When I chose the name “Cultivating Capital” for my new business, a colleague whom I greatly respect asked me about the name. I explained that the triple bottom line of sustainable business requires us to think about people, planet, and profit. However, we can’t really build triple bottom line businesses if we’re primarily focused on the profit component and only addressing the people and planet components through recycling programs and the occasional company volunteer event. If we really are going to build triple bottom line businesses, we must grow our social, natural, and financial capital (people, planet, profit) for the long-term, to avoid the disasters that result from short-term thinking.
Then he made an astute observation: “Most people will assume that it’s a financial services firm,” he said. “Are you willing to have this conversation every time?”
I answered in a heartbeat, “Yes. We have to have this conversation.”
My reason for believing this is simple. If what we need to do is to rethink how business operates – and as we witness both environmental and economic crises, it’s obvious that we do – then we need to realize that the paradigms of the past are simply not suited to the needs of the future.
Take, for example, Wal-Mart. As the world’s largest company, it has obviously excelled at growing its financial capital. At the same time, it has neglected its human capital. How has it done this? By not providing proper benefits to employees, resulting in alienation from certain consumers and “boycott wal-mart” movements. It is also just starting to pay attention to its natural capital, with a sustainability index that asks its 100,000 suppliers to report on energy and climate, material efficiency, natural resources, and people and community.
At the other end of the spectrum are organizations that are great at growing their human capital, yet don’t manage their financial capital very well. In fact, we don’t even call these businesses – we call them nonprofits. They fulfill a social mission and excel at bringing people together. However, their focus on social capital over financial capital places them in a precarious position, as they often manifest the organizational equivalent of living paycheck to paycheck through their lack of adequate financial resources.
However, this distinction between companies that exist to make money (grow their financial capital) and organizations that exist to do good (grow their social capital) implies that making money and doing good are at odds with each other. Fortunately, there is growing evidence that it is possible to be profitable and beneficial at the same time. The rise of Green MBA programs and Benefit Corporations (B Corps) are but two examples of the opportunity to make money while doing good.
The unifying feature about these various developments is that they require new ways of thinking that did not exist too long ago. In short, the distinction of “for profit” companies that only make money vs. “nonprofit” organizations that only do good is a relic of 20th century thinking. The challenges of the 21st century require us to recognize the limits of such distinctions in a new economy in which the businesses that will succeed are those that can make a profit while also being socially and environmentally responsible.
This is why I answered “yes” when my colleague warned me most people would assume that Cultivating Capital is a financial services firm and asked if I wanted to have this conversation every time. We simply can’t expect business to change if we continue thinking that the only capital worth managing is financial.