How can we shape capitalism to increase human well-being?
Fighting poverty and rebalancing wealth creation and appropriation is a fundamental issue for the 21st century. The excesses of financial capitalism have increased disparities in wealth accumulation, and the incipient technological post-capitalist age holds as many promises as threats for human societies.
All studies show that employment, through existing organizations and entrepreneurship, is crucial for fighting poverty and improving well-being. Having noted this, often economists offer no further recommendations. I believe that as management scholars, we can go further in the questions that we raise, such as: what kind of capitalism should we shape for tomorrow? What kind of organizations do we want to build? For which kind of well-being? The concrete answers to these questions lie partly in the management and governance practices that firms implement – what I term "orgology"(1), or the science of organizations and management - as well as in national and international public policies.
Bringing all-encompassing dimensions into business
To shift towards a form of capitalism more conducive to human well-being, i.e. a “well-being capitalism”, companies must first of all better take into account the requirements and expectations of their stakeholders. The latter of course include employees and customers, but also suppliers, the natural environment and civil society. The first step in thinking and shaping the collective well-being of the persons impacted by a company's activity is to integrate into the corporate project more all-encompassing dimensions than those typical of financial capitalism. In this context, management is no longer a technique geared toward financial optimization; it is a driver that enables the inclusion of sometimes conflicting but often compatible interests. The corporate world cannot become open to more inclusive goals, however, unless its measures of the social and environmental impacts of its activities improve. Indeed, traditional measures of economic and financial profitability are no longer sufficient to measure the impacts of business activities. They need to be broadened to include impacts on specific stakeholders, spanning ecological and social dimensions. The objective is that stakeholders – and investors in particular – should be able to understand companies' more all-encompassing projects and measure whether acts are in line with the missions stated, the positive externalities generated, and their interests.
A strong need for indicators of social impacts
Calculating social impact remains in its infancy. Ironically, it is the abundance of criteria and specific methods that is slowing down advances in evaluating the impacts of corporate strategy and actions. In the absence of consistent comparison tools, it is impossible to distinguish companies committed to social goals who accomplish a lot but communicate little from public relations professionals who accomplish little but communicate a lot. What is therefore at stake is the standardization of social impact indicators. It is a crucial step to take by economic actors, be they profit or nonprofit organizations. Also, to ensure that the business sector and policy-makers pursue consistent goals, it is important to harmonize and align their respective metrics and benchmarking systems.
At HEC's SnO (Society and Organizations) Center, we follow a pragmatic approach to change ways of measuring positive impact in business. We have been working to help some of France's leading multinationals to better evaluate their impact. These are difficult but exciting challenges. This is a time for convergence. Hard data research, examplary practices coming from firms, and advanced education programs offered by business schools will allow us to create a common framework to assess well-being. We are hopeful we can build a new narrative for a more responsible capitalism that is evidence-based.
A new vision for a turning-point in capitalism
If we want practices that improve the lives of employees, customers, and citizens to become more widespread and be even more beneficial to society at large, we must think beyond the simple measure of social and environmental impacts. We must ensure that the positive returns generated for human communities translate into economic value, so that companies receive a pay-back too. Their reward cannot be merely symbolic, for instance with rankings that improve their reputation as employers or suppliers: it must bring advantages that can be directly monetized. What remains to be done is to identify such advantages and set them up. They could take the form of facilitated access to credit, lower costs to issue securities, or favorable insurance systems in which advantages are proportionate to the well-being generated by the company and its contribution to the reduction of long-term systemic risks.
At the SnO Center, we engage in the study of such processes and mechanisms, which form the basis for a new vision for more responsible capitalism. For instance, the “Measuring business impacts on people's well-being” workshops held with the OECD are part of this joint effort to harness public policy to a renewed vision of the impact companies have on our shared heritage, on our Earth, and on human-driven businesses. We hope that capitalism will become more inclusive and responsible, so that historians may perhaps look back on the last years of this decade as a turning-point in the shift towards a new political and economic era.
The next steps
The OECD Statistics Directorate, together with HEC Paris/SnO Center, has issued a call for papers to develop and support research on “Measuring the Impact of Business on Well-being.” The call for papers focuses on several themes, including: showcasing good examples of existing frameworks; proliferation of common indicators; the use of national official statistics to assess business impact on well-being; and the effects of measurement of on business performance and consumer and investor behavior. Selected papers will be presented at the 6th “OECD World Forum on Statistics, Knowledge and Policy,” which will take place in Korea in November 2018.
1- Organizations, Strategy and Society : The Orgology of Disoranized Worlds, Routledge, New York, 2015