Recently, terminology such as breakthrough capitalism and circular economy were added to sustainability lexicons. These frameworks call for changes to the current economic system.
In the “sustainable capitalism” debate, I find it most interesting to look at the systemic changes required. Here is a short list of what’s broken and what needs fixing to make a meaningful progress:
- What is broken: (could be other ways)
Shareholder value maximisation, short-term financial focus, perverse incentives & excessive compensation packages
Entrenched interests & powerful incumbents (i.e. ‘too big to fail’ organisations enjoying privatised gains & socialised losses)
Excess leverage, instability & systemic risk in the market - bolstered by surplus liquidity, HFT & excessive speculation.
Regulatory complexity, inadequate valuation & risk assessment.
Tax evasion .
Proliferation of reporting standards, coupled with difficulty in measurement & lack of disclosure.
Limited integration of social & environmental externalities into financial systems.
Perceived powerlessness of the individual.
Wealth inequalities, under-employment, work-life imbalance & a culture of consumerism.
- How we can fix it:
When we consider “capitalism for the long-term” (See HBR, Barton, 2011), these challenges are not insurmountable and there are leverage points that have the ability to increase our rate of change:
Clarification of fiduciary duty .
Increased transparency of data & unification of standards.
Evidence on the materiality of environmental & social risk.
Sustainable investment structures, products & services .
Active & proactive government policy.
Is “sustainable capitalism” possible? = Yes. The bigger question is: Will we act and when?
Do you agree with these two lists? How and when we will address these?
These ideas were taken from different opinions.
