Incorporating Inclusive Growth

Oct 26, 2017 6:45 PM ET

Companies that think beyond the bottom line may be stronger and more innovative, a report on the private sector’s role in inclusive growth argues.

There's no shortage of opinion on how governments can reduce economic and social disparities, but what about the private sector? The long-held belief that focusing on the environment and society is at odds with making a profit is increasingly being challenged. A groundswell of sustainable investing has both retail and institutional investors pressing companies to live up to their environmental, social and governance responsibilities.   

“Finding ways to foster inclusive growth is no longer a nice-to-have, but something which can have a significant impact on the value of corporations,” says Audrey Choi, Chief Marketing Officer and Chief Sustainability Officer at Morgan Stanley. 

A new report from Morgan Stanley’s Institute for Sustainable Investing, “Inclusive Growth Drivers: The Anatomy of a Corporation,” [link to report] explores four key areas where a corporation’s activities can impact inclusive growth: Human Resources, Products and Services, Operations Management, Firm Management and Governance.

Corporations can promote inclusive growth in four key areas.

1. Human Resources

Studies show that employee satisfaction, which is influenced by fair wages and benefits, job security, diversity and work-life balance, correlates with improved corporate performance, with knock-on effects for stock prices.1 Another study found that members of the “Fortune 100 Best Companies to Work For” list delivered stock returns that beat peers by 2.3%-3.8%.2

2. Products and Services

A product’s design, the advertising campaign around it and its price are all things that can influence inclusive growth. For instance, a greater variety of less expensive mass-market smartphones and tablets could enable more lower-income consumers to connect remotely with financial, healthcare or other services. Studies show that developing affordable products for price-sensitive consumers can help firms improve their financial performance.3

3. Operations Management

U.S. studies suggest that socially responsible supplier selection can lead to increased revenue, sales growth and market share.4  Companies also should consider how business continuity plans can ensure safe operations for employees, customers and suppliers in an emergency.  Cybersecurity measures to safeguard customers’ personal information is also increasing in importance.

4. Firm Management and Governance

Transparency and strong governance systems can promote ethical decision-making and long-term thinking across an organization. Focusing on creating value over a longer time period can broaden a company’s perspective beyond quarterly earnings. More emphasis on the long-term business strategy can influence decisions around things like executive compensation, tax payments and practices, corporate social responsibility and philanthropy. A focus on inclusive growth as a driver of short and long-term business performance may also make a company more attractive to greater mix of investors. 

In future work, the Institute will continue to explore opportunities to drive corporate value, by fostering inclusive growth. We will delve more deeply into inclusive practices and corporate performance across these core business functions. The key takeaway for now: Expanding global economic activity to include more people may benefit long-term growth—and corporate performance.


1. “The Link Between Job Satisfaction and Firm Value, with Implications for Corporate Social Responsibility,” Alex Edmans, Academy of Management Perspectives 13(24), December 12, 2012. ( ; accessed Sept. 7, 2017).

2. “State of the American Workplace,” Gallup, 2013. (; accessed Dec. 23, 2016).

3. “The Antecedents and Consequences of Affordable Value Innovations for Emerging Markets,” H. Ernst et al., Journal of Product Innovation Management 32, 2015. (; accessed Dec. 23, 2016).

4. “Does socially responsible supplier selection pay off for customer firms? A cross-cultural comparison,” L. Thornton, et al., Journal of Supply Chain Management 49(3), 2013. (; accessed Dec. 23, 2016).

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