When we talk about sustainable capitalism today, the conversations frequently focus on the physical environment. While that is a critical element of sustainability, it is not the total picture. Sustainability needs to integrate the four legs of the stool: human, social, ecologic, and economic environments. They all go hand in hand to create the desired result long term.
The current business environment addresses this topic by focusing on ESG and DE&I. The challenge for all companies and individuals is recognizing the difference between initiatives and making real progress. The adage in the business world is that you get what you measure.
In Sustainable Capitalism, do we understand what we want and need and how to measure it effectively? The critical question is: do the metrics correlate with real progress?
Capitalism is a fantastic economic framework. It has created incredible prosperity across all aspects of our society, unleashing innovation at an unprecedented rate. That is its appeal and opportunity to just about anyone. But, in addition to its upsides and assets, it also has its downside and potential liabilities.
There are many challenges that capitalists face; among them being:
- Danger to focus only on the economic leg driven by short-term only thinking
- Potential to create monopolies
- Possibility to cause environmental issues either at home or abroad
- Likely to increase the wealth gap, thereby creating social tension and exploitation and leaving a significant percentage of the population behind economically, socially, and culturally
Creating a sustainably capitalistic society requires both individuals and companies to understand and implement practices that may negatively impact the short term. Unfortunately, the short-term impact may be the single most uncomfortable reality. However, other sustainability practices may enhance short-term results. As a result, there is a balance that needs consideration.
A few questions to consider:
- Are the four legs of the stool understood as they apply in your company?
- Are the boundaries around the sustainability of all four legs understood?
- How do you determine the effective balance across short/mid/long-term returns and economics? How do you address that publicly and politically?
- Are decisions made with intentionality? What are the consequences of these decisions?
- Can you live with the consequences of those decisions? Short/Mid/Long term?
- Are there metrics to indicate crossing the line that will disadvantage sustainability?
I offer that sustainability is simply a high-stakes risk assessment and management of the business. Both short-term only and long-term only thinking have a high probability of being unsustainable.
As neither extreme works well, sustainability requires a balance among Short/Mid/Long term practices and across many risk categories: financial, reputation, technical, strategic, social, supply chain, political, and perception.
If any of these is disproportionately driving the outcome, is that where you need to be?