This year has been one for the books. And an economics and business book published earlier this year in April, Reimagining Capitalism in a World on Fire, is a timely, worthwhile read. It discusses how an evolving capitalism can help solve many of the world’s biggest problems – problems we can no longer ignore, or address only with lip service.In her book, Harvard Business School’s Rebecca Henderson states that “markets require adult supervision.” She explains that “The problem is not free markets. The problem is uncontrolled free markets, or the idea that we can do without government, and without shared social and moral commitments to the health of the entire society on which effective government [and business] depends.”Dr. Henderson discusses early in the book how Milton Friedman and his University of Chicago colleagues, developed their widely accepted ideas around the efficacy of free markets and the purpose of the corporation being to maximize shareholder returns. She points out that these ideas, developed following World War II, were a product of their time and place – that they not only no longer serve us well today, but are causing great harm from those that follow them as dogma.
Henderson’s comment, also early in the book that a “mere decade ago, the idea that business could help save the world seemed completely crazy” was a bit surprising to me. Many of us in the field of corporate sustainability for a while would argue otherwise. Henderson herself makes reference to a number of businesses that were doing just that decades before (e.g., Eileen Fisher and Patagonia), including some acquired by Global 1000 companies who saw the value in those early pioneers (e.g., Ben & Jerry’s, acquired by Unilever, and Whole Foods by Amazon).
However, she clearly is deeply knowledgeable about the relevant trends behind the shifting of capitalism that has been underway this century, as well as the external forces and dynamics that are required to keep that shift going and get it to the next level. She weaves these pieces together in compelling stories and arguments supporting the title of her book.
Henderson goes on to outline and expound upon five key pieces of a reimagined capitalism – “a reformed economic and political system” – (1) creating shared value, (2) building purpose-driven organizations, (3) “rewiring” finance, (4) building cooperation, and (5) fixing our governments. In the “rewiring” of finance, she indicates that traditional finance “may be the single biggest stumbling block to reimagining capitalism.” But there are a few of my favorite, related trends here that she points out are already underway – a shift to including environmental, social and governance metrics (ESG) in deriving what is most profitable for investors; encouraging and providing impact investors what they need; and the growth of a newer form of incorporation – the benefit corporation – that reduces the power of investors and sets out the responsibility of the firm to other stakeholders.
While there is not a lot of ground not already covered by other books and publications, as some other reviewers have pointed out, Dr. Henderson does an excellent job tying these pieces together and has some new nuggets, both insights and facts, for the vast majority of readers – even experts on these topics. Her coverage of the devastating deforestation and climate impacts of wide-spread palm oil use, and the industry cooperative efforts behind the Roundtable for Sustainable Palm Oil (RSPO) is one example. I spent a good deal of time recently leading a team for a Fortune 100 company deeply involved in RSPO participation efforts, following a career of nearly 20 years in corporate sustainability, and saw some big challenges for those efforts. Yet, I was unaware of still several others that Henderson highlights in the book, as well as the potential solutions.
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