting, the concept of materiality can provide a useful filter for dealing with the 100+ issues that fall under the umbrella of sustainability.
  5. Who are your intended audiences? Not all reporting frameworks target the same audiences, so identifying your primary audience can help determine the appropriate frameworks to use.

Source: Thomas Singer, “Navigating Sustainability Reporting Frameworks: A Practical Guide,” The Conference Board, December 2021. 


Joining the conversation on controversial social issues is becoming a more common part of the relationship with customers, employees, and investors. As a CFO in public life, you have to fill a broader role in stakeholder communication, both externally and internally. Roundtable participants say that instead of just being grilled on financial performance, they are now being asked to opine on other issues that just a few years ago were considered out of bounds for a CFO. Communication with all constituencies needs to be thoughtful, strategic, authentic, and linked not only to company values but to business strategy as well. Participants say a greater emphasis is being placed on internal communication with employees. Engaging directly with employees on an issue often has greater impact and benefits than a public pronouncement on behalf of the company.

Embracing ESG-related issues builds engagement among your team within the function. Young people are excited about addressing broader societal concerns and want to be involved. Give them the opportunity. It will help you in attracting, retaining, and motivating talent. Avoid the certain morale breaker of positioning ESG as a burden rather than an exciting opportunity. Help them see the bigger picture about how the finance function has a mission that includes better serving society. It’s not just about the numbers anymore.


To understand how the shift to a stakeholder focus is affecting chief financial, human resources, legal, communications, marketing, and government relations officers—and the functions they lead—see the full series here.

Additional Resources From The Conference Board

Choosing Wisely: How Companies Can Make Decisions and a Difference on Social Issues, June 2021

Lessons from Leaders for Leaders: Organizational Impact & Social Change, May 2021

Lessons from Leaders for Leaders: Innovative People Approaches, May 2021

Brave New World: Creating Long-Term Value through Human Capital Management and Disclosure, December 2020

Insights for Investors and Companies in Addressing Today’s Social Issues, October 2020

Purpose-Driven Companies: Lessons Learned, October 2020

Sustaining Capitalism 2020 Election Series, September 2020 | CED Compendium

Organizational Characteristics of US Benefit Corporations, April 2020

Consumers' Attitudes about Sustainability – Part 2: How Sustainability Features Influence Consumers’ Choices, February 2020

Sustaining Capitalism: Bipartisan Solutions to Restore Trust & Prosperity, February 2017

Sustaining Capitalism Podcast Series, 2018–2021

CEO Perspectives, Episode 3: Multistakeholder Governance, May 2021 | Podcast

Sustainability Watch: What Can We Learn From 15 Purpose-Driven Companies?, September 2020 | Webcast



Senior Director, Content Quality
The Conference Board


President and CEO
Society for Corporate Governance
The Conference Board ESG Center

Rebecca L.Ray, PhD

Former Executive Vice President, Human Capital
The Conference Board

Dana M.Peterson

Chief Economist and Leader, Economy, Strategy & Finance Center
The Conference Board

Dr. Lori Esposito Murray

Former President
Committee for Economic Development

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