Capitalism at the Crossroads: From Obligation to Opportunity
Posted 9.22.05This month we review Stuart Hart's new book "Capitalism at the Crossroads: From Obligation to Opportunity". Taking the view that business is uniquely equipped at this point in history to lead us toward a sustainable world in the years ahead, Hart argues that corporations are the only entities in the world today with the technology, resources, capacity, and global reach required. The book's optimistic message is that, properly focused, the profit motive can accelerate the transformation toward global sustainability with nonprofits, governments, and multilateral agencies all playing crucial roles as collaborators.
“As we enter the new millennium, capitalism truly does stand at a crossroads,” says Stuart Hart, the SC Johnson Chair in Sustainable Global Enterprise at Cornell University’s Johnson School of Management, in an online discussion of his new book Capitalism at the Crossroads: From Obligation to Opportunity (see http://www.whartonsp.com/articles/article.asp?p=369398) published by Prentice Hall this year.
Taking the view that business is uniquely equipped at this point in history to lead us toward a sustainable world in the years ahead, Hart argues that corporations are the only entities in the world today with the technology, resources, capacity, and global reach required. The book's optimistic message is that, properly focused, the profit motive can accelerate the transformation toward global sustainability with nonprofits, governments, and multilateral agencies all playing crucial roles as collaborators. It envisions a central and expanding role for commerce, particularly multinational corporations, in fostering global sustainability and foresees massive opportunities for companies to make money and make the world a better place, particularly among the four billion poor at the base of the economic pyramid.
For many years command and control regulation coupled with a “take, make, waste” organizing paradigm created a corporate mindset that resulted in what Hart terms the “Great Trade-Off Illusion” – a belief that firms must sacrifice financial performance to meet societal obligations. The Great Trade-Off Illusion trained a generation of corporate, business, and facility-level managers to assume that societal concerns could only be drags on their business.
The passage of a pioneering voluntary initiative in 1988 known as the Toxic Release Inventory (TRI) as a rider on the Superfund Reauthorization become one of the most important and effective pieces of social legislation ever passed, according to Hart. Although it received relatively little attention after it passed, TRI only required manufacturers to disclose their use, storage, transport, and disposal of more than 300 toxic chemicals (all legal at the time). This data, maintained by the U.S. Environmental Protection agency, became an important new source of information for activist groups, the media, and third-party analysts to track corporate environmental performance, creating top 10 lists of corporate polluters.
Today corporations are being challenged to rethink global strategies in which one-size-fits-all products are produced for the global market using world-scale production facilities and supply chains. According to Hart, the next challenge will be for corporations to become “indigenous” to the places in which they operate. Doing so will require that they first widen the corporate bandwidth by admitting voices that have, up to now, been excluded; this means becoming radically transactive rather than just radically transparent.
Global capitalism stands at a crossroads—facing international terrorism, worldwide environmental change, and an accelerating backlash against globalization. Today's global companies are at a crossroads, too: finding new strategies for profitable growth has never been more challenging. Both sets of problems are intimately linked, says Stuart L. Hart—and so are the solutions.
In Capitalism at the Crossroads, Hart shows companies how to identify sustainable products that can drive new growth as they also help solve today's most crucial social problems. Drawing on his experience consulting with top companies and NGOs worldwide, Hart shows how to integrate new technology to deliver profitable solutions that reduce poverty and protect the environment at the same time. Along the way, this book teaches the reader how to become truly indigenous to all markets—and avoid the pitfalls of traditional "greening" and "sustainability" strategies.
Weatherhead School of Management at Case Western Reserve University cultivates creativity, innovation, and purpose-driven leadership to design a better world.