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Does Sustainable Performance Mean Abandoning Capitalism?

June 2, 2016 • EMERGING TRENDS, Capitalism in the 21st Century, Climate Change & Society, Special Report: The Future is Green, Unprotected Post

By Martin P. Thomas and Mark W. McElroy

We introduce multi-capitalism and the MultiCapital Scorecard as a means of extending capitalism to include social and environmental performance. Setting related standards in organisations’ own contexts starts profound learning and also answers the question: “How much is enough?” Leaders can then formulate strategies to become environmentally, socially and economically sustainable.

Many governors, leaders and financial officers recognise that planetary limits of natural resources will (if they do not yet) constrain traditional ways of operating their organisations. They also understand that the richest 1 billion of the world’s 7 billion people cannot expect to continue their over-consumption while the poorest 6 billion compensate for them. The dilemma that confronts many responsible leaders is therefore: “How do we balance our environmental and social duties with our economic responsibilities to investors?

Does it mean we have to abandon capitalism in favour of an essentially social mission?”

Of course, many prefer not to ask these questions, fearing the consequences of the possible answers. But as the frequent failures of governance in recent years have shown, turning a blind eye to vital questions is itself often the cause of failure.

Moreover, organisations of all sorts and sizes find that the accounting and reporting of their performance already consume immense amounts of time, money and information technology resources. Should responsible leaders contemplate doing more than simply focusing on their own economic impacts? After all, the funds flowing from financial success are needed to pay for existing administrative resources, which are usually stretched. And Milton Friedman in 19621 argued that the only duty of companies was to make money.

So for those with the courage to ask the right questions, are there any answers that do not imply the overthrow of the very capitalism on which the western world and their organisation have become prosperous? And is it responsible to ask questions that will inevitably require some administrative work beyond the status quo?

 
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About the Authors

thomas-webMartin P. Thomas, MA, MSc, FCMA, FCIS, CGMA, is a co-founder of Thomas & McElroy LLC. Martin’s 34-year Unilever international career included leading global corporate planning. His lifelong interest in measuring intangibles combined with Mark’s Context-Based Sustainability ideas since 2011 to create the MultiCapital Scorecard. As co-founder of The Change Leaders, he believes “what gets measured gets changed”. He hopes this “open-source” offering supports needed change.

elroy-webMark W. McElroy, PhD., is a co-founder of Thomas & McElroy LLC. Mark is a veteran of management consulting having spent much of his career at Price Waterhouse, Deloitte and KPMG. In 2004, he founded and currently leads the Center for Sustainable Organisations. He is the originator of Context-Based Sustainability, a science-, capital- and ethics-based approach to sustainability measurement, management and reporting.

 

References
1. Friedman, M. (1962) Capitalism & Freedom. (University of Chicago Press, Chicago).
2. Argyris, C. (2000) Flawed Advice and the Management Trap: How Managers Can Know When They’re Getting Good Advice and When They’re Not, (Oxford University Press, Oxford).
3. Fisher, I. (1906) The Nature of Capital and Income, (Macmillan, London).
4. McElroy, M. and Thomas, M. (2015) ‘The Multicapital Scorecard’, Sustainability Accounting, Management and Policy Journal, vol. 6, no. 3, pp. 425-438.
5. Thomas, M. and McElroy, M. (2015) ‘A Better Scorecard for Your Company’s Sustainability Efforts’. Available from: https://hbr.org/2015/12/a-better-scorecard-for-your-companys-sustainability-efforts. [11 February 2016].
6. Pacioli, L. (1494) Summa de Arithmetica, Geometria, Proportioni et Proportionalita, (Paganino Paganini, Venice).

 

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