The Covid-19 pandemic has brought the shortcomings and inequities of unbridled capitalism into stark relief, with some critics asserting that the current paradigm is not fit for purpose. Can we reimagine capitalism, or should we conceive of an alternative economy? What would this mean for business? Fiona Zerbst investigates.
Capitalism – generally defined as an economic and political system in which a country’s trade and industry are controlled by private owners for profit – is considered the most successful economic system in the world. An engine of wealth creation, it has been credited with raising living standards while reducing absolute poverty on a global scale. “Capitalism is one of the great inventions of humanity – an unparalleled source of prosperity, opportunity, and innovation. We won’t solve the problems that we face without it,” says Rebecca Henderson, author of Reimagining Capitalism in a World on Fire. “Only the relentless pressure of the free market can drive this kind of transformative innovation at scale.”
An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.
A systems solution framework to solve global challenges that include the climate emergency, waste, pollution, the loss of biodiversity and others.
An economic model that proposes how to provide for humanity’s needs without exhausting the planet’s finite
Proposes economic systems be organised around five key elements of the human experience: the body, nature, power dynamics, care and interconnectedness. It focuses on the shared needs of bodies, unpaid women’s contribution to the economy, the fact that we are embedded in the natural world, and the fact that the current economic system was built to be profoundly unequal, underpinned by social, racial and gendered hierarchies.
Posits that an economy should mimic biological systems, which are inherently regenerative, and depend on the health of the whole, rather than on the efficient functioning of parts.
Believes that the purpose of a company is to maximise the wealth of shareholders. It has a tendency to prioritise share price increases over long-term value creation.
Holds that companies should meet the needs of all stakeholders, including employees, suppliers, customers,
communities and partners – not just company shareholders. These principles were articulated in the Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution. Can also be defined as
inclusive capitalism and conscious capitalism.
Aims for a stable population and stable consumption of energy and materials, so the economy neither grows nor
contracts in an unsustainable fashion.
The Covid-19 pandemic has only exacerbated many of the flaws inherent in a system of unfettered free markets, however. The Oxfam International report ‘Profiting from Pain’ indicates that a new billionaire was created every 30 hours during the pandemic, while millions of people fell into extreme poverty every 33 hours, with around 263 million predicted to enter this category during 2022The ten richest men in the world – including Elon Musk, Jeff Bezos and Larry Page – saw their wealth more than double from $700 billion to $1.5 trillion during the pandemic.
The rise of ‘greedflation’ – obscene CEO remuneration in the face of workers’ wages falling behind inflation – has also accelerated during the pandemic, with CEOs in the United States earning 324 times the median worker’s pay in 2021, according to The American Federation of Labor and Congress of Industrial Organizations’ 2022 Executive Paywatch report. In South Africa, the Draft Companies Amendment Bill proposes that companies disclose the ratio of the top-paid to the bottom-paid 5% of workers, with shareholders required to approve executive remuneration, with the aim of improving accountability and reducing inequality.
‘Greedflation’, along with deepening inequality, limited protection for workers, mass layoffs, tax avoidance, and the contribution of corporate giants to environmental disaster have led to scepticism that capitalism is fit to solve our current crises. So-called late-stage capitalism – a term referring to the apparent irrationality of the current economic system – appears to be on a destructive path with people and planet.
It has become difficult to view capitalism as a force for good if it is exacerbating rather than solving problems of income inequality, pollution, unequal access to healthcare and biodiversity loss (see ‘Biodiversity in crisis: what companies can do’ on page 170). With Master of Business Administration (MBA) students across campuses in the US reportedly losing faith in capitalism itself, and expressing a desire to take the ideals of non-profit organisations (NPOs) into big corporations to effect change, there is a realisation that the current system needs rethinking.
Many business schools have responded to the challenge by offering more courses on ethics, social entrepreneurship, philanthropy, impact investing, and – as in the case of Harvard Business School – reimagining capitalism itself. However, a more inclusive version of capitalism may mean rethinking the tenets of capitalism itself, as envisaged by economist Milton Friedman, whose theory of shareholder capitalism has driven the pursuit of profit for more than five decades.
Nestlé’s conscious leadership
In 2021, Nestlé was recognised as one of the top companies at the Conscious Company Awards. The awards, held in Johannesburg, recognise companies whose leadership is committed to maintaining integrity, ethics and conscientiousness about people. Nestlé East and Southern Africa Region (ESAR) has launched the Makhoba Project, a pilot project. This is in line with its Good Communities core business pillar and the commitment to realising Empowered African Livelihoods (REAL) by working within communities to integrate youth skills development and employability with agripreneurship and regenerative agriculture.
The Makhoba community in Swartberg, KwaZulu-Natal relied on subsistence farming until Nestlé intervened in 2008 and assisted with upscaling the Springfontein Dairy, which is now the company’s largest blackowned dairy supplier in South Africa. In 2018, working with Inyosi Empowerment, it introduced the Youth Empowerment Service (YES) programme; 300 young people have completed the training, 50% of whom are women. Working with other stakeholders, the teams remove black wattle, an invasive species, and feed it to the cows, fostering a circular economy on the farm. The Springfontein Dairy also practices regenerative agriculture through various interventions to reduce the farm’s carbon footprint. These include soil management, water conservation, manure processing and a 77 KW solar energy system. The dairy farm has a target to be net zero in 2025.
Profit and purpose: the rise of stakeholder capitalism
It can be argued that shareholder capitalism – which has led to the devaluation of workers coupled with excessive pay rises for executives – has partly contributed to the so-called Great Resignation, which has seen swathes of employees resigning from their jobs during the pandemic, in search of work that better aligns with their values (see ‘The future of work in the wake of the Great Resignation’ on page 176).
Stakeholder capitalism arose as a reaction to the short-termism of shareholder capitalism, but although it gained traction in the 1970s it has only recently become an entrenched ideology. Many companies have taken active steps to meet stakeholder needs. B Lab, an NPO that sets out to transform the global economy to benefit people, communities and planet, is known for certifying B Corporations – that is, companies that meet high standards of social and environmental performance, accountability and transparency. Although these are smaller companies, B Lab’s B Movement Builders programme helps multinationals forge a new narrative about the role of business and the culture of capitalism, and think about their supply chains in a more considered way.
B Lab company Patagonia, which has set itself apart by placing people and planet above profit for its own sake, has declared: “We are past the time when any business can legitimately ask its employees to leave their values and humanity at home. And no business can any longer afford to year after year pursue minor incremental efficiencies while foregoing opportunities to help reweave the social fabric and regenerate, rather than deplete, the health of the natural world.”
In September, the company created two new entities, the Patagonia Purpose Trust and the Holdfast Collective, with the intention of allocating all profits not reinvested back into the company to both environmental and social causes. Founder Yvon Chouinard has stated that the company’s only shareholder is the planet, and companies should actively attempt to solve the greatest problems we face today, including climate change and biodiversity loss.
Purpose beyond profit: is de-growth the answer?
It has been argued that sustainable capitalism is a contradiction in terms, as capitalism depends on increased consumption and growth. However, we know this model is putting undue pressure on the planet. “More growth means more material extraction, which is the single biggest driver of biodiversity loss and ecosystem damage,”
says economic anthropologist Jason Hickel.
One of the most interesting debates of our time is whether we should strive for ‘green growth’ (also known as ‘climate-compatible growth’) or a ‘de-growth’ model, which is often confused with recession, but which puts forward the idea of a planned and democratic reduction of less necessary forms of production in wealthy countries to combat the effects of climate change in those countries most affected by it. De-growth economists call for “de-carbonisation and decent lives for all”, which entails focusing on equity, sufficiency and human wellbeing rather than growth and profit.
This aligns with UK economist Kate Raworth’s ‘doughnut economics’, which envisages establishing a safe, just space for humanity that exists between threats to society (insufficient water, food and energy along with inadequate healthcare, education and work) and threats to the planet (resource extraction, pollution, ocean
acidification, carbonisation, and climate change).
Doughnut economics calls for economies that are both regenerative and distributive by design (see sidebar ‘Walmart aims to become fully regenerative by 2040’). The Doughnut Economics Action Lab says businesses need to embrace regenerative practices such as zero-waste production, as well as distributive practices, such as
sharing value and opportunity more equitably, to fully embrace the circular economy. This may mean structural transformation – but what would that look like?
Some companies have adopted a ‘do what pays’ model, which means becoming more eco-efficient by cutting greenhouse gas emissions and benchmarking their efforts against those of their competitors. Others have taken a further step to ‘do their fair share’, like Nedbank, which introduced a Fair Share 2030 model addressing
various socioeconomic and environmental challenges. The bank allocates R6 billion a year to contain carbon emissions, ensure sustainable clean water and sanitation, and support various national development objectives. Many companies have adopted the ‘do no harm’ principle, which is also known as ‘mission zero’, aiming to considerably reduce their environmental impact over time. Nestlé’s dairy plant in Jalisco, Mexico is a good example – it meets its industrial water needs by condensing the steam evaporated from cows’ milk instead of extracting fresh water from the region’s groundwater reservoirs. However, the next step is to become redistributive by design, which may mean rethinking the organisational design of business.
The role of NPOs
If capitalism evolves to rethink the growth model (and there have been calls to de-prioritise gross domestic product (GDP) as the measure of a country’s success), there is no better business model than that of the NPO, which does not place profit at the top of the agenda.
Many NPOs, in the form of cooperatives, social enterprises, nonprofit companies or community-led businesses, have proved they are able to generate revenue, pay salaries, and create goods and services for the market. As they cannot make private use of the funds they generate, they redirect them according to their core mission, which is to serve society. In many ways, NPOs are uniquely equipped for a post-growth world.
Non-profit businesses are the third-largest employer in the US and collect more than $2.6 trillion in annual revenue (of which only about 10% comes from annual donations). These entities can potentially outperform for-profit businesses, simply by making more sustainable decisions like supporting local producers and working
in more energy-efficient ways. Non-profits can also raise funds in collaborative and innovative ways, from crowdsourcing and peerto- peer lending to making shares available to members and issuing community bonds.
Although shareholder capitalism relegates the not-for-profit business model to the fringes of the economy, stakeholder capitalism should be more open to collaborative ways to share wealth, particularly in a regenerative ecosystem. If the for-profit economy is delivering profit for only a few, the non-profit model may well deliver the kind of change society is calling for, from purpose-driven, egalitarian workplaces to wellbeing-focused business models. Growing social enterprises could also reduce the need for philanthropic giving.
What does this mean for companies?
Although capitalism has traditionally flourished on competition, extractive business practices and wealth accumulation, business can adopt a cooperative mindset and partnership models within the new economy. A good example of how different stakeholders can work together to achieve the ambitions of a circular economy is the
city of Amsterdam itself, which became the first municipality in the world to adopt a circular strategy in 2020.
Amsterdam Circular Strategy 2020–2025 sets out a plan to become 100% circular and climate-neutral by 2050, with a 50% reduction in primary resources by 2030. The programme is a collaboration between the city, the private sector and citizens, and it measures impact in four areas: local, global, social and ecological. The central
role of business is innovative – companies will develop new business models, design circular products, and collect and process products after use. The Doughnut Coalition comprises 40 businesses, research institutes and non-profits, with more than 200 private partners invited to participate.
John Elkington, the ‘godfather of sustainability’ who came up with the concept of the triple bottom line, has indicated we are on a journey from shareholder value to system value. In his book Green Swans: The Coming Boom in Regenerative Capitalism, he argues that system value is integrative – rather than off-setting ‘good
works’ against negative impacts, companies should strive to actively promote regenerative ecosystems. But this may mean moving away from familiar key performance indicators and linear benchmarks, and engaging in systems thinking.
Danish shipping giant Maersk recently announced it has invested in eight new ships that run on carbon-neutral methanol. While this is admirable, it is not entirely regenerative. By contrast, Finnish company Neste Marine Fuels has moved into the circular economy space by producing polymers from renewable and recycled feedstock, and reusing waste as raw material in its production processes.
Corporate social responsibility itself may change, Elkington argues, particularly if they set about ‘pre-distributing’ and circulating wealth rather than accumulating it. Other ways to advocate for circularity include having “voices for nature and the social agenda” on boards, accelerating impact investing, and not merely talking about becoming resilient (and mentioning this in annual reports) but investing in resilience, starting by moving beyond fossil fuels.
Walmart aims to become fully regenerative by 2040
Companies can adopt the tenets of regenerative economics by viewing wealth creation holistically, thinking about long-term value, empowering stakeholders to participate in value creation, nurturing resilient communities, and collaborating rather than competing.
Walmart – a company previously associated with corporate greed, which decimated retail competition and caused widespread loss of employment – is taking steps not just to rebrand but to reposition itself as a fully regenerative company by 2040. In 2021, it invested more than $20 million to strengthen smallholder farms, and invested more than $40 million to amplify workers and community voices. It intends to be solely powered by renewable energy by 2035 and is striving for ‘zero emissions’ in its operations by 2040. Along with the Walmart Foundation, Walmart will set out to protect, manage or restore at least 50 million acres of land and one million square miles of ocean by 2030.
Critics point to the fact that the company has a long way to go, but its actions will likely nudge other retailers in a
similar direction. The company says it aims to decouple growth from impact, since it can hardly get away from its core business of supplying affordable products to an expanding customer base. To be truly regenerative, it
will have to change customer behaviour and educate consumers about the circular economy.
- Henderson, R. (2020). Reimagining Capitalism in a World on Fire.
- Raworth, K. (2017). Doughnut Economics: Seven Ways to Think Like a 21st Century Economist.
- Mazzucato, M. (2021). Mission Economy: A Moonshot Guide to Changing Capitalism.
- Oxfam. (2022). Profiting from pain.
- Marquis, C. (2021). How multinationals navigate to a stakeholder economy: B Movement Builders share progress and challenges.
Accessible at: The Smith School. (2022). How to Save the Planet: Degrowth vs Green Growth?