In 1970, Economist Milton Friedman argued that “A company has no social responsibility to the public or society. Its only responsibility is to its shareholders.” That mantra of “Greed is Good” has guided American Capitalism for 50 years, and it’s not working for most of us.
Recently, this doctrine of “shareholder primacy” has come under heavy fire. Consumers proactively choose brands aligned with making the world a better place. Two-thirds of millennials are making career and purchase decisions based on companies’ ethical standards. Investors are increasingly supporting the concept of “stakeholder capitalism,” which requires consideration of impact on people and planet, in addition to profit. According to the Global Impact Investing Network (GIIN), there is nearly $1 trillion in impact assets under management, not including “sustainable investing” and Environmental, Social, and Governance (ESG) funds. The B Corp movement has created the Benefit Corporation as a statutory alternative that protects mission-driven companies from corporate raiders.
However, there has been significant pushback, with special interests promoting regressive legislation to undermine impact investing. While some corporations are making changes consistent with the Business Roundtable’s recent promotion of stakeholder values, others resort to virtue signaling with various forms of “impact washing.”
Despite the challenges, many now believe that the shift from greed to good may be approaching a tipping point, resulting in a new, more sustainable form of capitalism.
In our upcoming VLAB panel discussion, thought leaders and investors will discuss the most salient elements of impact investing and Benefit Corporations.
• How does impact investing differ from socially responsible investing (SRI) and ESG?
• Can metrics to quantify impact help investors achieve both social good and profitability?
• How can entrepreneurs attract impact funding? And is there a downside?