A new group focused on “inclusive growth” — and backed by prominent names in business and finance — is expected to launch on Friday during the Group of Seven (G7) Summit.
Called Business for Inclusive Growth (B4IG), the organization is being spearheaded by Paris-based The Organisation for Economic Cooperation and Development, in partnership with the Bill & Melinda Gates Foundation
The organization has gotten backing from major public companies like J.P. Morgan (JPM), Keurig Dr. Pepper (KDP), L’Oreal (OR.PA), Accenture (ACN), BASF (BA.DE), Unilever (UN) and the Virgin Group. Paris-based consumer giant Danone (BN.PA) is leading the charge with the OECD.
The B4IG’s formation comes amid a fierce debate over income inequality, and how governments and big businesses should respond to the challenge.
“Hundreds of millions of people have escaped poverty in the last 40 years, but even so global economic disparities are starker than ever,” said L’Oreal CEO Jean-Paul Agon in a statement Thursday.
“The role of companies today goes far beyond creating financial value. Building coalitions between businesses and governments in order to find new models of grow this the best way to make a meaningful impact,” he added.
The group’s strategy involves working with companies that adhere to key pillars, which include fighting inequality, a commitment to inclusion, and creating new business models.
This is starkly different from other business trends like corporate social responsibility, which has been criticized as more charity-based and not impactful enough.
That, according to Harvard Business School professor Joseph Bower.
“It’s not sustainable if it’s charity,” he said.
“The inclusive growth is also associated with the idea that what one is looking for is not ways to give charity, but ways to give commercial activity that solves major problems, and one of the most major problems we are facing is inequality.”
Paying ‘dividends in the long run’
The B4IG’s membership ranges across industries, and Hartford, Conn.-based CareCentrix, a home care company, have also joined the effort.
CEO John Driscoll told Yahoo Finance Thursday that his company has been focused on inclusive growth for some time.
“They reached out to us because five years ago we froze executive salaries and brought the minimum wage to above $15,” Driscoll said.
“Paying fair wages for hard work is necessary, and it was also important for us to show senior executives could help contribute to bringing wages up.”
The launch of the new group comes just days after the 47-year-old Business Roundtable released a statement signed by 181 CEOs committing to inclusive growth—specifically saying that shareholders cannot continue to be their priority.
But the declaration was criticized by some as lacking in detail and specific actions.
David Weil, a Professor of Economics at Brown University and a research associate of the National Bureau of Economic Research, said the B4IG’s effort is an encouraging sign that Corporate America is getting more focused on the long term structural issues facing the economy.
“If I can boost my profits today and goose my stock price at the expense of customers, that’s a short-sighted strategy,” Weil said.
“As a CEO, I will be punished, in the short run....but this is going to pay dividends in the long run,” he added.
He suggested the threat of greater regulation from some of the leading Democratic presidential contenders might also be playing a role.
The group’s push aims to address some of the central questions dogging the public’s commitment to free markets.
“The challenge is, if capitalism doesn’t reform itself, it’s going to be exclusively the government’s job,” said CareCentrix’s Driscoll.
“Business leaders are in the opportune place to come up with the most creative solutions to engage and support,” he added. “Shareholders will win if capitalism thrives, and companies are not going to survive unless all the constituents that business depends on are treated fairly. That includes employees and communities.”
According to Danone Chairman and CEO Emmanuel Faber, “the middle-class is shrinking in most G7 countries, whereas it is the foundation of market economy around the world,” he said in a statement.
“The result is that market economy will not last without more social justice,” Faber added.
B4IG will be presented to President Emmanuel Macron at the Elysée Palace on September 23 ahead of the G7 Leaders’ Summit in Biarritz.
Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem