Capitalism is in mid-life crisis as profit for purpose grows - Les Bayne

Is capitalism going through a ­mid-life crisis? The answer is yes, and if there is one trend that ­business leaders acknowledge this new year it is that capitalism’s trajectory of ­endless growth with profit as the sole ­metric is being seriously questioned.
The redefinition of business growth offers an epoch-changing opportunity, says Bayne. Picture: ContributedThe redefinition of business growth offers an epoch-changing opportunity, says Bayne. Picture: Contributed
The redefinition of business growth offers an epoch-changing opportunity, says Bayne. Picture: Contributed

Every year, Fjord, Accenture Interactive’s design and innovation practice, crowdsources trends for the year ahead from its network of 1,200 people in 33 studios worldwide. With new studios in Japan and across Latin America, this year’s trends are the most globally diverse yet. Despite the diversity of regional ­flavours and context, there was a high level of ­consensus.

The number one trend is that capitalism is evolving. The search for value has moved into a re-evaluation of purpose and an organisation’s place in the world. The 2020 Fjord Trends conclude that people are becoming increasingly conscious and hyper-aware of how their purchases affect others, and the Earth’s resources. As a consequence, growth for profit alone will fade away as people demand products and services that are meaningful and socially and environmentally beneficial.

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If this is the case, it requires a total reassessment of business fundamentals. It questions the decades-old definition we’ve had for business success, which is underpinned by the pursuit of profit, financial growth and shareholder value.But if financial growth is no longer an organisation’s sole business objective, what is? How do we pursue this without losing sight of the fact that profit is ultimately essential for an organisation’s longevity? In essence, the redefinition of growth offers an epoch-changing opportunity to imagine new ways to create and celebrate value.

The Business Roundtable (an influential association of nearly 200 CEOs from North America’s most prominent companies) recently redefined its mission, marking a major turning point.

'Time for a new capitalism'

For years, its formal statement of corporate purpose put shareholders first. As of August, its new purpose champions activities such as “value for customers”, “investing in employees” and fostering “diversity and inclusion”. It has turned to fundamental questions about how well capitalism is serving society.

Marc Benioff, Salesforce chairman and CEO, has said: “It’s time for a new capitalism – a more fair, equal and sustainable capitalism that actually works for everyone, and where businesses don’t just take from society, but truly give back and have an impact.” Profit with a purpose.

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BlackRock made an interesting development when it confirmed a global partnership with the Ellen MacArthur Foundation to launch its first circular economy fund – a powerful signal from the world’s largest asset management firm. To be clear, this is not a question of sustainability versus profit, but an essential strategy to staying in business. In the words of Bank of England governor Mark Carney: “Companies that don’t adapt – including companies in the financial system – will go bankrupt without question [but] there will be great fortunes made along this path aligned with what ­society wants.”

Without doubt, more growth will come through technology. While materials-based businesses will be constrained by their ability to change quickly, digital companies are able to move faster. They’ll have fewer constraints in their switch to renewables that reduce their energy and resource footprint. Resources, ever more scarce in the physical world, are limitless in the digital world – so long as we have the renewable energy to power them.

As you ponder this, I leave you with two stats. Firstly, according to a recent survey, more than 70 per cent of adults now feel public companies should be mission-driven as well as focused on shareholders and customers. Secondly, in a 2016 Harvard study, 51 per cent of 18-19 year olds in the US stated that they didn’t support capitalism. I wonder how that position has moved in the past four years.

- Les Bayne, joint MD, Accenture Scotland & Fjord Trends.