Sustainable Capitalism?

08/01/2012 / Kaj

I read a very interesting article in the International Herald Tribune, that discussed how the new model of corporate management and ownership was creating companies that had anonymous and absent owners and shareholders.

I am a firm believer that companies exist to make profit and, if we are to think about decent earned money, profit will also mean long term strategy, sustainability, transparency and corporate governance. I am talking here of real business, not ‘making money out of nothing, like what some venture capitalists have ‘invented”.

Companies need values and their CEOs should be the custodians that will lead the way.  Sustainability is as important in the mission of a company as having good accounting.  For a start, sustainability is the key element to secure long term profit and success.

About 12 years ago I met the late Ray Anderson Owner and the CEO of Interface, the biggest flooring company in the world. He was in Stockholm to give a lecture at the Natural Step Foundation conference. He was on of the first Green Industrialist coming out the US.   He created a sustainability team in Interface to develop the strategy that integrated economy, ecology and social issues.  These elements were the core of the continuous success of Interface.

Fortune has described Anderson as “America’s greenest CEO,” and the title fits, because there is no one else in the corporate world that has taken to heart the essential lessons of sustainability and then put them into practice, generating profits.

I can think of other companies that became desirable and popular brands thanks to their strong values and ethics. The Body Shop was bought by L’Oreal, Ben & Jerry’s ice cream was bought by Unilever and Pret a Manger by McDonalds. The new buyers have kept the mission and values intact, as they see that these are the sources of the brands’ success.

Another model of ownership with values is the Co-op model in which the owners believe in the values of self-help, self-responsibility, democracy, equality, equity and solidarity.  Many of them are successful, such as the health co-ops in Japan, the worldwide credit unions with 184 million members and the employee co-op in the UK, John Lewis Partnership, with its 23 department stores, 112 Waitrose supermarkets, a turnover of GBP 2.8 billion and pre-tax profits GBP 150 million.  John Lewis is known for its solid environmental and social strategy involving supply chain and customers.

More and more, the corporate world is realizing that sustainability means long-term success, lower operational costs and profitability, let alone good PR. John Elkington raised in an article last week and asked if 2012 should be the start of a decade of Sustainable capitalism.

And in public statement the CEO at Unilever, Paul Paul Polman, said he wants an equitable, sustainable capitalism. Iain Cheshire of Kingfisher is talking about a paradigm shift. Even the Harvard Business Review has called on CEOs to “fix the system”.

I am not convinced that the issue is so easy to give a proper answer on. But, its necessary to give the issue a place on the 2012 agenda.

Some companies still think they can ignore those issues, but bad publicity can harm a brand. Apple has been found both to ignore the inhumane conditions of workers making their products and to  be involved in buying  conflict minerals from Congo.

Unfortunately, Apple’s example is not an isolated case. The news of how corporations cause unnecessary human suffering and environmental destruction are rather common and frequent still. Lundins Oil is another business as usual “activist” in Africa that have been listed in connection to Human Rights issues.

In the shadow of what I would like to call political privatisation in the welfare state - The UK and Sweden examples are now on the agenda to discuss business ethics and values.

But there is hope.  In a study by The UN Global Compact and Accenture, already in 2010, out of  766 chief executives interviewed, 93 percent believed that sustainability will be “important” or “very important” in the future success of their companies.

As Interface’s Ray Anderson put,

“From my experience, it’s a false choice between the economy and ecology.  We can have both — and we have to have both.”

A part of a puzzle that will build Sustainable Capitalism?

Kaj Embrén

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Comments
  1. Ali

    Why shouldn’t companies that produce other types of value exist without making a profit?

    Are you suggesting sustainable capitalism is just profit made in an ethical way? I feel like that misses some of the grittier questions around sustainable capitalism and diverts the conversation into a fluffier discussion on corporate behaviour.

    Surely fundamental questions surrounding sustainable capitalism are how can we decouple growth from our environmental footprint? And, especially in view of recent social dissent, how can we construct a capitalism that is not based on a few amassing the wealth produced by the many? In other words, how can the system make wealth distribution equal? The Co-Operative and John Lewis are interesting examples in that respect…

  2. On 01/10/12 6:07 AM, Martin. Malmros wrote:
    Hi Kaj

    In Aura Light we consider sustainability as an integral part of our business model. In essence sustainability is a collective word for the external factors that we need to take into account when conducting our business both on a short and long term view. The business we do should not cause such effects on the environment or society that it negatively impact our potential to continue to do this business long term. We have chosen to use The Natural Steps model of the core principles for sustainability and added this to the allready existing principles of a market economy a company must adhere to in order to have a sustainable business model. The understanding of what a sustainable business model is for a particular company or organisation must be looked at in detail and I KPI´s to be established together with an action plan. Almost no company will find that they can continue to do business as they do today without cause such effects on the environment or society that it negatively impact their ability to continue to do business as is long term. The paradigm shift you are referring to I think is the outcome of more large corporations senior management starting to understand the core principles for sustainability and a creeping sensation that they sit on a ticking bomb. I share the view of the Harvard Business Review that corporations will soon start to take the lead rather than political forces in achieving real change since corporate profits will be at risk and share valuations when it becomes more and more apparent that only produce, sell and distribute with a profit is not a sustainable business model.

    Regards Martin

  3. The system is definitely broken, Kaj. CEOs fixing the system? That isn’t going to happen. CEOs are the poster child of the problem – huge irrational gains for unknown reasons. The people running the boards and the people buying the products need to fix the problem. Voting in our democracies and voting with our choices every day with sustainability as a desired outcome will get results.

    Keep up the good work.

    Give care, Daniel

  4. My favourite subject! Fr us it began 15 years ago with a white paper proposing an alternate paradigm, with this as the core argument:

    12. Positing numbers as real entities, and basing economics on that unproved and unprovable hypothesis, risks disposing of real entities (human beings) in favor of imaginary entities (numbers.) The only variable needed for that to happen is unscrupulous human beings.

    13. Human-based – that is, people-centered – economics is the only valid measure of economics.

    14. Manipulation of numbers, represented by currency/money, allows writing “new” money as needed. There is no tangible asset, or anchor. There are only numbers, managed by whomever might maneuver into position to do so. Economics came to be based on numbers, rather than real human beings.

    15. On that basis, capitalism trumped people and therefore trumped democracy. Democracy is about people, who since Descartes are considered necessarily real, rather than numbers which are not necessarily real. An imaginary construct, numbers, rule a real construct, people. That arrangement allows for disposal of real human beings, in the name of the imaginary construct.

    16. Capitalism nevertheless remains the most powerful economic system ever devised. The problem is not with the construct. The problem is with the output of the construct, wherein imaginary constructs – numbers, and currencies represented symbolically by numbers – are left to control real human beings to the material benefit of relatively few people and to the exclusion of many others. Classical capitalism has reached equilibrium in this regard. However, and consequently, many and growing numbers of human beings are excluded in the realm of finite resources hoarded by those most adept with manipulating numbers/currencies.

    http://www.p-ced.com/1/about/background/

  5. This seems like a good example of muddled conventional thinking. We need greater creativity in both defining the problem and imagining solutions. Gore and Blood (what a pair of names for a polite discussion of sustainability!) define sustainable capitalism as “a framework that seeks to maximize long-term economic value by reforming markets to address real needs while integrating environmental, social and governance (ESG) metrics throughout the decision-making process.? This definition seems to presume govenernmental guidance to the market. Who else would produce a “framework.” Perhaps they are hoping that a framework will ‘emerge’ from the complexity of personal choices and corporate interests. If one does, it is unlikely to look like what they wish for. Indeed, it already has in the version of capitalism that we already have.

    Governmentalism also shows through in “Mandate integrated reporting”, “End the default practice of issuing quarterly earnings guidance”, Align compensation structures with long-term sustainable performance, and “Incentivize long-term investing with loyalty-driven securities.” These have not yet emerged – indeed what has emerged is current business practices – and likely will not without a push from government to “mandate” what the market cannot provide by iteself. Unsustainability is a market failure that government can correct. Even if we accept the former statement, it is doubtful that government can fix it appropriately.

    I think that this very conventional approach to sustainability is a reflection of simplistic, reductionist thinking. Do we really know what sustainability is? In my view it is a pathway not a goal, it is a tendency or direction not a specified outcome. As humans change their behaviors, their environment will change both from its own internal processes and our interaction with it. If this is so, humans will have to continually change their behaviors: no silver bullets exist.

    What does it mean for humans to change their behaviors? This is about more than corporate governance or profit horizons. It is about how interactions between economy and society change who we are, what we want, and how we behave. Capitalism, as Marx knew, is not only about firms and markets. It is in the end about society and the people within it that society constructs.

    Capitalism may become sustainable but in the end it is down to the mass of individuals (some of whom control the decisions of firms) to choose what is both good for them and for the planet. We are a long way from that.

  6. It is good to try to introduce this SUSTAINABILITY of the planet and integrate it into the business arena but when the rules of doing business are corrupt CAPITALISM thrives.

    So it is in the nature of the political and corporate system to create disparity, disunity and destruction in the community, this is a MARKETING policy and the political and corporate have through their elite sponsors (INHERITED WEALTH) continued to follow a genocidal strategy to manipulate the aspirations, size and movement of the global population.

    Today CONFLICT, CONTAMINATION and CORRUPTION are endemic in the governance system.

    Until this is rectified no amount of talk, blogging or lip service will deliver the SUSTAINABILITY objectives that are needed to being harmony back into the local communities around the world and the beauty of the diversity of all nature be allowed to rule.

    GLOBAL SHARED RESOURCES changes the rules.

    KNOWLEDGE has no ownership!! It is an accumulated asset of humanity.

    SUSTAINABILITY requires less not more (of everything physical, mental and spiritual)

    INDIGENOUS TRIBAL systems from any where in this world will teach you how to do this.

    CONSUMERISM is the mantra of a failed abusive system that does not equate capacity, dignity, respect values of the human intellect as a self sustaining. system we are born with, it is only the induction, of the CAPITALIST system through the education and social structures that makes individuals that are dependant on the business led consumeristic servitude.

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