Redefining the Purpose of Business in Society

(This article originally appeared in Ambition, AMBA’s thought leadership publication – in print and online – and has been republished on this website with the permission of AMBA.)

The business world is not living up to societal expectations and needs to be reset, says Ignacio de la Vega. The Dean of EGADE Business School discusses redefining the purpose of business in the context of Covid-19, and his institution’s work on providing a starting point for the economic relaunch of Mexico.

Over the past six months, as survival instinct dictates, almost every country in the world has directed its energy inside its own borders to address the triple emergency – health, social and economic – sparked by the Covid-19 pandemic.

Paradoxically, while focusing on domestic affairs is urgent in the short term, the definitive solution to this multi-faceted crisis requires us to look beyond the end of our noses because the challenges are global. We have an uncontrolled virus that is travelling without a passport, a globalised economy on the brink of ruin, a long-announced environmental debacle, and a population that is getting poorer by the minute (and that could be heading towards mass migration). In recent history, the global effect of this pandemic is comparable only to the Second World War.

Devastated by war, the world’s leading nations back then laid the foundations for a new world order, with the reconstruction of societies, reactivation of the economy and promotion of multilateral organisations as the priorities. This led to the creation of the UN, IMF, World Bank, European Union and the Organisation of American States; institutions that populist governments are now endeavouring to discredit.

However, the interdependence of economic, social, environmental and technological systems is clearer today than it was 75 years ago. The risks affect us all and produce a scale effect that calls for closer international cooperation. Are the leaders of today equal to this enormous historical responsibility?

We are experiencing one of the worst crises of leadership in our history. The void of leadership to face today’s complexity, in both governments and companies, was already here before the pandemic. We were immersed in a profound environmental and social crisis that was gradually eroding citizens’ confidence in globalisation, democracy and a shareholder capitalist model that, while generating growth and opportunities, also exacerbated inequality and caused practically irreversible damage to our planet. The pandemic will have also deepened inequality and injustice.

Our societies and organisations need and deserve transformational leaders who can bring communities together while promoting inclusion and a sense of belonging. These leaders should also be able to make meaning out of the crisis, reimagine the future and communicate it effectively to shareholders.

In the absence of a clear political leadership, civil society demands actions that will not just repair the damage, but also lay the foundations for a new world. One of the most outstanding, and plausible, proposals is ‘the great reset’, put forward by the World Economic Forum and comprising a set of strategies for building a more resilient, inclusive and sustainable society. This initiative brings together the private sector, its stakeholders, civil society and communities, since collaboration between all actors, including the public sector and universities, should be the cornerstone of recovery.

In Mexico, the challenges we face reflect a far from negligible gravity. The tragic loss of human lives is coupled with a catastrophic economic impact, an extremely high social cost and a latent environmental vulnerability. With a sense of urgency, EGADE Business
School, Tecnológico de Monterrey, has fostered collective learning in relation to this multidimensional crisis that has come to fruition in the form of the recently published Decalogue for the Economic and Business Refounding of Mexico (Decalogue).

As a Business School, we are aware of the leading role companies play in articulating economic growth and solving the country’s challenges, but, for decades, we have also witnessed a business model that has not properly lived up to legitimate social expectations. In the new economy, companies will have to abandon their orientation towards short-term benefits and think about the long term – environmental and social sustainability, limited natural resources, and the relevant communities. We should move on from the capitalism of shareholders to a capitalism of stakeholders. Today, companies that invest in their communities perform better. In this ‘new reality’ we will need a great deal of true innovation, and to design new business models for the majority of sectors that have already been disrupted, or that will be sooner or later. We also know that the fourth industrial revolution has been accelerated as a result of the pandemic, and we must place all these technologies at the service of humankind before it’s too late.

The future of work will be defined by automation, AI, and talent operating in the gig economy. To thrive in this environment, creativity and innovation will be key. Organisations will need to make sure that their talent has the competencies and knowledge required to be competitive.

Ignacio de la Vega is Dean of EGADE Business School and the Graduate Business School at Tecnológico de Monterrey. Prior to joining EGADE, he served as CEO of Global Babson. His previous roles have also included participating in the setting up of the Prince Mohammad Bin Salman College (MSBC) in Saudi Arabia, as well as positions as Chief Learning Officer of BBVA worldwide and President of the Global Entrepreneurship Monitor (GEM). For 20 years, de la Vega worked as a teacher, researcher, and director at IE Business School in Spain, where he led its International Center for Entrepreneurship and the Development of Business Initiatives.