There’s a lot of buzz and debate about ESG and corporate social responsibility lately, so I wanted to post something I worked on recently on this topic. I helped Quartz put together a page describing its mission to “Make Business Better,” and most of that reflects group work bridging a range of perspectives within the organization.
I’m pleased to take credit for one bit, though, where I tried to articulate my own thinking on the topic:
Milton Friedman’s theory of shareholder capitalism kept things simple: Companies should not break the law, and other than that they ought to serve shareholders. By contrast, “stakeholder capitalism” or “corporate social responsibility” can seem hazy, unfocused, and not rigorous.
So here’s a short checklist for what a better form of capitalism would require of businesses, in plain English and in economic jargon:
Solve a real problem for someone (in econ terms, create “surplus”)
Share the rewards fairly (customers, workers, suppliers share in the surplus—and not just those who are members of privileged groups)
Don’t pollute (minimize negative externalities, or at least pay for them)
Follow the rules (follow the law in spirit, not just in letter)
Be a good corporate citizen (compete fairly, and don’t undermine the institutions on which you depend—including government and civil society)
That’s it. A little more complicated, sure, and a little harder to write down as a mathematical model. But we believe it’s what’s needed in a world beset by inequality, climate change, and (one more econ term) countless market failures. We can’t just leave these problems to the market, and we can’t just leave them to governments or philanthropists either.