We are living in uncertain days, facing the most complex set of intractable and interconnected problems our species has ever faced. The good news is that there is an opportunity here for citizens and profit-driven businesses alike to lead change.
Like many people, when we began thinking about the state of our earth we began with, well the state of our earth — the big problems associated with the environment. For instance, did you know that just to maintain the way we live today, scientists estimate we humans consume 1 1/3 “worlds” worth of natural resources? And, with the global population growing and China and India industrializing quickly, we will soon require 2 “worlds” worth of resources. At the same time that we’re consuming what’s left of the natural world, we’re also emitting enough waste to poison what remains. It begs the question: Does anybody know where we can get a second planetary home? Before the end of this century? ‘Cause if we don’t change our ways, we’re going to need it.
There can be no arguing the effects of climate change anymore, despite the best efforts of those who would deny or obfuscate the issue. We‘re now on a path that looks more like the worst-case scenario many forecasters feared when they first focused on the effects of greenhouse gasses on global warming. It’s the kind of scenario that truly could wipe out the human race.
That outcome is made more likely by the underlying causes of global warming. We’re getting more and more crowded on this planet, and we haven’t yet figured out how to support that population in a sustainable way. Nor have we figured out, even in unsustainable ways, how to assure vast tracts of the world of access to clean water and safe food.
But we came to realize quite quickly that this isn’t just about a sustainable environment. Other major forces are affecting us as humans and citizens. We’re seeing intolerable and dangerous breakdowns in behaviour from the institutions we rely on to guide us to a sustainable future. Governments, financial institutions, big business, even organized religion all are acting in such a way as to cause us to say “What now”? Do we think the Great Recession was an inevitable event, or was it the result of the system being allowed to fail us? So what now, indeed?
While it’s tempting to think we’re smart enough to recognize that as humans we are standing in front of an oncoming train, most of us have yet to realize that. The world is currently led by the “grasshopper generation”, so coined by Kurt Anderson in his seminal essay in Time Magazine (March 26, 2009). We’re busily satiating ourselves by consuming everything around us with little regard to consequence. We have successfully taken the prosperous world forged by our parents and grandparents, the Greatest Generation, and driven it into the ditch in the space of one generation
Maybe somebody will find a magical cure for this whole mess, but based on current and past behaviour, can we really count on government to save the day? While regulatory intervention must play a role in changing the current human trajectory, we’re going to have a bit of problem reaching the kinds of international agreements that are required. You see, the industrialized world is currently responsible for the use of 80% of the world’s resources, and creating 80% of the resulting trash. Unfortunately, or maybe fortunately, that’s only 20% of the world’s population doing that. So somebody has to get the other 80% to agree that they’re quite happy with their status quo. They have to agree that they’ll never acquire the standard of living that the industrialized world has. Oh yeah, and along with that, not get hung up on those “luxuries” like reliable access to clean water or abundant and safe food.
Oh, and while we’re using our silver tongues, we’re going to have to get the Chinese and Indian governments, among others, to agree that they, too, are satisfied with the status quo. They’ll have to stop the growth of their middle classes and their consumer societies because the world will never recover from the resultant spike in resource consumption and environmental degradation. We’ll simply have to persuade them that since the West industrialized first, it got to use all the resources, fill the environment with pollutants, and now bask in lives of comparative comfort. Sorry, China and India – you’re too late to the party. So what if they’re bigger than the West and own most of the debt of the United States. I’m sure they’ll listen to reason.
Yessir, sounds like brokering the necessary global agreements on these issues is gonna be a piece of cake.
So while we hope for breakthrough government achievements, maybe we ought to look for other possible solutions given the fate of the human race is at stake. While there are numerous other “actors” in this play—NGOs, foundations, academics, etc.—there are only 2 who have the power to drive the change we need: businesses and citizens.
Let’s look at business first given their collective power and financial resources. In the vast majority of the world, the operating system of business is capitalism. Here’s my favorite definition, taken from Joyce Appleby’s book “The Relentless Revolution: A History of Capitalism”:
A cultural system rooted in economic practices that rotate around the imperative of private investors to make a profit
Ah, the profit imperative. As Milton Friedman said, “The social responsibility of business is to increase profits”. That’s pretty cut and dried; nothing about saving the world there. And business has been consistently and relentlessly successful about achieving that profit imperative at all costs, or it dies trying. It’s also had success ensuring that governments have been populated by regulators who believe that the world will be just fine if we let the market economy do it’s thing, and stay out of business’ way. But as Nobel Prize winning economist Paul Krugman points out in a recent issue of the New York Times Magazine:
“When there are negative externalities in an economic transaction—costs that buyers and sellers impose on innocent bystanders—any presumption that a free market economy will do the right thing goes out the window”.
Negative externalities. That’s economist-speak for the acid rain that damaged our forests, and put chemicals in our water. Or for thousands of Americans losing their homes in the Great Recession. Mostly instigated by business misbehaving while seeking profit.
Now you Capitalists don’t roll your eyes and walk away. We’re with you. We just happen to think capitalism needs a bit of a rethink. To be clear, business will play a critical role in resolving the issues. We believe it just needs a push. When it sees the profit possibilities this new thinking opens up, we know it will rush to be part of the solution.
So, let’s recap. Government ain’t gonna save us, and business won’t unless and until it’s in their profitable interest. That leaves you and me.
We, simply put, as stakeholders — consumers, customers, employees, investors and citizens — can make choices that contribute to the problems, or to the solutions. We can support businesses, brands and politicians who take the long view of the world and behave well by benefiting more stakeholders. We can support companies who are engaged in their local communities as well as the global community.
As citizens, we have never in history had the power that we do now to change the world. There are very few dark corners left in the world thanks to the internet, so we can make more informed, better choices about the impact we create on the planet, and share those choices with others. The power now resides with us. It’s nothing short of a new world order, and we call it Citizen Capitalism. Here’s how it’s works.
Once upon a time we would have believed business when they told us they “got it” and that behaving with decency and respect was their priority. They could shift the focus away from their dark bits by shedding light on snazzy social responsibility initiatives. But times have changed.
External observers —- customers, regulators, bystanders —- now have the ability to peer deeply into the way a business operates. We can see whether Company A is behaving as it says it does, and most importantly, whether it is doing so for all Stakeholders. It’s not just about delivering a benefit to shareholders and investors, or even customers, but rather it’s about doing so without those dreaded “negative externalities” for everybody else.
In the same way, we have the ability to find and support those companies that are genuine in both their desire and their behaviour to do good and make profit concurrently.
We also, as any one of the Stakeholder groups, have the ability to tell the world about the good and bad behaviour we see on the part of business — instantly and with broad effect thanks to social media, as we tweet it or post it on Facebook for our friends to share with their friends.
So with average citizens motivated like never before to support businesses and brands that do the world good — according to the 2009 Edelman GoodPurpose Study, 83% of people would change consumption habits if it would make the world better (amazing how a fundamental and growing threat to our very survival catches our attention!) — how will business respond? In the only way they are programmed: They will change their ways in the pursuit of profit. The smart ones will do it fastest and enjoy the greatest return.
We are entering a period of innovation where businesses that focus on genuinely doing good will do better because of it. They will apply stakeholder thinking and eliminate those nasty “negative externalities”. At least the high growth businesses will. And those who don’t will be caught between the power of regulation and the anger of the consumer.
I believe the successful companies in this period of innovation will be defined by one other key characteristic. Sincerity. To succeed, having decided they want to practice Stakeholder thinking, and have their profits derived from economic activity that does no harm (or even better, does good), they will have to ensure that the way their company behaves contributes to the same goal.
In a world where any profit-producing product can be reverse-engineered and launched by a competitor, cheaper and in a heartbeat, true sustainable competitive advantage will come from the way a company behaves toward all its stakeholders. Successful companies will have a compelling answer to the question “Why does my brand or business make the world a better place for investors, employees, suppliers, customers, and everybody else who shares the planet with them?”
Isn’t it ironic that while the world has never been plagued with such deep and far-reaching challenges as it is today, the solutions to our very survival will ultimately be driven by little actions taken every day by you and me. By the choices we make as citizens — to vote at election time, to take an active role in our communities by volunteering or shopping local, to be mindful of how and why we consume.
Governments will change regulations because we as citizens will vote them out if they don’t. They can be a powerful utility for change, but it’s up to us to use them properly.
Business will prosper by heeding the interests of all its stakeholders, or we as citizens will buy from their competitors.
It will be nothing short of a reboot of the operating system underlying our economy and our way of life. Change will be driven by us, as individuals. As consumers. As voters. As shareholders. As employees. Behold the birth of citizen capitalism, the salve for a hurting world that will also provide smart business with the greatest opportunity for innovation and profit since the invention of the steam engine.