This report delves into why capitalism needs to be reinvented to create a more sustainable economy for everyone. The brief examines the weaknesses and limitations of contemporary capitalism and presents a transformation agenda for businesses to adopt to create a brighter future.

Taking stock

The brief cites several unsustainable outcomes of contemporary capitalism, including increasing inequality, climate change, shrinking biodiversity, and growing social unrest. The authors argue that these issues have emerged because contemporary capitalism is too focused on short-term, financial returns. They propose a reinvented capitalism that prioritises “true value” – long-term social, environmental, and personal well-being – over value extraction.

Diagnosing today’s capitalism: Why is it delivering unsustainable outcomes?

The brief suggests that contemporary capitalism is not only limited by its focus on financial returns but also by environmental, social and governance (ESG)-related issues, such as a lack of standardised and mandatory ESG accounting rules; under-investment in public goods; and regulatory regimes that incentivise companies to shift profits to other jurisdictions with more favourable tax arrangements.

Existing efforts to address capitalism’s weaknesses

The authors briefly discuss existing initiatives aimed at addressing capitalism’s deficiencies, such as the shift towards stakeholder capitalism, which emphasises the need for companies to consider a broader range of stakeholders than just shareholders.

The capitalism we need

To create a more sustainable future, the authors outline features of a reinvented capitalism, such as ESG integration, long-termism, stewardship principles, a focus on system-level change, and reserving transparency as an essential component of accountability. These features would enable capitalism to deliver true value, driving environmental sustainability, social well-being, and prosperity around the globe.

Getting from here to there: The transformation agenda

The authors present a transformation agenda for businesses to adopt that maps out the tangible steps required to create a more sustainable economy and deliver true value. The agenda is grouped into seven themes, including risk and return, accounting, governance, incentives, markets, institutions, and metrics.

Where to start: Priorities for business

The brief explores companies’ priorities, outlining the top steps that businesses can take to lead the transformation agenda, including:

• Rigorously account for and report on ESG risks and impacts, making disclosure mandatory and standardised, and providing high-quality, comprehensive, and comparable data on those risks and impacts.
• Incorporate multi-stakeholder considerations into governance models, decision making, and incentives, to ensure all stakeholders’ interests are considered.
• Ensure executives’ remuneration reflects stakeholder impacts, not just short-term financial gains.
• Update legal frameworks to influence corporate strategy, contingent upon having “skin in the game” and ensure market prices reflect the full social and environmental costs and benefits of business activities.

Conclusion

The reinvention of capitalism may seem daunting, but it is a necessary step towards delivering a sustainable economic future for all. The brief concludes that businesses must be willing to adapt and fundamentally transform their approaches to create a more sustainable world. The alternative is an increasingly unequal society, underpinned by a traditional capitalism that perpetuates negative ESG outcomes.