The world has witnessed many structural changes, economically, socially and politically speaking. In fact, ever since globalization became the new normal, all of these changes have had to adopt increasingly complex performance frameworks and more sophisticated management tools in order to thrive.
As for today, our current capitalist system has for long been put into question, particularly regarding concerns about its impact on the planet and society. The still ongoing sanitary crisis has additionally reinforced the idea that the current model of capitalism is unsustainable; and yet we can’t throw away the fact that private enterprises and competitive markets, which are the core of this system, are fundamental elements of the much needed transformation towards sustainability.
And so the question now does not talk about whether we should change or remain the same, but rather how we are going to make the change. What is it that companies and markets can already do to push a more sustainable system forward?
The contemporary overall context reflects a downfall of trust in the many organizations that encompass society’s infrastructure, leaving a void on the answer to who should take lead of change. To many, the answer lies in purpose driven companies; this is, organizations whose activities are crafted and carried out for the benefit of society and the environment, without sacrificing economic performance.
In a way, we can also talk about people driven leadership, as it is oftentimes social demands that encourage change in economic and democratic institutions. In this regard, growing demands for the reinvention of our current economic model should be seen as a window of opportunity and competitive advantage for companies that understand the urgency and act upon it.
A reinvented capitalism
The World Business Council for Sustainable Development (WBCSD) recently published a report that conveys key points that could help alter the current capitalist system and find a more sustainable alternative to our increasingly obsolete methods. A simple idea that clearly reflects and defines the nature of change is that the capitalism we need is one that rewards true value creation – not value extraction (WBCSD, 2020).
But there are three contemporary failures the report notes that have become major obstacles on the way to achieve a newly defined sustainable development inside capitalism:
- Poor or incomplete performance metrics that fail to distinguish between value creation and financial value extraction.
- Market structures that favor short-term financial value extraction rather than long term true value creation.
- Weak and fragmented institutions incapable of enforcing rules to adequately address market failures and align them to true value creation.
What can we do?
It is clear that the common denominator of failure inside the capitalist market is true value creation, more accurately, the lack of it. Financial performance has been prioritized to the point where everything else ceases to be. But without true value, the system, as well as society and the planet, begins to decline.
The report finds five features for a an efficient reinvented capitalism that puts purpose, people and true value at the core of successful economic performance:
- A stakeholder-oriented approach that takes over the current shareholder value-maximizing strategies. The purpose of companies lies in creating value for all stakeholders, from employees to suppliers and the communities in which they operate. This should be at the core of corporate governance models.
- Impact-internalizing, that is, both positive and negative social or environmental impacts should be internalized into the price of a given good or service, as well as the market valuation of the company providing them. Businesses and investors should seek to optimize performance beyond risk and return, including impact into the traditional equation.
- A long-term approach is key to align businesses and investors with the long timeframes that actually define social and environmental performance and its feedback. A necessary strategy to assess and manage long term risks such as climate change.
- A regenerative system that puts circularity first, understanding, defining and integrating universal principles of systemic health into the economic design. Economic decisions and activities should be guided by the need to preserve all types of capital, including social and natural capital.
- Accountability should be a driving force inside the market. The market should be regulated so as to provide an oversight of the actions and impact of companies. Strong governmental and non-governmental actors can help implement effective regulations that represent societal demands.
Engaging through transparency
In DoGood we believe that it is precisely through engaging with all stakeholders that we can enhance the value of our project and help pave the way to a more healthy and sustainable future. We want to serve as a benchmark for improvement and building of a strategy by prioritizing transparency and measurable information in order to bring light to the scope of the responsibility and sustainability performance of an organization.
In this regard, it is essential to our work to promote good corporate governance, meaning that the processes of disclosure and transparency are followed so as to provide regulators and shareholders as well as the general public with precise and accurate information about the financial, operational and other aspects of the company, including a more accurate definition of the ESG performance.
We have developed a corporate government tool that helps establish ESG impact objectives for employees in regards to the sustainability strategy of the company. Through our technology we are able to activate and track employees’ impact, creating engagement that translates into improved ESG metrics, reputational value and an overall positive impact for the environment and society.
If you want to know more about how we work to create a positive social and environmental impact, click here.