Liza Minelli in her 1970s song says money makes the world go round. Anyone who can make money honestly has the respect of many, as success is so often equated with the ability to accumulate wealth. Unfortunately, many do not have what it takes to achieve their dream of having enough money to live comfortably or even just decently.
Capitalism has for decades based its vision on business being left as unfettered as possible to enable entrepreneurs to make as much money as they can. However, things seem to be changing as the new economy is leaving behind many who cannot adapt fast enough to become winners in the race to acquire wealth.
A McKinsey essay describes how millions of books have been written over the past several decades to define precisely what a business is. Obligations to society at large and to the many stakeholders in business systems, including customers, shareholders, employees, suppliers and communities to name just a few are defined in many different ways.
For many, businesses serving customers is the beginning and end of their mission as they know that this is the most practical way of adding shareholder value. This myopic focus misses the critical element of recognising the importance of multiple stakeholders to promote social environmental and financial value.
The good news is that this limited interpretation of how the business world can serve society is being challenged. This year the Noble Prize for economics has been awarded to three economists for their research on poverty alleviation. Two of them are a married couple. Esther Duflo is only the second woman to win the 50-year-old economics prize, while her husband Abhijit Bannerjee is only the third non-white man.
Businesses should identify where their input can accelerate change for the well-being of society
Economists will be the first to admit that economics is not exactly a science that excites ordinary people. Most economists were understandably blamed for being unable to predict the global financial crisis of a decade ago. They often couch their recommendations and predictions in ambiguous terms that often lead to more confusion.
This year’s Nobel Prize economists have made their profession more relevant in the eyes of many, especially young people, by basing their research on how poverty and the economy interact. Globalisation has pulled out many millions of people, especially in developing third world countries, out of misery. Sadly, it has also created a new class of poor people in western societies.
Western politicians of the past few decades promoted the undeniable advantages of globalisation but failed to prepare adequately two or three generations of workers to adapt to the new economic realities. In many cases, they also dismantled parts of the welfare state that helped European societies to prosper in the post-war years.
The result of this political failure is that people are now shifting their trust to maverick populist politicians who exploit the frustration of millions of people living in western societies who see no hope in the future. Poverty among pensioners and children remains high while investment in the social fabric is nowhere near what it needs to be to rekindle hope in communities who have been left behind by the economic developments of the last few decades.
The business world is now beginning to acknowledge the risk of a breakdown in social values. While many politicians continue to take the short-term view of how best to improve their chances of being elected in the next contest, some businesses are taking the long-term view by adopting strategies that ensure that their core business is fundamentally value-creating − not just for shareholders but also for customers, employees communities and the environment.
This change in business attitude needs to go further. The world is facing formidable social, environmental and financial challenges of immense proportions and complexity. No one stakeholder can overcome this challenge single-handedly. Politicians need to rope in support of business to speed up the remedial action needed to address the threats that today’s society is facing.
There is an urgent need to prioritise issues. Businesses should identify where their input can accelerate change for the well-being of society. For some, this input will be in the protection of the environment. For others, it will be the promotion of healthy living, especially for those whose financial means restrict their choice of healthy food.
For other businesses, the contribution for the betterment of society could be investment in educational programmes that help those children from a distressed background to further their education successfully.