In a 2021 interview on McKinsey & Company’s ‘Inside the Strategy Room’ podcast, Rupert Younger, founder of the Center for Corporate Reputation at Oxford University, proposed that the emphasis on Environmental, Social, and Governance (ESG) factors in today's business environment signifies a departure from traditional capitalist views. This notion, which appears to be shared by both Younger and ChatGPT4, challenges Milton Friedman’s famous assertion that the primary obligation of businesses is to their shareholders.
Friedman, in his 1970 article for The New York Times Magazine titled "The Social Responsibility of Business is to Increase its Profits," argued that business leaders' main responsibility is to maximize shareholder value. Simply put, he believed a business's primary function is to be profitable.
When Younger's comment sparked my curiosity, I asked ChatGPT if it believed that ESG principles conflicted with Friedman’s theory. It agreed, generating a response that included, “It's important to note that Friedman's views contrast with the broader concept of corporate social responsibility, which considers a wider range of stakeholders, including employees, customers, suppliers, and the community at large.”
I believe that prioritizing profitability and embracing ESG principles are not mutually exclusive. In fact, this approach environment, society, and governance governance-conscious approach may be a key reason why our CEO Nathaniel Metz, and this company, Phoenix Paramedic Solutions, have successfully navigated through the challenges of COVID-19 and continue to evolve and expand.
The idea that a business’s primary objective is to be profitable holds true even when ESG comes into the equation. If this notion seems narrow or limited, it's worth reexamining. Just as individuals need income to support their families, businesses require profitability to offer sustainable employment and fair wages to their teams. This concept is not just my viewpoint but is echoed by leading business figures.
For instance, Bill Gates, co-founder of the Bill and Melinda Gates Foundation, has donated over $50 billion to charitable causes since 1994. Despite his philanthropic endeavors, Gates acknowledges the value of capitalist systems, once stating, "Capitalism has worked very well. Anyone who wants to move to North Korea is welcome." This comment underlines his belief in capitalism as an effective economic model.
Similarly, Warren Buffett, who pledged in 2006 to donate more than 99% of his wealth to philanthropy, emphasizes the importance of financial prudence in business. He famously said, “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."
These examples demonstrate that profitability enables individuals like Gates and Buffett to make significant societal contributions.
I contend that the driving force behind ESG is rooted in evolving consumer expectations and habits. Today's consumers, particularly Millennials and Gen Z, are increasingly concerned about how companies impact the environment, treat their employees, and stand on social issues. Their brand loyalty and purchasing decisions are influenced by these factors. Failure to address them not only undermines customer retention but also conflicts with the best interests of stakeholders. It's commendable that Millennials, including our CEO Nate, are spearheading this shift in business consciousness.
The book "From Millennials With Love" challenges stereotypes about this generation, often perceived as flexible yet lacking loyalty, creative but unstructured, empowered but dismissive of hierarchies, and skilled at multitasking but unfocused. The book offers insights into Millennial perspectives on brand loyalty, work-life balance, and evolving career aspirations. It illustrates how their views on work are continually shaping and evolving, like the molding of clay.
This shift towards valuing social and environmental responsibility is reshaping the consumer landscape. Companies that fail to acknowledge and address these concerns risk losing touch with younger generations.
At Phoenix, we embrace ESG principles as our core character and values. What do you get when you combine a visionary Millennial CEO, a team of dedicated caregivers, and a diverse group of individuals who have triumphed over adversity? You get a culture committed to overcoming challenges, challenging traditional mindsets, and consistently providing compassionate care.
Environmental (E) Responsibility:
We are exploring a shift from diesel to propane-fueled ambulances, recognizing propane's lower emissions and smaller carbon footprint, aligning with our commitment to environmental stewardship.
Social (S) Impact:
Our social initiatives extend beyond addressing issues; they're about meeting critical needs. During the COVID-19 pandemic, we adapted by establishing an adjunct shelter at the YWCA and later at a local church, ensuring safe havens for those without housing who could not access our LTHC Homeless Services or Lafayette Uban Ministry's shelters. We also organized a smaller PRIDE festival, maintaining community connections amidst challenging times.
Compassionate Care and Occupational Health Services:
Our focus on compassionate care is unwavering. Our mobile occupational health services, inclusive of mental health and substance misuse support, exemplify our commitment to holistic well-being in the workplace.
Governance (G) Principles:
Our governance model, symbolized by the phoenix in our logo, centers on nurturing potential and empowering individuals. Led by Nate, our advocacy efforts aim to modernize healthcare systems, fostering innovation and sustainability.
This brings us full circle to the initial debate. As Tricia Griffith, CEO of Progressive, aptly stated, “CEOs work to generate profits and return value to shareholders, but the best-run companies do more. They put the customer first and invest in their employees and communities.” This approach to long-term value aligns with Bruce Henderson's vision of being at the cutting edge of industry standards. “Our future lies in forever being able to be at the cutting edge, well in advance of the general state-of-the-art. When we are no longer able to do this, we will relinquish our role to others and wish them well.”
At Phoenix, we are committed to redefining healthcare norms, exploring every avenue to deliver exceptional care and positively impact health and society.
That is what it means to rise up and be a Phoenix!
Jason Padgett
Chief Strategy and Transformation Officer
Phoenix Paramedic Solutions
padgett@phoenixparamedics.com
