Reimagining Capitalism in a World on Fire Summary

Can capitalism save the Earth it so rapidly threatens? Not without a bold transformation, argues Rebecca Henderson.

1. The Problem with Shareholder Primacy

Prioritizing shareholder returns above all else has significantly harmed the planet and society. This focus stems largely from Milton Friedman's philosophy that the sole obligation of a business is to generate profits. According to Friedman’s argument, prioritizing profit results in efficiency and innovation, supposedly benefiting society as a whole.

However, this approach has often favored profits at the expense of vital needs, like protecting the environment or ensuring fair wages. Fossil fuel companies, for instance, continue their destructive practices despite the growing climate crisis. Their prioritization of short-term profits over sustainability has created long-term destruction. Shareholders gain, but at what cost to everyone else?

Even the financial rationale for this approach is flawed. Companies like Peabody Energy generate billions in revenue by burning coal, but the resulting climate and health damages far exceed their earnings. This isn't just bad for the planet—it's unsustainable for businesses in the long run.

Examples

• Fossil fuel firms prioritize short-term profits, exacerbating climate change.
• Peabody Energy's coal practices caused societal costs five times larger than its revenue.
• Shareholder-focused lobbying has fueled inequality and enabled regressive political policies.

2. Doing Good and Doing Well Are Not Mutually Exclusive

Ethical and profitable businesses exist, debunking the myth that social responsibility undermines success. Companies like Norsk Gjenvinning (NG), a Norwegian waste disposal firm, prove that doing the right thing can lead to long-term growth.

NG’s CEO, Erik Osmundsen, overhauled operations by eliminating corruption, enacting transparent policies, and introducing innovative recycling technology. These changes improved the company’s reputation and made it one of Scandinavia’s most profitable waste businesses.

By focusing on sustainability and ethical operations, NG boosted efficiency and created valuable resources from waste. This approach attracted top industry talent who aligned with the company’s mission, showing that purpose-driven businesses can attract the best people.

Examples

• NG raised its recycling capabilities to 96%, improving both revenue and environmental impact.
• Osmundsen introduced zero-tolerance corruption policies that fostered trust among stakeholders.
• Foreign hires from brands like Coca-Cola brought fresh ideas to old systems.

3. Moving Beyond Short-Term Profits

Companies often feel pressured by shareholders to deliver quick financial returns, but this limits their ability to tackle big challenges like poverty or global warming. Reforming such short-sighted thinking requires structural changes in accounting, investments, and shareholder influence.

Reforming corporate accounting by reporting environmental, social, and governance (ESG) factors encourages investors to support long-term sustainability. Impact investors, like the Bill & Melinda Gates Foundation, further strengthen this by channeling funds to businesses that prioritize positive change.

Another solution involves limiting shareholder power outright. Facebook achieved this by issuing different classes of shares, ensuring the founders retained control of critical decisions. With these reforms, companies gain the freedom to prioritize long-term societal benefits over short-term gains.

Examples

• ESG reporting draws investors who value sustainability over immediate returns.
• Gates Foundation funds businesses that tackle global health and inequality.
• Facebook retains decision-making power via dual-class stock structures.

4. Collaboration Fuels Larger Change

When individual businesses drive change alone, the impact is often limited. However, when companies work together, they can create new standards and push for laws to protect both people and the planet.

Nike experienced this firsthand when it grappled with supply chain issues involving child labor. After realizing it couldn’t solve the problem alone, Nike founded the Sustainable Apparel Coalition. By collaborating with other firms, they collectively overhauled unethical practices in the industry.

The power of partnerships goes beyond specific industries. Historical moments, like the repeal of discriminatory laws in Indiana or North Carolina, demonstrate how corporate coalitions can influence broader changes that benefit society.

Examples

• Nike collaborated with competitors to root out child labor in supply chains.
• A business-led coalition repealed North Carolina’s anti-transgender bathroom bill.
• Merchants and entrepreneurs historically fought for civil rights, including voting reforms in the English Civil War.

5. Sustainability as a Smart Investment

Unilever’s transformation in tea farming illustrates that sustainability isn’t just "the right thing to do," it's also good business. Recognizing the vulnerabilities of traditional tea farming to global warming, Unilever committed to sustainably grown tea.

This initiative ensured better soil health, higher crop yields, and decent wages for workers. Despite initial costs, Unilever’s strategy improved long-term supply chain resilience and bolstered customer loyalty.

By demonstrating leadership in sustainability, Unilever avoided scandals and positioned its brands as ethical choices for consumers. This enhanced reputation translated into increased loyalty from environmentally conscious buyers.

Examples

• Unilever switched to 100% sustainably sourced tea to counter climate risks.
• Sustainable farms achieved better profits through healthier yields.
• Happy workers and loyal customers strengthened Unilever’s future growth.

6. Shared Purpose Inspires Transformation

Mark Bertolini of Aetna increased wages for entry-level workers and inspired his company around a shared mission: transforming US health care. Believing financially secure employees could better support customers, he made this bold move.

This shared purpose tackled the impersonal systems of US health care. Aetna focused on personalized patient care, which not only improved outcomes but also cut costs by preventing severe illnesses.

By aligning his employees with a mission of improving lives, Bertolini built trust and motivation within the workforce. Aetna’s profitability showed that purpose and profit don’t need to compete—they build on each other.

Examples

• Aetna improved patient care by prioritizing prevention and personalization.
• Employees benefited from higher wages, enhancing their own health and performance.
• The company saved costs while tackling one of America’s most broken systems.

7. Businesses Can Fight Inequality

Companies can be potent allies in the battle for fair treatment. Through inclusive policies and bold political stances, businesses amplify marginalized voices and challenge oppressive systems.

IBM and AT&T led the way decades ago, introducing anti-discrimination policies before they were legally required. More recently, companies like Merck and Google have opposed discriminatory government legislation, demonstrating their commitment to fair treatment.

By showing that profit doesn’t need to come at others’ expense, these companies provide valuable examples for the broader business world. They demonstrate that businesses can prioritize human rights and remain economically competitive.

Examples

• IBM added sexual orientation to its anti-discrimination policies as early as the 1980s.
• Google’s opposition to discriminatory laws helped repeal North Carolina’s bathroom bill.
• Ken Frazier resigned from Trump’s council after Charlottesville, setting an ethical precedent.

8. Climate Action Requires Collective Effort

The fight against climate change isn’t the work of only politicians or activists. Businesses have critical roles to play in building sustainable systems. But this change doesn’t happen overnight—it takes years of groundwork and collaboration.

Leaders like Erik Osmundsen demonstrate the importance of collective action within companies. Behind every innovative reform is a team of dedicated individuals working to implement change, one practical step at a time.

Whether reducing emissions or advocating for renewable resources, businesses contribute little by little to transformative movements. The key is persistence and teamwork.

Examples

• Osmundsen credited his reform success to his teams’ collective effort.
• Coalitions encouraged renewable energy adoption, one regulation at a time.
• Cross-industry collaborations are reducing long-term emissions globally.

9. Small Actions Add Up Over Time

No single person or company can fix global problems, but small, consistent actions add up. The progress made by the Civil Rights Movement and sustainable businesses alike demonstrates the power of incremental change led by many hands.

Martin Luther King Jr. is remembered for his charisma and speeches, but countless unsung workers—flyer distributors, cooks, strategists—formed the backbone of the movement. The same is true for business-led reforms.

This lesson reminds us that everyone can play a role. From visionary CEOs to entry-level employees, every effort matters in creating a world where businesses serve humanity rather than exploit it.

Examples

• Civil Rights leaders relied on movements of cooks, cleaners, and organizers.
• Companies like NG succeeded because of employees executing daily tasks.
• Unilever relied on individual farmers to change the face of their operations.

Takeaways

1. Advocate for sustainable practices in your workplace or community; even small steps can build momentum.
2. Support ethical businesses with your purchasing power; demand transparency and fairness.
3. Collaborate with others to amplify your efforts, whether you're an employee, consumer, or entrepreneur.