What is the role of business in today’s social and environmental climate and how can companies evolve to meet changing expectations? This chapter discusses the idea of “capitalism 3.0″ and the ideal of sustainable, more responsible corporations. It also details the notion of a “commons sector”, a movement that already has green shoots in the form of community gardens and other projects, and, on a larger scale, land and water trusts and greenhouse gas initiatives. Such a cultural shift could also result in a change of attitudes towards work, one that is more encompassing and less obsessed by finance.
In the New York Times almost 40 years ago, Milton Friedman, an economic hero for Margaret Thatcher, said: “The social responsibility of business is to increase its profits.” This is just one of the shortcomings of the current corporate design. The primary legal duty of fiduciaries and boards is to deliver straight profit maximisation, meaning that other considerations have to be second or third best. The quarterly beauty-parade short-termism of investors necessarily leads to a similar short-termism in corporate strategy. This is not borne particularly or simply of malevolence, it is corporations merely “doing their job.”
These days we demand startled companies to both make money and improve the world.
These days we demand startled companies to both make money and improve the world. Yet even the 1990s and early noughties fad of Corporate Social Responsibility has lost much of its gloss. Sir Jonathon Porritt, a one time proponent of CSR efforts with his Forum For the Future consultancy, said recently: “The difference between today’s prevailing band-aid CSR and an integrated, strategic commitment to becoming genuinely sustainable, over time, couldn’t be greater… The very fact that… they continue to pursue their core business (quite legally and, indeed, quite logically, given the failure of politicians to change the rules) without the remotest likelihood that they or their products/services will ever become genuinely sustainable, reveals all one really needs to know about the empty, seductive illusion that is CSR.”
There are increasing pressures on companies to become more responsible.
In his book The Great Turning, David Korten reviewed numerous US polls from sources such as Harris, Gallup, Business Week and The Washington Post and found that:
- 72% of the public think corporations have too much power over too many aspects of American life.
- 74% think big business has too much influence over government, 82% small business has too little.
- 88% distrust corporate executives.
- 90% want new corporate regulations and tougher enforcement of existing laws.
- 4% think America is best served when corporations pursue only the goal of maximising share value.
- 64% think government is run by a few big interests.
The problem is that companies and the frameworks within which they operate were never designed to make the world a better place. If we want the business of business to be more than just business, we need to redesign “the corporation” for a new era in which profit and economic growth are not the sole objectives.
If we want the business of business to be more than just business, we need to redesign “the corporation” for a new era in which profit and economic growth are not the sole objectives.
We may begin to see a shift towards younger, brighter companies taking the mantle from traditional, monolithic incumbents. For example, it took a small disruptive innovator like Lemnis to bring LED (light-emitting diode) lighting to the market. Fascinatingly, Lemnis was set up by two great-grandsons of the founder of Philips – if they could not make the future of lighting happen within Philips then no one could. Incremental change is not going to be enough for the current incumbents; as Peter Drucker once said: “Nothing is less productive than to make more efficient what should not be done at all.”
Currently we have three basic spheres of influence that make up society: government, the corporate sector and civil society (public, voters, and Consumers). The corporate and government sectors have become sclerotic due to their short-termism and myopic focus on economic growth. If a new people- and planet-friendly form of capitalism is to evolve we urgently need politics and business to be dragged out of its short-termist and growth-obsessed worldview and into the new societal conversation about “good lives”.