What is good business? The answer to that question will drive the fundamentals of business in the future.
This discussion has been underway. In 2019, for instance, the European Union passed legislation to ensure full Environment, Social and Governance (ESG) disclosure by listed companies and investment funds. Goldman Sachs even declared that it would cease supporting the IPOs of companies that have an all-male board of directors. In August 2019, one of the United States (US)'s largest business groups, the Business Roundtable, replaced its longstanding "shareholder primacy" mantra to urge companies to consider the wellbeing of environment and workers, alongside their pursuit of profits.
The pandemic has intensified this discussion on the nature, role and purpose of business. The crisis provided an unflinching perspective on how businesses really conduct themselves — the level of scrutiny applied to businesses (and even, business leaders) has been unprecedented. And quite rightly so. Business is a useful metaphor for capitalism itself; the basis of our society, where and how we create value, and how we define success.
As part of our 75th celebrations, the Mahindra Group launched a public conversation on what constitutes good business. The results clearly reflect the shifting sentiments regarding business's role, and what really constitutes a good deal, or job, or investment. According to Mahindra's Good Business Study, covering over 2,000 Indian citizens, 62.42% of respondents cited society and community as critical to their idea of good business. From an employee perspective, nearly half (49.35%) the respondents believe that equality of opportunity, diversity, flexible working and an innovative environment are the top qualities of a good employer. Such new definitions of what constitutes good business are even reflected in investment choices. 70.27% of respondents claim that they would never invest in a business they did not consider to be genuinely good.
Two factors have influenced these changing perceptions of good business over the last ten years.
First, the emergence and activism of the millennial generation (typically, aged between 25 and 35). According to Deloitte's most recent Millennial Survey, more than a quarter of millennials would choose not to purchase from an organisation because of its stance on a political issue, and 29% would do the same, based on the comments or behaviour of a company leader. 70% of millennials expect their employers to focus on societal or mission-driven issues. No other generation has exerted such an impact on the way we do business, on employee experience, and on consumer expectations. They represent one of the last decade's biggest drivers of good business.
This is also reflected in our own Good Business study. 45.27% of millennial respondents relate good business to non-financial metrics such as workplace diversity and environment. By contrast, just 39.22% of those over the age of 46 applied the same metrics.
Second, the overwhelming priority for many traditional and existing businesses, including ours, has been to ensure that they are genuinely good. For example, minimising the environmental impact of the production and use of products, ensuring transparent and fulfilling careers for employees, and communicating the same to investors and the wider community are factors that contribute to companies making it to the Great Places to Work lists.
Some of our own businesses are a case in point: Susten, for instance, delivers clean energy to some of India's remotest regions; Mahindra Waste To Energy Solutions Ltd converts organic waste into Bio-CNG and fertilizer; while Mahindra Electric Mobility Ltd has been a pioneer in electric transport. Collectively, these businesses epitomise this transformation towards good business, and are already generating over half a billion dollars every year. Such businesses epitomise the purpose of our Group – enabling people to rise and achieve the best of themselves. In effect, this encapsulates what good business means to us.
What do these trends suggest about the coming decade?
One, in demographic terms, it will be fascinating to see whether and how today's millennials retain their influence, as tomorrow's managers, entrepreneurs and business leaders.
Two, I am particularly interested in their successors, Generation Z, who are under 25. This generation of consumers will increase their per capita spending by more than 70% in the next five years. How will they impose their perceptions of "good" business on the way they consume, work, and invest?
One recent study describes them as even more committed to our planet and other ethical considerations. A staggering 92% surveyed said they care about social and environmental issues, and 89% are worried about the health of our planet. Significantly, 94% believe that companies should help address such urgent issues; this is an even higher percentage than their millennial predecessors. Such statistics provides a clue — and an optimistic one — to the nature of good business in the coming decade.
Finally, the approach of adapting existing businesses towards this new set of considerations that characterised the last decade will be gradually replaced by businesses that are created to be fundamentally good – good by design. Businesses will define their existence — their products, means of production, relationships with employees and community — in terms of their wider role in society. Here, technology will play a crucial role — not merely in the conception of products and services, but in how they are produced and delivered to consumers.
The transformation of the education sector provides a case in point. India's EdTech market is expected to grow from less than US$1 billion to eight or ten times that size over the coming five years. The sector is the epitome of good "by design", employing technology to deliver relevant skills to Indians who, in many cases, would otherwise not have access to it.
These clues from the last decade provide a glimpse into the future of good business. Will this still be the most important discussion of the next decade in 2030?
Ideally, I would hope not. The best outcome would be that the good prefix is discarded as irrelevant, And that the nature of business will be inherently good by design. Good and business would become synonymous. Such businesses are already making an impact, even in terms of financial returns. For society, the return would go well beyond financial metrics and be far more significant.
By 2030, what would be the point of contemplating any other type of business?
Anand Mahindra is the chairman of the Mahindra Group.