“My students are on fire.”
This from Rebecca Henderson, economist and professor with Harvard Business School. Henderson was referring to MBA students in her course, “Reimagining Capitalism.” Enrollment for the course has grown exponentially in recent years, as students search for a more purpose-driven and positive approach to business.
Henderson was speaking to a group of CEOs at the Center for Higher Ambition Leadership’s annual CEO Summit. She previewed ideas and research from her book, Reimagining Capitalism in a World on Fire, due out May 2020.
Her headline for us? It’s time to act, and we need to move fast.
We discussed the challenges society faces today, including the loss of trust, accelerating inequality, polarization, and climate change. Despite the dire evidence that things are getting worse, Henderson is still hopeful. She believes business can lead a new path forward – creating economic prosperity in harmony with the environment and social equity.
Here are four approaches companies can take that Henderson believes will change the game.
1) Leverage Shared Value
Shared-value models can be a smart bet against an uncertain future. Investing in “doing good” areas creates more options for companies. This is critical with the speeding pace of change. To stay competitive, companies should be experimenting and testing.
Unilever is one example. As customers increasingly want to buy products with a positive impact on the Earth, Unilever began to create new green and sustainable product lines. In 2017 Unilever’s sustainable living brands grew 46% faster than the rest of the business. This is good for the company and good for the environment.
Henderson stressed that the more companies move this way, the harder it will be for companies to do the wrong thing.
2) Build Cooperation
The biggest challenges we face won’t be solved by individuals or single organizations. They require working together, often with our competitors. Henderson challenged us to imagine what would happen if competitors worked together to limit or shift the negative environmental or social impacts caused by their industries. Pre-competitive cooperation could allow companies to do better without taking a financial hit. When done transparently with accountability built in, this approach can transform industries.
This is happening already. For example, thirteen leading seafood companies make up the nonprofit coalition Seafood Business for Ocean Stewardship. Through their corporate actions, they have the power to impact the structure, function and future of ocean life. CEOs gathered in 2018 in Japan to address overfishing, illegal catches and the use of slave labor in the seafood industry. The companies have collectively set a high bar for action and areoperationalizing their agreements by assigning staff to key roles in materiality assessments and monitoring and reporting efforts.
3) Rewire the Capital Markets
Industry players like BlackRock’s Larry Fink are already calling for firms to emphasize a more sustainable, long-term view. As Henderson points out, investing in ESG – the consideration of environmental, social and governance factors, alongside financial factors – doesn’t cost anything and could really shake up markets in a good way. CEOs and Boards can also influence markets by measuring and reporting on a broader set of metrics that offer a more holistic view of value and performance.
4) Rebuild Politics
From education policy to labor laws, the work of lawmakers is interwoven with the success or failure of our businesses and the wellbeing of our communities. Business is in a strong position to influence political action. The policy views expressed by CEOs garner substantial media coverage and attention from policymakers.
Mark Bertolini of Aetna taking a stand on paying workers a living wage is one example. Another is the Conservation Alliance. Founded by outdoor industry leaders REI, Patagonia, The North Face and Kelty in 1989, the alliance has developed an advocacy component to defend public lands under political attack.
When it comes to rebuilding politics, Henderson recommends starting at the local level, where there is less polarization. Mayors and other community leaders tend to be pragmatic and welcome bipartisan involvement that will drive progress.
Trust is the Secret Weapon
As leaders re-think their purpose and their responsibility to all their stakeholders, the way they show up will demonstrate their commitment to those around them. If they are inclusive, invite different points of views and consistently act in alignment with their values and purpose, they will build trust and engagement. This will inspire stakeholders to join them. And together we can make every day count for the betterment of the common good.
“We can all be pebbles in the avalanche,” says Henderson.