Can Capitalism Save The World? With Rebecca Henderson
The Higher Ambition Leadership Alliance recently gathered a diverse group of executives to explore this question with HBS Professor Rebecca Henderson author of the recently published groundbreaking book "Reimagining Capitalism in a World on Fire."
Professor Henderson paints a vision of how individual and collective efforts could add up to building a more just and sustainable world. I first met Rebecca back in 2015 at The Higher Ambition Leadership Alliance CEO Summit and again at last year’s Summit. It is intriguing to see how her work has evolved.
Rebecca’s research and stories sparked a rich and exciting conversation among the many members of the Higher Ambition Leadership Alliance community. We hope these ideas will be as thought-provoking and inspiring for you.
-- Mette Norgaard, Core Faculty for the Alliance’s Higher Ambition Leadership Institute
Full Recording Coming Soon
Capitalism has a PR Problem
“Why reimagine capitalism, why not just throw it out the window?”
This is the question Rebecca Henderson is met with all the time – especially from next-generation leaders. She observes that 50% of the world’s population says capitalism is not working for them, and that 70% of US millennials say they prefer socialism to capitalism.
“That statistic scares me because I think capitalism is one of the great inventions of the human race,” she said. “I think genuinely free and fair markets are an unparalleled source of innovation, creativity, and prosperity.”
Yet Rebecca acknowledges that not all companies are operating in a way that creates value for all. During the Q & A, Rebecca fielded a question from a leader who serves on five publicly traded boards. This leader stated that she is obviously a capitalist at heart, yet her heart breaks for capitalism. She observed that people don’t trust our institutions and corporations; and, sadly, for good reasons.
Rebecca agreed, “So what can we do? I think real and meaningful metrics have to be the first and central point in rebuilding trust.”
Investors are Putting ESG on the Agenda
This led to a CFO of a fortune 500 firm reporting that she has seen an explosion in the number of conversations with investors about how companies are measuring progress on environmental, social, and governance (ESG) and the UN Sustainable Development Goals. Investors want to know the specific policies and metrics companies have in place -- and being good in one dimension is not enough. There is a lot of uncertainty about what are acceptable metrics and what levels of year-over-year improvements are acceptable.
Rebecca sees developing a set of non-financial metrics, tailored by industry, as a critical step.
“My advice in this space is for companies to report what's material to them, that this is a great opportunity to communicate to investors and with stakeholders. What are the non-financial metrics of performance that the company wants to be judged and measured by?”
Four Pillars of Action for Sustainable Capitalism
Rebecca maintains that we have the resources and the knowledge we need to build a more equitable, sustainable capitalism. But to get there, the business will have to change. We need a moral revolution to build a business culture that will help solve public problems.
What will it take? Rebecca recommends four areas of action:
Building purpose-driven firms committed to not only generating profits for investors but also to help solve public problems, such as sustainability.
Cooperating with other firms to advance progress. When everyone does the right thing, from lowering emissions to paying living wages, then such commitments will no longer be a competitive disadvantage.
Rewiring our financial systems: from impact investing to creating robust ESG (environmental, social, and governance) metrics to give investors better data for decision making.
Building democratically accountable, transparent governments that can enact smart regulation in partnership with firms to ensure compliance.
Companies and Individuals Can -- And Should-- Be Catalysts
Rebecca shared stories of companies forging ahead with meaningful, game-changing progress. She keeps a file of what she calls “cool companies” doing amazing things. For example:
A Scandinavian waste management company has created a machine where you “put a car in at one end and at the other end comes basic raw materials. … it’s really the circular economy.”
Producers around the world are developing lab-cultured meat with the same molecular structure as traditionally farmed meat, which can significantly reduce carbon emissions.
Most inspiring was Rebecca’s firm belief that each of us can be the catalyst that shifts a firm and even tilts an entire industry. Rebecca urges, “You as the individual can make the change.”
Rebecca closed with, “I think we need some kind of cultural, moral revolution…There are hundreds of entrepreneurs who are running at these problems. The major problems we face are huge business opportunities. If we can find a way to address them and unlock the value that they represent while treating our employees with dignity and respect, and giving them decent wages, we will set an example that has the potential to completely change the conversation.”
Rebecca believes purpose-driven firms could catalyze significant change in the broader system.
“Business can save the world. And it is my experience in working with groups like The Higher Ambition Leadership Alliance that this is really happening. You are the catalyst that could change the whole system.”
Learn More
Read Rebecca’s article Reimagining Capitalism in the Shadow of the Pandemic, Harvard Business Review, July 2020
Explore case studies and more on https://rebeccahenderson.com/
Upcoming Events
The Higher Ambition Leadership Alliance community is doing considerable work in the areas of corporate-community partnerships. Join our November 6th Conversation with Tom Friedman: “Why CEO Leadership On a Regional Level is Critical for America’s Future.” Tom is a Pulitzer Prize-winning author and political commentator and columnist for the New York Times. Learn more and register (link).
