Future of Business: Socially Oriented Capitalism
Times are changing and so are the rules of business. Generation of steady profit and keeping the shareholders happy is no longer the start and the end of the purpose of business. Increasingly, social factor is coming into play. Some view this phenomenon an advent of corporate citizenship and corporate social responsibility (CSR) while others term it as corporate philanthropy. But this trend towards integration of social factor with purpose of business is much broader than corporate citizenship and corporate philanthropy. I prefer calling this trend a move towards "socially oriented capitalism", the only sustainable way of doing business in the long run.
Perhaps time has come for businesses to realize that they cannot exist in isolation of society at large. In coming years, survival and sustenance of businesses will be dependent on how well they empathize with the society and their surroundings. Striking an optimal balance between wealth generation for shareholders, betterment of the society at large, and judicious and sustainable use of natural capital will be the essence of doing business in future.
The problem perhaps lies in the current paradigm of doing business. The current paradigm focuses predominantly on a single parameter – maximization of shareholder’s wealth. In pursuit of this goal, often the business becomes short-sighted and neglects the long term scenarios. The present paradigm follows what Milton Friedmen advocated when he said, “The business of business is business”. But fortunately or unfortunately, this concept of business is soon going to be obsolete and unsustainable. The reason is simple. Single minded pursuit of wealth generation for shareholders often entails ruthless exploitation of natural capital as well as concentration of wealth in a few hands which is detrimental to social inclusiveness. Ruthless exploitation of natural capital means faster depletion of natural resources than its renewal leading to ever decreasing availability of resources for increasingly demanding population. Similarly, concentration of wealth in a few hands prevents diffusion of wealth, a prerequisite for holistic social development.
Tomorrow’s star businesses will be those who proactively make society a business partner. Corporate social responsibility and corporate philanthropy may not do as much good to business as entering into a social partnership with society will.
I feel following are some of the behaviours that will drive the success and sustainability of corporations in coming years:
Ultimately it is a one world. Corporation and society cannot exist separately. For sustained prosperity they have to enter wedlock and live happy ever after!
Labels: Socially Oriented Capitalism