What will the future of business be like? One way of finding out is arguably to focus on future challenges in society at large. 

In 2017, Geoffrey Jones, professor in Business History at Harvard Business School, published Profits and Sustainability. In the opening lines, he wrote: “The degradation of the natural environment presents the greatest challenge faced by humanity.”

He has continued to pursue this theme and has just published a follow-up book, Varieties of Green Capitalism: Industries, Nations and Time.

After my first conversation with Geoffrey regarding lessons from business history, I therefore returned to speak with him again. I wanted to capture his perspectives on the future of business and the challenges facing us.

Below is an edited transcript of my conversation with him.

* * *


Jonathan: In Profits and Sustainability you write that climate change is the biggest challenge. You point to inequality too. But are we really in such dire trouble? Are things not perfectly ok?

Geoffrey: Well, I haven’t changed my mind since I wrote that book. I think both climate change and inequality remain fundamental challenges. I think the degradation of the natural environment, as I think I wrote it, is the greatest challenge. Simply because if the planet becomes uninhabitable, that’s kind of the end of things. And there is really strong evidence about it. Like melting ice caps and rising water, which indicates that very large cities and some countries will actually sink. So that’s why I continue to think that climate change is the most serious challenge.

But inequality is a huge challenge too. We have a situation where half the world lives in poverty, and that’s now flooding over to the part of the world which lead these privileged safe existences, as you know very well over in Europe, right? Social systems like the Swedish one are under huge pressure from people fleeing these bad conditions. So that is a huge problem. It’s having huge political consequences. The rise of populism, of nationalism, and that sort of thing. 

Jonathan: How did we end up in this situation?

Geoffrey: Well, overall we’ve made the same mistakes in the second wave of globalisation – since the 1980’s – as they did in the first wave of globalisation in the early 20th century. And that is to create a very rich 1% while leaving a lot of people behind. It has major political consequences. In the early 20th century it helped drive fascism and communism, and today the consequence so far has evidently been a resurgence of racism and nationalism. It’s too soon to tell where it’s all going, but the consequences are serious enough already – and it’s spilling out into the same kind of policies we saw back then. 

So yeah, to sum it up, I would continue to say for me that those two are the two huge issues of our time.

Jonathan: Regarding the inequality issue, how do you see the relationship of the rich 1% in the west and the billions of people living in poverty?

Geoffrey: The connection is very clear. The affluence of the West in multiple ways depends on the poverty of many people in the Rest. We’re wearing shirts from Indonesia or Bangladesh made by deeply impoverished people who get very little benefits. And you can say the same about electronics. If you’ve got an iPhone, well, that’s made by semi-forcibly conscripted people working in China. The people who made your iPhone are far from owing one themselves. We all enjoy the benefits of fast global communication, but these people only do slightly better than they would have done if they’d stayed in their villages. They don’t capture any of the real benefits of globalisation.

So the two worlds are interrelated, and all the benefits I think have gone to the West. Was that inevitable? I don’t think so. But to avoid it, it would have required that business actors, in particular, had thought a bit harder about the consequences of their actions. They should have invested more in reducing the number of losers. That would have been to the longterm benefit of the capitalist system. Because with a better income these people would have become better customers. They would be more likely to support the value system, and more likely not to support certain political parties. And less likely to become Islamic militants who seek to harm non-believers, if they get a chance.

So, to think about the consequences would even have been in the long term interest of larger corporations.

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Jonathan: So, if only corporations had cared for citizens, societies and for the natural environment… It seems very far from what actually happened…. But, to stay positive, what is the solution, you think? 

Geoffrey: It’s all really very difficult because in a way it’s a collective problem. If one company really decides to act in another way, it’s competitors may not, and its shareholders will not like it. The shareholders are institutions like pension funds who have to provide pensions for increasingly aged populations. So they might end up getting less money – in order for firms to be more sustainable. In the end, the cost would fall on retirees who would get less income. It’s a system-wide challenge and failure. 

Jonathan: Based on what we know about corporations and what motivates them, I would also find it a bit naïve to trust them to fix it themselves. Don’t you think we need some sort of regulation or enforcement?

Geoffrey: I’m no enormous fan of the ability of governments to move things on. But regulations can certainly level highly distorted playing fields. Things like a carbon tax, for example, would probably be quite a good way to intervene. And there are many other things like that. There’s a ton of things governments could do to improve the skill levels and the opportunities of poor people. But in fact it’s going in the opposite direction. I think it’s almost system-wide that if you live in an expensive area and can afford an expensive house, then your kids will probably go to a better school and in turn have a better chance of buying an expensive house. And so you have this circular process, and none of that is inevitable or rocket science.

In the United States we have a bizarre education system which is paid for by local property taxes. So, inner city schools struggle, and will continue to struggle, while the rich suburban schools do well and their kids will do well. But that’s simply a political and institutional artifact.

So, if you want to be optimistic, I think the problems are solvable. It’s not like inventing interstellar travel to solve many of the problems. Architects know how to build much more sustainable buildings. Clean energy technologies are already pretty good and getting better. All the problems of inner city schools etc. are not fundamental problems.

So in a sense that’s very optimistic. We know what needs to be done, and it is doable. But then we have this political and cultural log jam, which means that people don’t want to pursue those strategies for all sorts of reasons. Vested interests or whatever. So I think what we need very much is a change of mindset. Which is where journalists and hopefully academics come in. And hopefully talented political leaders who can offer a vision – instead of the alternative.

Jonathan: Yes, but I guess at least knowing the solutions is a good starting point… 

Geoffrey: People in the Middle Ages didn’t know the solution to the black death. Then you’re really stuck.

Jonathan: Then it becomes your fate. The problem today is different. Is it simply human behaviour? That we don’t want let go of our riches and don’t want to pay for the poor? Is it just because we’ve become so obsessed with our own fortune?

Geoffrey: Well, it’s kind of understandable that people in for example Denmark don’t particularly want to give away large resources to people who has fled from Syria and ended up in Denmark. And still, a lot of individuals now give some money away to charities. They look at labels of food. They do all sorts of things which suggest that they have some kind of concern beyond their personal or their family’s income. So I think there is quite a lot of altruism floating around, but it’s not being applied in an effective way. It’s not being captured at the moment.

Also, people who are not altruistic at all are apparently much better at the moment at advancing their ideas, which is to shut out the bad problems rather than address them. Or to deny that the problems exist in the first place, which is what climate deniers do very effectively.

But overall, I’m a bit optimistic about humans. We’re not entirely selfish beings. I think there’s quite a lot of evidence about altruistic behaviour. On all sorts of planes of daily life, people do things that doesn’t naturally serve them as individuals. Like giving instructions to a stranger in a town or anything.

Jonathan: It’s also interesting how this problem connects all the different entities of society – companies, citizens, NGOs, government… 

Geoffrey: Yes, and there’s no way governments are going to have a magic wand to solve these things. I don’t believe. We have a world of politicians who need to get elected and all sorts of stuff going on. So I think co-creation with governments is key. And, I would stress, local governments more than national governments. We need entrepreneurs who can innovate in solution areas, and consumers who can support particular choices or follow particular rules. I think you need to get them all on board. And that always comes back to the thought leader’s story. That you need people articulating what can be done and diffusing that in ways that people can understand and appreciate. That’s where a lot of the log jam is at the moment – and it’s not at all easy to solve.

Jonathan: So it’s a long battle, but we need to speed it up…  And then you read that 40% of the global population don’t know about climate change. It’s a staggering number.

Geoffrey: It’s a staggering number. But when you think of the daily life of most people in Africa and some parts of Asia, in big cities or in the countryside. Today, most people there have some literacy, but their daily life is still the struggle of survival punctuated by endless misfortunes of health. So, it makes sense that climate change is not top of their list.

It’s actually more shocking in a country like the United States where you have a great deal of people who deny climate change. Who believe dinosaurs didn’t exist. It’s more shocking that some of our education systems teach evolution and creationism as equal theories. That is shocking.

I’m less shocked that the deeply impoverished people in Asia and Africa don’t have much time to think about it. Although that may be underestimating things. In some ways, they are at the forefront at the consequences of climate change, and I wouldn’t be surprised if going forward some of the strongest advocates of the need to act will be from regions and countries outside the western world. 

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Jonathan: What role do businesses play in all of this? How important are they in terms of these problems of climate change and inequality?

Geoffrey:  They play a crucial role. Businesses reinforce trends and promote winners. The regions that are already in good shape tend to do well in a globalised business environment. And people with a lot of skills also do very well in this environment. So, in that sense, businesses tend to increase inequality.

I’m not saying that businesses are wicked, but they reinforce trends. The decisions behind these reinforcements are quite rational. For example, if you’re going to set up a research lab, you’re not going to set it up in Congo. You’re going to set it up somewhere with a strong research tradition and universities.

As for businesses and the environment, then one of lessons is that it’s going to cost more if you’re going to do things in a way that doesn’t destroy the environment. The idea about a win-win is a myth. Conventional business has no regard for its environmental impact – whether it’s climate issues, destroying species or anything else. 

So I think a big challenge moving ahead about is redefining business so it can have a more productive impact on the world. And by productive, I do not just mean generating income. The whole system depends on generating some income for shareholders, so not getting rid of that, but figuring out how businesses can productively contribute to societal welfare, including environmental welfare.

It’s not a new idea at all. It’s been the ambition of businesses, business leaders, over a very long period. It’s interesting, if you look at the history of management education then it’s more or less what Harvard Business School was teaching future managers from the 1920s maybe until the 1970s. You can see it on record, that one Dean after the other was talking about that back then. And now we have a Dean who’s talking about it again.

However, it’s never been fully achievable across the system. Some individual businesses have done a much better job than others. The problem is how to move a system so that the new conventional business is one that provides wealth, continue to innovate and yet shares the benefits of that with a wider group of people. And with the natural environment.

I think that’s the challenge going forward. I think that will require changes to the concept of fiduciary duty, for example. I think it probably will require capital to act in different ways. The holders of capital need to accept that kind of mission.

* * *


Jonathan: What we’re talking about here, I guess, is the need for sustainable business, and a sustainable business mindset where you think beyond the bottom line and short-term profits. It’s about sustainability, isn’t it?

Geoffrey: Well… one thing that has in fact changed in the last 30 years has been a globalisation of the sustainability rhetoric. And I think it’s quite unfortunate because a lot of the rhetoric is fairly meaningless. I mean, today every company in the world is apparently sustainable. There has been a spread of this rhetoric. It used to be that different countries had different narratives. Now there’s a single global narrative, and all to rarely is it based on reality. 

Jonathan: I also think the level of greenwashing has increased the past few years. For example, most of the old oil companies, no matter how big their portfolio of renewables is at the moment, are becoming “energy companies who are building a sustainable future” or similar. But I guess it happens across all areas of business.

Geoffrey: I think the whole area of sustainability has arguably become an obstacle to environmental protection. Because it’s become a mixture of vague metrics, a spread of a rhetoric and a failure to invest in any kind of system-wide solution. So as a consumer today you’re unaware of the environmental impact of a product. Every company is green. Every brand is green. Things are even painted green…

Jonathan: Is it just the case that profit-thinking is not sustainable? Or can you in fact merge the two, profits and sustainability?

Geoffrey: I think you can. But I think it comes down to how you define profits, and how you define sustainability as well. So, I think if you developed accounting methods to fully incorporate external costs into balance sheets, then you could still have a profit-driven business. But negative environmental externalities would have to be included in how you measure profits. So, that’s what I would favour. I think we have a problem with our present accounting systems. If we change those we may be able to continue. We would be able to get the good side of profits which is for example material incentives for innovation and all the rest of it – without some of the consequences. But sustainability is so vague now that it’s practically a meaningless term.

So, I do think profits and sustainability can be reconciled. But we need to go back to the definitions and to the kind of measures that are used. I don’t think that a very narrow shareholder value type profit and fiduciary responsibility to maximise your profits can be reconciled with any kind of sustainability.

This also has to do with the huge problem we have with metrics, how we measure these things. I was at an event recently where someone noted: “We have no metric to measure the extinction of a species”. We know that we are in the sixth period of mass extinction – species are dying or disappearing at an alarming rate – but as the CEO of a company you have no idea if what you’re doing is contributing to that. 

* * *


Jonathan: So if that’s the context in the 21st century – climate change and inequality, in particular – what then do you imagine will be the key challenges for business in the future? How can they thrive or even survive in this environment?

Geoffrey: Compared to twenty years ago, I think businesses will find a much more politicised environment when they go to foreign countries. And even within their own country. There’s been a huge diminishment of trust in businesses and a huge rise in hostility to foreign businesses. And that’s across systems, from U.S. to China to practically everywhere else.

So navigating governments and political hostility I think are among the biggest challenges faced by firms. At the high point of globalisation in the 80’s and 90’s that was hardly there. Everybody was taking away restrictions on foreign companies. People were competing to attract businesses. And there was this ideological view, even in countries with strong socialist traditions, that business was the engine of growth and solutions. All of that has really dramatically gone away.

Navigating that whole environment is and will be very difficult for firms. I mean what firms do is they do business. They create products and services, they manage a large workforce, they do logistics. That’s what they do. So having to navigate a political context like that takes up a bunch of firms out of their comfort zones or even their capabilities. So, if you have a business which has a global value chain… well, best of luck! There are restrictions, regulations, political pressures coming on you all over the place. You could end up on a U.S. President’s Twitter account for daring to source something in Mexico rather than in the U.S. For most firms, even the big ones, that is a very uncomfortable environment. Is it a temporary blip? I don’t think so. I think all the trends are that this is accelerating, in part because of all these structural problems in the world economy of inequality and the reaction to that.

So that’s going to be with companies for a long time, and they have to think it through very carefully in terms of how to build their societal legitimacy within that context. And that has to do with a lot more than fake CSR campaigns. Or sustainability reports which don’t say very much.

Jonathan: Yes, I guess it’s pretty easy to do your own report… 

Geoffrey:  I think so. It just doesn’t mean anything. And worse still, most people know it doesn’t mean anything. That’s a bit of a shame, and that’s different as well. When the first sustainability reports came out 10-15 years ago companies were highlighted for doing that. It was a plus, and they would get customer approval. Today, everyone’s doing those reports and people do not have much faith in it.

So, I predict a difficult time, particularly for globalised companies.

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