Toward a New Capitalism

Modern capitalism is under fire—even the US political debate rings with it. Questions include what is simply “good business” vs crony capitalism, and what about the interests of the consumer? The business world is being forced to come up with new ways to respond. Whether it’s the public resistance to the autocratic regime in Venezuela or the vehement anti-capitalist rhetoric of Occupy Wall Street and the Sanders movement that took it up, capitalism as we know it is feeling a bit of an earthquake, and the corporate world is feeling some aftershocks.

Naturally, there will always be a contingency that blames big business for perpetuating the worst woes of capitalism such as the income gap, global warming, or the economic collapse of 2008. For years, companies have fought long and hard to put to rest any negative associations with terms like “profit,” “corporate,” and “bottom line.” But this approach only enforces the binary. Now, some businesses are taking a more creative approach in which they fully own and embrace the power of capitalism to make money and a positive impact.

I’ve ventured into this territory before in writing about top business executives who are channeling their social and financial capital toward a greater good. Powerful figures like Sheryl Sandberg, Tim Cook, and Marc Benioff, to name a few, are pioneers of this fascinating new trend: the CEO-turned-activist. We’ve seen this in Sheryl Sandberg’s mission to empower women, Howard Shultz’s Race Together Campaign, and Mark Benioff’s protest over the recent “religious freedom” act in North Carolina. The message is evident: this isn’t your father’s capitalism.

This type of activist social change is not the typical corporate responsibility policy we usually see, but instead a scalable business strategy with long-term benefits. Changing the world has become profitable. Fortune seemed to agree when they released “Change the World,” a list recognizing fifty companies with measurable positive social impact in their core business strategies. With corporate behemoths like GlaxoSmithKline, Nike, and Nestle—yes, Nestle—in the top ten, the criteria extend beyond “doing good” and focus on practices that strive towards social change and profit.

The “Change the World” list was formed with the help of Harvard Business School professor Michael E. Porter. In an article originally published in Harvard Business Review, Porter and his colleague Mark R. Kramer introduce the theory of “shared value,” a management strategy focused on creating measurable value by acknowledging and addressing social problems. “Shared value” lays the foundation for Fortune’s “Change the World” list and sheds light on the increasing popularity of CEO activists.

When the article was published in 2011, Porter and Kramer reported that public trust in corporations was extremely low. Tune in to any news cycle and you’ll find the statement still applies today—in spades. Porter and Kramer blame it on businesses’ focus on short-term profit, a move that may delight shareholders in the short run but could also “overlook the greatest unmet needs in the market as well as broader influences on their long-term success.” The charges Porter and Kramer leverage against corporate America rival those of any disgruntled everyday Joe. If companies weren’t blinded by short-term profit and this outdated notion of value creation, they ask, “why else would [they] ignore the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of suppliers, and the economic distress of the communities in which they produce and sell?” Why indeed.

Fortune’s eye-opening “Change the World” list demonstrates that what makes the selected firms’ social impact so valuable is that they did not set out to be do-gooders. In fact, many corporations on the list—such as Mastercard, Coca-Cola, and Bank of America—are of the ilk that make those skeptical of corporations turn away in disgust. For those firms on Fortune’s list, social change is a secondary result of improved business models and realigned visions, which is exactly what Porter and Kramer called for years ago when “shared value” was in its genesis.

Today, smart business leaders and CEOs are recognizing that even after the customer is served, a modern company’s work isn’t done. Socially conscious firms that practice “shared value” have the potential not only to generate profit, and quite a lot of it, but also to reshape modern capitalism’s relationship with society. These changes aren’t taking place through full-scale business transformations. Rather, businesses are taking new approaches to their corporate visions and transforming the ways in which they approach their markets, customers, suppliers, and communities. While these changes often start small, the impact can be huge. If “shared value” becomes what it takes for businesses to get to the top, everybody wins.