On sustainability and resource allocation

August 27, 2021

I recently finished Reimagining Capitalism in a World on Fire by Rebecca Henderson. 

The book provides a thorough review of key themes in sustainable management and engaging arguments on the “shared value” approach to growth.

That said, to my mind, the book skews too closely towards finding justifications for maintaining the current profit-driven corporate model without discussing the changes that would result in a fairer allocation of resources and investment return to workers, states and communities that are impacted by the operations of multinationals. 

In fairness to Ms. Henderson, the book was written before the COVID-19 pandemic and the subsequent renewed focus on sustainability and corporate purpose. 

But the approach underscores to me how important it is to stop thinking about sustainability as simply a theory of management. 

It is a broader discipline that needs to be incorporated into every area of our lives in a much more meaningful way -- health and education being among the most critical. 

It requires multinationals to completely rethink the way they operate and consumers to completely rethink their preferences and habits. 

Ms. Henderson’s debate on capitalism is interesting but it’s very theoretical. It doesn’t really lead to any action.

The true changes need to happen within the corporation itself. Some theories of sustainable corporate governance are engaging, but you don’t need to write a dissertation in corporate law to make a difference.

It’s ultimately a question of resource allocation. And those are mostly going to shareholders and management at the expense of workers and communities.

Asset managers talk a lot about ESG, but at the end of the day, they still want their dividends maintained.

What are they willing to give up to make the world a fairer place? Most are still collecting interest payments from heavily indebted sovereigns, even after the pandemic!

In my view, this is where the change needs to happen. Either waive your rights to dividends and interest payments or use your vote so that they are restructured and reinvested in initiatives for workers, communities and host countries.

Larry Fink’s interview in the FT talking about his “green is good” slogan really sums it all up.

Sounds a lot like Gordon Gekko’s.

CPM