What’s good for society is good for business

Today the Henry Jackson Initiative for Inclusive Capitalism launched a very interesting paper making the case for society to move towards a more inclusive capitalism model. It’s a good read and an acknowledgement by those most in favour of market enterprise of the need for positive reforms in current models of western capitalism if it is not to come a cropper later down the line.

There are also some pretty decent recommendations in the report – not least a call to rethink the education young people are receiving in the west today to ensure they have the right skills to be employable in the economy of tomorrow. However, what really caught my eye was the the quote they put in the report from the Harvard Profess Michael Porter: “We once thought that if business just increases its profit, what’s good for business is then good for society …we need to think differently: what’s good for society is good for business.” For those of us who have been pushing for triple-bottom lines, hybrid enterprise models and robust social impact measurements over the past few years we could see this as more evidence of corporate responsibility now exploding into the mainstream of capitalist business models.

Not surprising really as we know there is good evidence that: firms with high levels of corporate responsibility are better managed, firms with mutual models of ownership were more robust in the financial crisis, firms perceived as more ethical can have an advantage in recruiting the best talent, and traditional non-profits are realising that profit can actually significantly enhance and sustain their social impact. Yet, I bet you a dollar that for all the premiums and competitive advantages that businesses believe they can gain from being ‘best in pack’ on corporate responsibility they will always default around the board room to looking at price and how they can reduce costs to maximise profit.

This is perfectly rational in the current model of capitalism as any good business person would tell you: to increase profits you need to either reduce costs or increase sales – ideally both!  Now, I think for those of us passionate about strengthening society, what we really want to see is increased sales of goods and services that increase social bonds and relationships within communities. For example sales of TVs and Xboxs that encourage people to isolate themselves in their own rooms are actually not good for society, while services such as open-air music festivals which enable people to come together and interact with each other are good.

So, a more inclusive model of capitalism is actually much more than mainstreaming corporate responsibility within the system and institutions. It is about the next generation of businesses and enterprises enabling citizens to come together and interact within communities, rather than consume in isolation. Those organisations – whether they be commercially or socially driven – who can most effectively innovative to connect people will be the ones that can do the most good for society. It’s an open question whether such collaborative goods and services will be purchased in place of personal consumer goods (which would have a profound impact on the current model of capitalism) or whether they will be purchased in addition to current personal consumption habits.

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