Move over, CSR. It’s time for New Capitalism

There’s been something new happening around what is called “corporate social responsibility,” a term that emphasized how distant caring about its social impact was from a company’s core mission. The new thinking is this: is it possible to integrate positive social impact (or, at least, much-reduced negative impact) into the very fabric of a profit-making business?

Examples are popping up more frequently. Wal-mart has received attention for its initiatives promoting compact-fluorescent lighting and its recent effort to improve the nutrition of the food it sells.

Already in 2011, two important works have emerged in this area of thought. First, Umair Haque’s book “The New Capitalist Manifesto,” and, in the Jan-Feb Harvard Business Review, “Creating Shared Value,” by Michael Porter and Mark Kramer. Of the two, “Manifesto” is more brightly written and attention-grabbing, while “Shared Value” is solider, with more salient examples.

Haque in particular has a way with a metaphor. For example,

Imagine two worlds: The first is a big world of abundant resources and raw materials, an empty world where demand is infrequent and easily satiated, and a stable world where disasters are infrequent and weak. The second is a tiny world, emptying of raw resources, a crowded world where demand is always hungry, and a fragile world, where contagion of every kind can flow across the globe in a matter of minutes, days, or weeks. A big, empty stable world is like a vast, placid, untouched game reserve.

But a tiny, crowded, and fragile world is like an ark. Industrial-era capitalism was built for a big, empty, stable world.

But at the dawn of the twenty-first century, the world is more like an ark – tiny, fragile, and crowded.

Consuming, borrowing, and utilizing are the engines of prosperity in a big, empty, stable world, but the engines of crisis in a tiny, fragile, and crowded one.

Porter and Kramer traffic in more ground-level thinking, but with the same aim in mind:

The traditional playbook calls for companies to commoditize and exert maximum bargaining power on suppliers to drive down prices – even when purchasing from small businesses or subsistence-level farmers.

[By contrast,] Nestle worked intensively with its [coffee] growers, providing advice on farming practices, guaranteeing bank loans, and helping secure inputs such as plant stock, pesticides and fertilizers. Nestle established local facilities to measure the quality of the coffee at point of purchase, which allowed it to pay a premium for better beans directly to the growers and thus improve their incentives. Greater yield…and higher production quality increased growers’ incomes, and the environmental impact of farms shrank. Meanwhile, Nestle’s reliable supply of good coffee grew significantly. Shared value was created.

This is the key thread connecting “Manifesto” and “Shared Value.” Neither is proposing offsetting bad actions with some related or unrelated good actions. Rather they both advocate creating profits and benefiting the planet through “ark management.” Recognizing and capitalizing on the interdependence of people/resources/governments; regaining a focus on the welfare of the communities in which a company does business; and planning, not just for the next quarter, but decades into the future.

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