I was listening to the audio book The power of Impact Investing by Judith Rodin and Margot Brandenburg and the concept of sustainable capitalism stayed with me. I was wondering what it is and what aspects of it are sustainable. Is this another synonym for ESG or sustainability?
The people of the internet describe sustainable capitalism as an innovative approach to capitalism's economic system. It emphasises the long-term sustainability of companies and their social and environmental effects. Hah - got you ESG! But how does this differ from what we traditionally think of as ESG and what are the social impacts?
What is Sustainable Capitalism?
Sustainable capitalism is a business philosophy that promotes social good and environmental protection. Businesses use local assets, expertise, capabilities and resilience to build profitable long-term success while protecting the environment at the same time.
Sustainable capitalism is the idea that companies should be held to a higher standard than Milton Friedman's "Friedman Doctrine," which considers any business practice not explicitly illegal as legitimate for increasing profits. Unfortunately, incomplete government regulation and an unwillingness to price natural resources fairly have resulted in numerous unsustainable business practices.
What is the Purpose of Sustainable Capitalism?
Sustainable capitalism strives to create economic systems that are not only economically and socially stable, but also environmentally sound. Addressing the increasing ecological risks threatening humanity's future as well as that of our planet must be our top priority.
Under capitalism, economic development often relies on the extraction of natural resources at a cost to the environment. Furthermore, government regulation is often insufficient and companies aren't fully held accountable for their use of such resources.
These unsustainable practices deplete Earth's resource reserves and threaten its capacity for regeneration, potentially leading to nonlinear, catastrophic outcomes on a global scale (Rokstrom et al., 2009).
Instead of relying solely on growth to achieve a sustainable world, it is time for our economic system to one that rewards overall value and emphasises renewable energy and carbon neutrality. To accomplish this goal, we must reorient business and governance models, fiscal strategies, remuneration policies, reporting practices and accounting procedures.
What is Sustainable Capitalism in Practice?
Sustainable capitalism is an economic philosophy that places importance on a company's impact on the environment and community. It attempts to reduce a company's carbon footprint while providing employees with quality of life.
This ethical approach to business allows companies to save money on overhead by not having offices in expensive cities, while also improving the quality of life for employees through more livable working conditions. There is also an aspect of managing the supply chain sustainable thus avoiding potential human rights violations and worker exploitation in companies that supply the main business. Furthermore, it helps businesses become more environmentally friendly and reduce their carbon emissions.
Paul Polman, former CEO of Unilever and leader in this movement, is one of the leading figures. His vision focuses on reducing Unilever's environmental footprint through decreased energy use, using renewable sources of energy and guaranteeing all employees living wages.
What is the Social Performance Practitioner view on Sustainable Capitalism?
Social performers practitioners support companies in addressing labor working conditions, community health and safety, stakeholder engagement, lands and livelihoods related issues in the context of a standalone project or an operational site. These practitioners often work to IFI standards and use a variety of practical tools that translate larger concepts into actionable tasks and management plans.
Some of the concepts under sustainable capitalism are not foreign to a social performance management. For us, addressing human rights in the context of working conditions include: comprehensive human resources policies, workers code of conduct, management plans for worker accommodation, also supply chain mapping and management plans, audits if applicable to make sure that workers human rights and working conditions are in line with applicable standards, even if they're working for a supplier in a different country. We aim to integrate these social aspects into the procurement plan to make sure any subcontractor or supplier is legally committed to compliance on a variety of environmental and social topics.
Stakeholder engagement with affected communities is what social performance practitioners do very frequently regardless of the project stage. The tools that we have include a stakeholder engagement plan with a grievance mechanism, the community health and safety management plan. The Stakeholder engagement plan is designed to set out the principles, frequency, responsibility for engaging with communities and disclosure of information. It includes the mapping of relevant and interested stakeholders, the most appropriate channels to share information or interact with them.
The community health and safety management plan is usually informed by an assessment on the project risks in relation to local communities along to project site, construction traffic routes or main traffic routes and near any significant related infrastructure.
Luckily more and more often social performance practitioners have the scope to go beyond a compliance and proactively identify opportunities to invest in communities. I guess if we think about it in the sustainable capitalism perspective this would be the end goal: conducting the for-profit business in a way that minimises adverse impacts on communities and where possible contributes to community investments.
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