I love this time of year in the UK, nature is smiling, it is flamboyant, and it is beautiful. The woods, near to where I live, are carpeted with bluebells and wild garlic; during these unprecedented times it does seem as one part of nature is suffering the other is flourishing. But the surreal world of my forays into the woods is escapism from the reality of our times. What will be the economic outcome of Covid-19? Will Green Growth flourish or will the rise of state isolationism put this on hold? How do we address climate change and the loss of biodiversity now that economies are so negatively impacted? And, how will millions of people around the world be protected from inevitable levels of poverty? Ultimately, the answer to all these questions lies in the answer to this one question: Can we truly build the new ideals of sustainable capitalism based around ethical economics? As much as I am certain that next Spring the bluebells and wild garlic will return, I am also optimistic that the answer to that last question is, yes.
In many ways the wild garlic, or to give it one of its correct names, Ramsons, is a great metaphor for our current consumptive form of capitalism: when it grows it just goes wild and consumes the entire forest floor, taking over with its pungent aroma and broad green leaves. But, unlike our consumptive World, after a couple of months Ramsons gives way to new forms of life, and then to return again – it is sustainable. Well, no more of metaphors we now have to find real ways of mimicking much of nature’s sustainability.
Capitalism is motivated by markets and in turn States support this structure; in modern times based around free-market economics and globalisation. However, the words of capitalism and globalisation have come to cause much fear and loathing to many people; yet, there would be very few economists who would not agree that we have never seen such prosperity at many levels. But this consumptive, avaricious form of capitalism that we have built has also created mass division, social inequality and irrevocable negative impacts on our planet. Quite simply, as economist, Paul Collier stated, ‘… what modern capitalism is currently delivering is aggression, humiliation and fear: the Rottweiler society.’
Is it any wonder that we are at a crossroads? These are not great qualities at the best of times, (sorry Rottweiler owners!) let alone during a pandemic or the emergency we face from climate change. But also, is it any wonder we are in this place when capitalism relies on two main facets, States and markets to work together or at least have some sort of harmony between public interest and economic growth.
Globally we have demanded that States allow free-market-economies to thrive, where shareholder primacy is the rule of law and the best type of government is the one that governs from a distance. The result is that on the one hand we have corporate ‘greed’ due to their fiduciary responsibility to make profits to be shared to investors and, on the other, States that are so divorced from public interest that we end up with divided and divisive peoples. Just look at the commentary on social media during this time. We are trying to build the ethical state and the ethical corporate on vested interests not public interest, in other words on individual profit and emotion. Not only this but perhaps the most inadequate element of all this is the crazy notion that somehow if we employ CSR in the corporate world, corporate social responsibility, then corporates will off-set their greed and individualism by giving to the very societies and environments that their greed and individualism devastates in the first place. However, blame is not an ally for change, and I am as guilty as anyone. I am an entrepreneur and have built business where I took risk, so I wanted such reward and I have employed CSR policies whilst sharing in profits. But change is needed, and I am an optimist and believe ethical economics and sustainable capitalism can and will thrive. It can and must work for our planet and everyone: to not leave any part of nature behind.
As I finish writing this we are celebrating Earth Day, which makes this question even more poignant: what could Sustainable Capitalism look like?
Primarily we need to think far more about ethics and stakeholders and shift the emphasis from responsibility to resilience; I believe this should be employed by States as well as corporations. This shifts the emphasis of CSR to corporate social resilience, but as I have said, within the public as well as the private sector. Responsibility is a moral compass and although ethics are bound by this, the reality is sharply different. Resilience is robust and although it can be argued it works on an alternative level to responsibility, and the latter will undoubtedly be contained within it, there is a vast difference between setting responsible policies or strategies versus setting resilient ones. Resilience is about absorbing the now, adapting and transforming; it is about building collaborative partnerships that build from adaptive co-management: the inclusion of stakeholders not just shareholders. In other words, we all work together for ethical shared values and mutual obligations. The problem with responsibility is that, it is subjective and shared values become vested interests.
Resilience will allow States to play a far greater role in ensuring public interest is upheld over the destructive vested interests. States need to be underpinned by ethical foundations of shared value and obligation – that is not a pipedream. This has happened in the past, look how in the UK the NHS came about, or how many countries pulled together after WW2, including the defeated. Post Covid-19, which has been likened to a war, poses similar global challenges, and I have to add here that I do fear about the sort of populist, neo-nativism that is currently predominant in the UK and USA . I believe the post Covid-19 era will see many States employing resilient policies, looking to international collaborations, whereas my fear makes me believe the UK and USA will continue to be isolationist – the Rule Britannia and America First thinking.
In the last decade or so, we have seen rise to new types of corporate formation in an attempt to build shared value and resilient outcomes. These range from Community Interest Companies, Social Enterprises and Companies Limited by Guarantee in the UK, to the new Public Interest Companies in the US. However, the main issue lies with the multitude of global SME’s to the MNC’s, that employ the Friedman principle, highlighted in 1970 in the New York Times – that the social responsibility of a corporation is to make profits for shareholders. Should we now say, well, those profits need to be divided to stakeholders? If we do, the courts will be very busy! So, my question to corporate lawyers is this. Why can’t the environment and social interest be represented on corporate boards as shareholders? Let’s allow the stakeholders representing social interest and the environment become shareholders – it is a fair-share model of corporate entity. This still allows the risk takers to benefit from their risk and reward model but offers a new light for the inequality and injustice inflicted on those stakeholders. This obviously needs to be investigated further than the words in a short blog on a website. Questions will abound about who buys the shares and where do the funds come from? Who represents social interest and the environment? But I believe there are strong answers to this, and resilience will allow and prevail sustainable outcomes. As much as Simon Sinek made famous the Start With Why I argue that we should also engage the Who.
As the above may take time to engage and implement we can at least ensure corporates are obligated to follow a ‘due regard’ model, as Ed Probert from Probert Legal stated to me, ‘The original focus on shareholder profits was joined by the requirement to take regard of the interests of employees. Now the matters of which the directors need to ‘have regard’ has been increased to include, among other things, the impact of the company’s activities on the environment. We expect this duty to be lifted to the level of Health & Safety or Modern Slavery in due course – becoming a mandatory core element of the way a Company is governed and its performance reported.’
This is just a snapshot of my thinking for a post Covid-19 world of sustainable capitalism, and as I see the word count moving upwards to 1500 words I know I now need to stop, but we do have the time and ability to read this during our present lockdown. I wonder though, during my walks in the forest, whether we will make the time or have the inclination to change, will we, like the wild garlic, accept sustainability is about ensuring life for the next generations?
I want to thank two economists, by reading their amazing books, that have cemented and shaped my thinking and writing in this area and build on my work in CSR, Ethics and Sustainability. I would encourage anyone to read these two works.
Mazzucato, Mariana (2013) The Entrepreneurial State. Debunking Public vs Private Sector Myths. UK: Penguin Random House.
Collier, Paul (2018) The Future of Capitalism. Facing the New Anxieties. UK: Penguin Random House.