海角大神

Verneuil-sur-Seine is not the sort of place you expect to find a revolution going on.

It鈥檚 a sleepy, nondescript suburb outside Paris, its streets hushed on a recent midweek morning. But in a cramped office in a converted apartment, an ebullient American mother of five and her French husband, a former auto executive, are busy reinventing capitalism.

Putting purpose before profits and ethics above everything, they are building a new sort of business. 鈥淲e wanted to bring all our personal values into the company,鈥� says Elizabeth Soubelet, a trained midwife. 鈥淏asic humanist values like respect for people and the planet.鈥�

Ms. Soubelet and her husband Nicolas make Squiz, re-useable pouches for toddlers to suck applesauce from, which help parents cut down on plastic packaging waste. Theirs is a tiny company with ten employees (we鈥檒l come back to them later), but they are by no means alone. Even titans of finance are on the same track as a new mood sweeps through businesses on both sides of the Atlantic, prompting CEOs to shift out of greed and into good.

And the global coronavirus pandemic has added compelling force to this movement. Suddenly, firms are expected to display compassion and promote the common interest; the way in which stressed companies treat their workers has become a loud and pressing public concern; in the United States, paid sick leave has become a political issue.

Battered by the 2008 financial crisis and its aftermath, tainted by yawning disparities in income and opportunity, and focused tightly on the bottom line, 鈥渃apitalism has been derailed,鈥� says Paul Collier, an Oxford University economist and recent author of a surprise best-seller 鈥淭he Future of Capitalism.鈥�

鈥淭hat is stirring new anxieties ... and mutinies鈥� from Lebanon to Chile and from Brexit to President Donald Trump鈥檚 election, Professor Collier argues. 鈥淧otentially, capitalism is a wonderful system,鈥� he adds. 鈥淏ut it doesn鈥檛 run on autopilot. It needs rules.鈥�

After decades of laissez faire, he says, from business schools to boardrooms, 鈥渢here鈥檚 a sea change going on.鈥�

Time for a reset?

When the global businessman鈥檚 bible, the Financial Times, launches a campaign entitled 鈥淐apitalism: Time for a Reset鈥� as it did last September, you know something is afoot.

In the developed countries where capitalism first flowered, but shifted away from its social obligations, its credibility today is badly tarnished. A worldwide poll earlier this year found that 56% of respondents thought the system was doing 鈥渕ore harm than good.鈥�

And when the pro-free market think tank Legatum surveyed British public opinion in 2017, it found the notion of capitalism most often associated with greed, selfishness, and corruption 鈥� 鈥渢he kind of 鈥榖rand personality鈥� one would expect from an organization in acute reputational crisis,鈥� its report pointed out.

The current model of unfettered neoliberalism is not keeping capitalism's promise of rising prosperity for all. From San Francisco to Stockholm, well-educated people living in a metropolis have done well from globalization and the prevailing ethos of individualism; less-educated provincials have seen far fewer benefits.聽

Labor鈥檚 slice of the global income pie has fallen from 54% to 39% since 1970, while the share going to wealthier individuals who own capital (such as stocks) has risen correspondingly. In the U.S., labor productivity has gone up by nearly 70% since 1979, but wages have risen by less than 12%.

Executive pay, meanwhile, has reached astronomical levels. In 2018, the 100 best paid U.S. CEOs earned 254 times the median pay of their companies鈥� employees, according to SEC filings.

Income inequalities 鈥渁re going very fast in the wrong direction,鈥� acknowledges Angel Gurria, the Mexican head of the Organization for Economic Cooperation and Development, the free market鈥檚 Paris-based think tank. 鈥淵ou can understand why everybody is so angry.鈥�

Behind the figures is the way capitalism has been practiced for the past half-century, since the free market economist Milton Friedman wrote in a celebrated New York Times article that 鈥渢here is one and only one social responsibility of business ... to increase its profits.鈥�

That dictum has dominated business thinking ever since, and it has made 鈥渟hareholder value鈥� the sole metric by which to judge a company鈥檚 success. CEOs have been obliged 鈥� by their boards and their investors 鈥� to prioritize quarterly earnings performance over all other criteria.

It wasn鈥檛 always like this; Henry Ford was keen on reminding people that 鈥渁 business that makes nothing but money is a poor business.鈥� But in the 1980s that mindset was swept aside by the outlook expressed in a sign hanging outside the trading room of Bear Sterns: 鈥淟et鈥檚 make nothing but money.鈥澛�

It didn't help in the long run; Bear Sterns was the first bank to go under in the 2008 financial crisis.

Back in 1943, Johnson & Johnson published its business credo, stressing the firm鈥檚 responsibility to customers, employees and suppliers, and to local communities and the environment, before its duty to stockholders.

That approach was not common then, but it is stirring now in more and more boardrooms as business leaders carve out a new role for their companies. Last August 181 U.S. corporate members of the Business Roundtable, including the bosses of Apple, Walmart and PepsiCo, signed a pledge proclaiming their 鈥渇undamental commitment to all of our stakeholders鈥� and renouncing the doctrine of shareholder primacy.

And now the coronavirus pandemic has prompted people to scrutinize such companies鈥� behavior, and hold them to higher standards. Whole Foods, part of the Amazon empire, ran into a storm of public criticism recently when CEO John Mackey suggested that employees could donate their paid time-off hours to colleagues facing medical emergencies. This appeared to put some of the burden on Whole Foods鈥� staff, rather than the company.

Whole Foods and other聽firms have revised their paid time off policies to help employees cope with the pandemic.

鈥淚t鈥檚 these notions of purpose, trustworthiness, values, and culture that underpin a reconceptualization of business for the 21^st century,鈥� said Colin Mayer, the former dean of Oxford University鈥檚 Sa茂d Business School, at a recent seminar.

But what does that look like in real life?

Considering every angle

For Elizabeth Soubelet, it all began with shame. She was buying applesauce in 64-pouch family packs, she recalls, 鈥渁nd my kids were finishing them in like 14 seconds flat鈥� and then throwing the aluminum-lined plastic containers away.

鈥淚 grew up in America in the '70s and '80s, in the heyday of trash,鈥� she says. 鈥淚 thought this was one thing that I could do better.鈥�

She looked online, and found that all the reusable pouches came from China. That was no good; she didn鈥檛 like the idea of buying something that might be made in an exploitative sweatshop with poor environmental controls 5,000 miles away. Bad for the planet.

So she decided to make her own, and with her businessman husband set about creating a company with a simple mission: to help people reduce waste by using the company鈥檚 reusable pouches, playfully decorated with cuddly exotic animals.

But Squiz also has a broader vision of its purpose, Nicolas explains. 鈥淲e want to build an organization that cares for people generally 鈥� our customers, our employees, our suppliers and the environment.鈥�

That isn鈥檛 always easy.

So as to keep the company鈥檚 carbon footprint light, and to fulfill a social purpose, Squiz entrusts its packing and dispatch to a local nonprofit employing intellectually disabled people. Last year that meant some time-consuming and costly mix-ups, but Squiz sales administrator Virginie Bartoli, who spent weeks at the packing center sorting things out, discovered a silver lining.

鈥淚 didn鈥檛 know much about handicapped people, but I realized when I was working there that everyone has the right to work,鈥� says Ms. Bartoli. 鈥淭his job I do has made me more human, in some ways.鈥�

Squiz insists that all its products鈥� components should be made and assembled in Europe, to European labor standards. 鈥淲e take a stand,鈥� says Sophie Amman, head of marketing and engagement. European workers are expensive, she knows, 鈥渂ut for us the bottom line is not the top priority.鈥�

Still, what does all the care for the environment, the employee perks, the insistence that all materials be recyclable, do to the bottom line? Just how much does it raise the cost per unit?

鈥淭hat鈥檚 a question that drives me crazy,鈥� Elizabeth splutters. 鈥淲hat would you call the base cost? The China price? You can only tell the 鈥榬eal鈥� price when you add in the damage to peoples鈥� health and to the planet.鈥�

Squiz has settled on a price of $5.50 for a pouch designed to be used at least 50 times. Sales have risen 40% year on year as the company鈥檚 reputation for fairness has spread.

That reputation has been cemented by Squiz鈥� certification as a 鈥淏 Corporation鈥� (the B stands for benefit) by an independent agency that has validated the company鈥檚 performance as a sustainable and ethical enterprise.

The 3,000-plus B Corps around the world, which include Ben and Jerry鈥檚 and the outdoor-gear manufacturer Patagonia, are legally obliged to consider the impact of corporate decisions on their workers, customers, suppliers, community and environment. They see themselves as the vanguard of 鈥渂usiness as a force for good,鈥� a better way of running capitalism that benefits a range of stakeholders, not just shareholders.

And there is no more vocal champion of 鈥渄oing well by doing good鈥� than Paul Polman.

Making capitalism sustainable

Mr. Polman, an energetic and talkative Dutchman, climbed the corporate ladder at Procter & Gamble for 27 years. But he made his name as the boss of a rival consumer goods giant, Unilever, the Anglo-Dutch firm that owns brands worldwide such as Hellmann鈥檚, Dove, and Lipton tea.

It was there, until he left his job last year, that he pioneered the stakeholder model of multinational capitalism.

At first, he angered investors when he took over in 2009 by refusing to offer the traditional quarterly profit forecasts on which financial analysts rely, and insisting on taking a longer-term view of his company鈥檚 performance. Unilever shares fell 10%.

Then Mr. Polman alarmed them even more by devoting money and attention to something he called the Unilever Sustainable Living Plan, which involved all sorts of projects that seemed harebrained at the time.

He pledged Unilever would buy all of its agricultural raw materials from sustainable sources by 2020. (In fact, it has managed to hit 70%.) He announced ambitious personal hygiene targets in developing countries, launching hand-washing programs for kids and building 30 million toilets.

鈥淓ach Unilever brand had a social mission and a purpose,鈥� Polman recalls.

That built the trust that is especially critical to consumer product companies, but which can decide the fate of any company. And a global study earlier this year found that ethical issues such as integrity are three times more important to people than competence when it comes to trusting a company.

For Unilever, all this paid off. The company yielded 290% shareholder return over Mr. Polman鈥檚 decade at the helm, he says proudly. 鈥淭he development agenda is a business agenda,鈥� he insists. 鈥淚t doesn鈥檛 have to be a tradeoff.鈥�

The financial markets are still somewhat hesitant, he says, 鈥渂ut investors are starting to wake up.鈥�

BlackRock, the largest asset management company in the world, handling $7 trillion, is a case in point.

In his 2019 annual letter to the heads of the companies that BlackRock invests in, CEO Larry Fink urged them to identify and express their companies鈥� purpose. This year he announced that BlackRock鈥檚 actively managed funds will no longer invest in companies that derive more than 25% of their revenue from thermal coal.

鈥淲e鈥檒l walk away from businesses whose purpose we don鈥檛 believe is particularly compelling or will ensure that the company will be around for a long time,鈥� explains BlackRock spokesman Ryan O鈥橩eeffe.

In the same vein, the head of the world鈥檚 largest asset owner, the Japanese government鈥檚 pension investment fund, warned in an open letter earlier this month that 鈥渃ompanies that seek to maximize corporate revenue without considering their impacts on other stakeholders ... are not attractive investment targets for us.鈥�

Such pronouncements have drawn accusations of 鈥減urpose washing鈥�; and activists are still waiting to see any change in behavior by any of the companies that signed on last year to the Business Roundtable鈥檚 declaration of commitment to 鈥�all of our stakeholders.鈥�

鈥淭hat was just a statement,鈥� says Andrew Winston, who advises businesses on sustainability. 鈥淚t didn鈥檛 actually commit the companies to much of anything and it remains to be seen how they apply it. But it was symbolically important and it has started a debate.鈥�

Now they must put their money where their mouth is, says Mr. Polman. And he doesn鈥檛 think they should be afraid to forge a new path for capitalism. The figures seem to back him up: In the current stock market rout, ESG funds (focusing on environmental, social, and governance investing) have outperformed their peers.

鈥淭en years ago, I did what I did as an act of faith,鈥� Mr. Polman says. 鈥淏ut now there are quite a lot of hard facts showing that purpose-driven, long-term, multi-stakeholder firms which respect people and the planet see better business performance.

鈥淐ompanies that do all this will be ready for the future. The rest will turn out to be dinosaurs.鈥�

Read the entire Navigating Uncertainty series.聽