Conscious Capitalism Brings New Stakeholders into Corporate Decision-Making
By Dr. Paula Gable
In a Marketplace podcast, reporter Sabri Ben-Achour noted with concern that U.S. productivity has been flat for the past 10 years or so. This is somewhat puzzling, because the economy as a whole is up. However, the worker’s output of goods or services per hour worked remains stagnant.
Productivity is an important metric because it ties into profits, which, at least theoretically, reflect a worker’s wages and thus a sense of well-being. In the world of economics, productivity is a big deal.
In keeping with traditional economic dogma, Ben-Achour posited that we need a technical fix to boost productivity — technological breakthroughs to boost yield and improve the quality of life for the masses.
The traditional treatment for a “diagnosis” of low productivity is to invest heavily in research and development to boost productivity and ultimately profit. But let’s step back from economic conventions for a moment to ask a fundamental question:
Why is profit now seen as the “be all and end all” of business?
In large part, you can either blame or credit Milton Friedman, a University of Chicago professor who won the 1976 Nobel Prize for Economics. One of his most significant contributions was stockholder theory, aka the Friedman Doctrine: A company’s only social responsibility is to increase profits for the owners (stockholders), as long as it doesn’t engage in deception or fraud.
However, in light of the October 2018 report from the United Nations Intergovernmental Panel on Climate Change, we cannot continue to do business as usual. The U.N. report makes it clear that we are facing a real and imminent global threat.
As Charles Darwin’s Theory of Evolution warned in 1859: Change or die. A century later, the Rev. Dr. Martin Luther King Jr. acknowledged that in the nuclear age, “We must learn to live together as brothers [and sisters] or perish together as fools.” By extrapolation, this could lead to the logical conclusion that we must decrease carbon emissions now or our planet will soon become uninhabitable. It is that simple — and that scary.
Changing the Measures of Success
The encouraging news is that we still have incredible reserves of untapped creativity and intelligence available to us — in fact, more so than in the past, due to global telecommunications, which make knowledge transfer virtually instantaneous to anyone with unfettered internet access.
Investing heavily to convert from fossil fuel to green energy would be the obvious, albeit unpopular, approach to reducing carbon emissions. The answer is simple but not easy, because there is much at stake for those who profit from the production, distribution and use of oil, gas and coal.
So what will it take for the world to voluntarily wean itself from fossil fuels and adopt renewable energies? Perhaps part of the answer is to change the way we measure and reward “success” in the industry.
Imagine what might happen if we replaced the Friedman Doctrine of “profits first and only” with the triple bottom line: profits, people and planet.
This term, coined in 1994 by John Elkington, places equal value on shareholder return on investment, quality of life for people, and sustainability of the planet.
This old-fashioned notion of corporate social responsibility (CSR) is suddenly becoming popular again, as business leaders and investors embrace the wisdom of the triple bottom line. In fact, some CSR leaders acknowledge being inspired by the centuries-old wisdom of the Native Americans and other Indigenous People, who made decisions to benefit the next seven generations.
Imagine if corporate executives and world leaders took this “seven generation” approach to heart. We already have the technical ability to shift to green energy. Solar, wind and wave power come to mind immediately. Other technologies may be on the horizon. What’s lacking is the will to invest multitudes of dollars to replace carbon-based fuels with renewable or zero-emissions energy.
At present, there’s no immediate financial return on investment to shareholders. Instead, business would sink vast amounts of capital into technology that would likely result in a financial loss — at least initially. Executives who made these decisions based on current metrics would be considered fools and would quickly lose their jobs. And, rightly so, for they are charged by their boards with maximizing quarterly earnings, as per the Friedman Doctrine — not safeguarding the future for generations to come.
Yet, given the significant environmental, social and economic threats global climate change places before us, it is becoming hard to deny that we need drastic, global changes in energy policy, production and use.
Realistically, a full-scale shift from short-term financial gain to long-term “triple bottom line” thinking is unlikely to happen if we alienate the fossil fuel industry, which provides jobs, investment income, status and meaning to millions of people around the world. The personal losses to those with a vested interest in the status quo are just too high. What is needed is a fundamental shift to rewarding decision-makers for their skill in achieving a triple bottom line.
A New Way of Thinking
National policies and non-binding global treaties are not enough. We’ve tried that with limited success. What is required is a new way of thinking — a change of mind and heart and maybe spirit. That’s a goal of the conscious capitalism community: including planet, people and profits in the metrics for corporate success.
Emphasis on profits alone was a limited approach in the 20th century, and in the 21st century it is obsolete. However, Friedman’s folly is so engrained in our economic system and our culture that we need a quantum shift in thought to transition from carbon-based to renewable energy sources.
Technical fixes to global environmental problems — alone — are effectively futile without an accompanying paradigm shift.
In the simplest terms, we must move from a consciousness of “me first” to “we’re all in this together.” The shift requires an understanding of our interconnectedness: An individual’s economic profits cannot trump the well-being of the planet and its inhabitants. It also requires a change of mind and heart — what Zen practitioners call shin, often translated as “heart-mind.” It requires an awakening to the realization that we can no longer separate the well-being of “self” from “other.” We’re all in it together, on the only planet we have ever called home.
Time is running out. Rather than continuing to lay waste to resources without concern for the future, we must return to being responsible stewards of our shared environment.
Will we continue to adhere to the Friedman Doctrine of self-centered, short-term gains, or will we partner with enlightened leaders to transform and promote business as a source of good?
Shifting global consciousness requires choosing and funding a nimble, global team of wise and compassionate leaders who can put the betterment of the planet and its people ahead of personal motives. The key is getting them to work together to bring the rest of the world along, voluntarily, because they inspire others with the vision of a sustainable economy and healthy planet.
Perhaps this was part of Albert Einstein’s vision when he posited that our fundamental task as human beings is to “free ourselves from [the] prison [of self-centeredness] by widening our circle of compassion to embrace all living creatures and the whole of nature in its beauty.”
Dr. Paula Gable is principal at a consulting firm specializing in nonprofits. This article was originally published by Conscious Company Media.
B the Change gathers and shares the voices from within the movement of people using business as a force for good and the community of Certified B Corporations. The opinions expressed do not necessarily reflect those of the nonprofit B Lab.
Shifting to the Triple Bottom Line: Incorporating People and Planet in Business Decisions was originally published in B the Change on Medium, where people are continuing the conversation by highlighting and responding to this story.
Source: B the Change