Family Business in the 21st century

family Business has always been the backbone of economies, creating jobs, driving innovation and gross domestic product (GDP) growth in many countries around the globe. This observation is still true if you look at the current statistics. It is also true that Entrepreneurs are most likely the ones who can find solutions for the most pressing issues and run their businesses based on values and with the intention to keep it in the family for future generations to come.

This has always required the ability of family businesses to reinvent themselves, manage conflicts and define a purpose that goes beyond making money and creating jobs. Their commitment to giving back and contributing to communities was one of those and part of the Family Business DNA for centuries. In the Covid pandemic, Family Business has proven to be more agile and resilient than many corporates.

But the pressing issues of the 21st century are different and much more related to increasing wealth asymmetry, climate and environmental issues, political and societal polarisation as well as faster technological disruption, putting family business to test their agility and resilience.

In fact, according to the recently published Edelman Trust Barometer, private businesses are still the most trusted form of organisation, far more than media, governments or even non-governmental organisations (NGO’s). But this comes with the huge public expectation that business leaders need to act on environmental and societal issues. I am convinced that in the 21st century the long-term success of any family business will depend on their ability to adapt to this new reality and combine profitably and purpose. This will include making environmental, social and governance (ESG) a top business priority and discovering the opportunities that come with it. Unfortunately, there is still a gap between ESG commitment and real action, according to our latest PwC Global Family Business survey that we conducted in collaboration with Family Business Network International (FBN).

At the same time global investors and corporates made ESG a number one business priority and cascaded this down to all their business partners. Also, the regulators are pushing ESG goals like the EU Green deal or taxonomy. All of the above has caused family businesses to lose their trust bonus, according to a recent research by Family Capital.

In my view, the current ESG discussion creates an opportunity for family businesses to redefine how to run their business, how to engage with the next generation and how to invest in family wealth. Of course, this is not easy but of critical importance in order to renew their license to operate and deliver not only to public expectations but their mission for long-term value creation for future generations.

Nordic family businesses and entrepreneurs are already leading in many ways when it comes to taking care of environmental and societal issues. In fact, Nordic countries lead the charts on ESG metrics in PwC’s EMEA Entrepreneurial and Private Business Heatmap. That being said, there is still much more to do. As PwC, we are honored and glad to be the Partner of FBN Finland for many years and fully committed to supporting you and your members in the future.

Peter Englisch

Global Family Business and EMEA Entrepreneurial Private Business Leader, Partner PwC Germany