On the cover of the September 4, 2017 Businessweek, a feature article is described as “Unilever CEO Paul Polman battles for the soul of capitalism.” The inside article considers whether Unilever’s higher purpose business model is sustainable in a world where private equity giants focus on the shareholder. 3G, a Brazilian private equity firm that owns KraftHeinz, represents the dark side; the firm’s strategy has been summarized by Fortune as “Buy. Squeeze. Repeat.”
The Battle for the Soul of Capitalism
The world faces critical social and environmental problems with governments that are limited or paralyzed. Major firms can make a difference because they often have the local knowledge, needed assets and skills, the nimbleness to be responsive, and the talent to create and manage effective programs. It would be a tragedy if these firms lost their soul or if it were taken from them in exchange for a disciplined focus on short-term profits for stock market gain.
Businessweek correctly suggested that Paul Polman and others like him (from Marc Benioff of Salesforce and Elon Musk of Tesla) carry the torch – and they need to deliver. They must find social and environmental programs that leverage their organization’s assets, address one or more meaningful societal problem and be truly effective at doing so.
Further, the programs should be conceived and implemented so that they directly or indirectly enhance the long-term profits of the organization whether by energizing the organization and its brands, creating new markets or inspiring customers. At a minimum, they should minimize the adverse effects on financial performance. Such a task requires strategic talent, leadership skills and a belief in the organization’s higher purpose.
Who Can Make a Difference?
It is not only the existing C-Suite leadership that is responsible as suggested in Businessweek; there are other players that need to step up to the “soul-saving” task.
Customers who care about the social and environmental issues facing the world need to support firms that are serious about addressing the issues. Customers must research which brands and firms have impressive programs, spread word about the programs and reward those firms with purchase loyalty. It does not take many to influence whether a higher-purpose firm struggles or experiences robust health.
2. Enlightened Employees
Employees need to have a bias for working for firms that are doing good and avoiding those that do not (including all of the C-suite). And they should use their voice within the firm to encourage a social and environmental purpose, and to support the accompanying programs. That includes all elements of the C-Suite team. If top talent has a strong preference for a firm with a higher purpose, that will make a difference.
Investors need to support firms that score high on social and environmental programs. They need to have a place in their portfolio for such stocks even if it means stopping short of maximizing returns. There is already a significant movement in that direction. Per the Global Sustainability Investing Alliance 2016 review, nearly $9 trillion (representing 22 percent of all investment assets in the U.S. professional management) is based in part on social and environmental consideration. That number needs to continue to grow and make itself heard.
4. Business Schools & Influencers
They have a role to play by motivating people to care about social and environmental issues and to seek meaning in their professional lives. At the end of the day these are the key drivers for consumers, employees, and investors.
The Businessweek article’s framing of the current struggle for the soul of capitalism was right, but leaders like Polman are not in it by themselves. They’ll need help from consumers, employees, investors, business schools and influencers. Winning the soul of capitalism so that serious problems of society get addressed is too important for any of us to stay on the sidelines
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