Capitalism at the Crossroads: Aligning Business, Earth, and Humanity / Edition 2

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"Capitalism at the Crossroads is built on strong theoretical underpinnings and illustrated with many practical examples. The author offers a pioneering roadmap to responsible macroeconomics and corporate growth."
-Clayton Christensen, Professor of Business Administration, Harvard Business School and author of The Innovator's Dilemma

"I hope this book will be able to influence the thought processes of corporations and motivate them to adapt to forthcoming business realities for the sake of their own long-term existence. Besides business leaders, this is a thought-provoking book for the readers who are looking for solutions to capitalism’s problems."
-Muhammad Yunus, Founder and Managing Director, Grameen Bank, Bangladesh and 2007 Nobel Peace Prize recipient

"Capitalism at the Crossroads is a practical manifesto for business in the twenty-first century. Professor Stuart L. Hart provides a succinct framework for managers to harmonize concerns for the planet with wealth creation and unambiguously demonstrates the connection between the two. This book represents a turning point in the debate about the emerging role and responsibility of business in society."
-C.K. Prahalad, Ross School of Business, University of Michigan, co-author of Competing for the Future and author of The Fortune at the Bottom of the Pyramid

"Stuart Hart was there at the beginning. Years ago when the term ‘sustainability’ had not yet reached the business schools, Stuart Hart stood as a beacon glowing in the umbrage. It is clear commerce is the engine of change, design the first signal of human intention, and global capitalism is at the crossroads. Stuart Hart is there again; this time lighting up the intersection."
-William McDonough, University of Virginia, co-author of Cradle to Cradle

"Professor Hart is on the leading edge of making sustainability an understandable and useful framework for building business value. This book brings together much of his insights developed over the past decade. Through case studies and practical advice, he argues powerfully that unlimited opportunities for profitable business growth will flow to those companies that bring innovative technology and solutions to bear on some of the world’s most intractable social and environmental problems."
-Chad Holliday, Chairman and CEO, DuPont

"Capitalism at the Crossroads clearly reveals the essence of what sustainability means to today’s business world. Hart’s analysis that businesses must increasingly adopt a business framework based on building sustainable value speaks to the entire sustainability movement’s relevance. Sustainability is more than today’s competitive edge; it is tomorrow’s model for success."
-Don Pether, President and CEO, Dofasco Inc.

"Stuart Hart has written a book full of big insights painted with bold strokes. He may make you mad. He will certainly make you think."
-Jonathan Lash, President, The World Resources Institute

"A must-read for every CEO—and every MBA."
-John Elkington, Chairman, SustainAbility

"This book provides us with a vast array of innovative and practical ideas to accelerate the transformation to global sustainability and the role businesses and corporations will have to play therein. Stuart Hart manages to contribute in an essential way to the growing intellectual capital that addresses this topic. But, beyond that, the book will also prove to be a pioneer in the literature on corporate strategy by adding this new dimension to the current thinking."
-Jan Oosterveld, Professor, IESE Business School, Barcelona, Spain Member, Group Management Committee (Ret.), Royal Philips Electronics

"Capitalism at the Crossroads captures a disturbing and descriptive picture of the global condition. Dr. Hart constructs a compelling new corporate business model that simultaneously merges the metric of profitability along with societal value and environmental integrity. He challenges the corporate sector to take the lead and to invoke this change so that the benefits of capitalism can be shared with the entire human community worldwide."
-Mac Bridger, CEO of Tandus Group

"Stuart L. Hart makes a very important contribution to the understanding of how enterprise can help save the world’s environment. Crucial reading."
-Hernando de Soto, President of The Institute for Liberty and Democracy and author of The Mystery of Capital

"Stuart Hart’s insights into the business sense of sustainability come through compellingly in Capitalism at the Crossroads. Any businessperson interested in the long view will find resonance with his wise reasoning."
-Ray Anderson, Founder and Chairman, Interface, Inc.

"This stimulating book documents the central role that business will play in humanity’s efforts to develop a sustainable global economy. Professor Hart presents an attractive vision of opportunity for those corporations that develop the new technologies, new business models, and new mental frames that are essential to a sustainable future."
-Jeffrey Lehman, Former President of Cornell University

"The people of the world are in desperate need of new ideas if global industrial development is ever to result in something other than the rich getting richer and the poor getting poorer, with nature (and potentially all of us) suffering the collateral damage. Few have contributed more to meeting this need over the past decade than Stuart Hart by helping to illuminate the potential role for business and new thinking in business strategy in the journey ahead. Capitalism at the Crossroads challenges, provokes, and no doubt will stimulate many debates—which is exactly what is needed."
-Peter Senge, Massachusetts Institute of Technology, Chairperson of the Society for Organizational Learning, and author of The Fifth Discipline: The Art and Practice of The Learning Organization

New Foreword by Al Gore
Brand-New Second Edition, Completely Revised with:

  • Up-to-the-minute trends and lessons learned
  • New and updated case studies
  • The latest corporate responses to climate change, energy, and terrorism

Global capitalism stands at a crossroads-facing terrorism, environmental destruction, and anti-globalization backlash. Today's global companies are at a crossroads, too-searching desperately for new sources of profitable growth. Stuart L. Hart's Capitalism at the Crossroads, Second Edition is about solving both of those problems at the same time.

It's about igniting new growth by creating sustainable products that solve urgent societal problems. It's about using new technology to deliver profitable solutions that reduce poverty and protect the environment. It's about becoming truly indigenous to all your markets, and avoiding the pitfalls of first-generation "greening" and "sustainability" strategies.

Hart has thoroughly revised this seminal book with new case studies, trends, and lessons learned-including the latest experiences of leaders like GE and Wal-Mart. You'll find new insights from the pioneering BoP Protocol initiative, in which multinationals are incubating new businesses in income-poor communities. You'll also discover creative new ways in which corporations are responding to global warming and terrorism. More than ever, this book points the way toward a capitalism that's more inclusive, more welcome, and far more successful-for both companies and communities, worldwide.

  • Paths to profitable sustainability: Lessons from GE and Wal-Mart
  • Shattering the "trade-off" myth
  • New commercial strategies for serving the "base of the pyramid"
  • What enterprises have learned about doing business in income-poor regions
  • Becoming indigenous-for real, for good
  • Codiscovering new opportunities, cocreating new businesses with the poor
  • Learning from leaders: 20+ new and updated case studies
  • Best practices from DuPont, HP, Unilever, SC Johnson, Tata, P&G, Cemex, and more

About the Author xii Acknowledgments xiii Foreword: Al Gore, Former Vice President of the U.S. xxiv Foreword: Fisk Johnson, Chairman and CEO, S.C. Johnson & Son, Inc. xxvii Prologue: Capitalism at the Crossroads xxxi

Chapter 1: From Obligation to Opportunity 3
Chapter 2: Worlds in Collision 31
Chapter 3: The Sustainable Value Portfolio 59

Chapter 4: Creative Destruction and Sustainability 87
Chapter 5: The Great Leap Downward 111
Chapter 6: Reaching the Base of the Pyramid 139

Chapter 7: Broadening the Corporate Bandwidth 169
Chapter 8: Developing Native Capability 193
Chapter 9: Toward a Sustainable Global Enterprise 223

Epilogue 249

Index 254

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Editorial Reviews

Soundview Executive Book Summaries
Stuart Hart has written some of the most pivotal and provocative articles about the implications of sustainable development and environmentalism for business strategy in the Harvard Business Review. In Capitalism at the Crossroads, he explains how corporations can help to create a sustainable force of global development for everyone on the planet. Showing how there is no inherent conflict between improving the world and achieving economic prosperity for all, Hart shows how responsible corporate growth can be done. Copyright © 2005 Soundview Executive Book Summaries
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Product Details

Meet the Author

STUART L. HART is one of the world's top authorities on the implications of sustainable development and environmentalism for business strategy. He is currently the S.C. Johnson Chair of Sustainable Global Enterprise and Professor of Management at Cornell's Johnson Graduate School of Management. He also serves as senior research fellow at both the Davidson Institute (University of Michigan) and Tilburg University in the Netherlands.

Previously, he taught strategic management and founded both the Center for Sustainable Enterprise (CSE) at the University of North Carolina's Kenan-Flagler Business School, and the Corporate Environmental Management Program (CEMP) at the University of Michigan. His consulting clients range from DuPont and Hewlett-Packard to Procter & Gamble and Shell.

Hart wrote the seminal article "Beyond Greening: Strategies for a Sustainable World," which won the McKinsey Award for Best Article in Harvard Business Review in 1997, and helped launch the movement for corporate sustainability. With C.K. Prahalad, he also wrote the pathbreaking 2002 article "The Fortune at the Bottom of the Pyramid," which first articulated how business could profitably serve the needs of the four billion poor in the developing world.

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Read an Excerpt

Foreword: Al Gore, Former Vice President of the United StatesForeword: Al Gore, Former Vice President of the United States

The global context for business continues to change at an unprecedented rate, and Stuart Hart has effectively captured important insights into the nature of this contextual shift in this updated edition of Capitalism at the Crossroads. I agree. In fact, my partners and I at Generation Investment Management believe that sustainability will be a key driver of global economic change over the next 50 years. And we think companies face an unprecedented opportunity to create shareholder value by helping to chart the way forward, and by contributing to sustainable development.

Now, more than ever, factors beyond the scope of economist John Maynard Keynes' "national accounts" (the backbone of today's gross domestic product) are directly affecting a company's ability to generate revenues, manage risks, and sustain competitive advantage. While our current system is precise in its ability to account for capital goods, it is imprecise in its ability to account for natural, social, and human capital. Natural resources, for example, are still—in some ways—assumed to be limitless. This, in part, explains why our current model of economic development is hardwired to externalize as many costs as possible, therefore imposing environmental and social costs on society at large.

The interests of shareholders, both public and private, over time, will be best served by companies that maximize their financial performance by strategically managing their economic, social, environmental, and ethical performance. This is increasingly true as we confront the limits of our ecological system and its ability to hold up under current patterns of use. "License to operate" can no longer be taken for granted by business when challenges such as the climate crisis, HIV/AIDS, and other pandemics, water scarcity, and poverty reach a point where civil society and consumers demand a response from business and government. Leading companies understand this and are already moving ahead of legislators and regulators and, in so doing, securing competitive advantage.

The global climate crisis is the perfect example of a challenge that pushes our companies and our policymakers beyond their traditional comfort zone. The risks and opportunities presented by global warming are clearly material to the long-term health of our economic system. Companies that are part of the climate change solution will be able to enhance revenues, attract the best talent, and develop brand benefits—all of which will translate into optimized shareholder value over the long run. Today, action on the climate crisis makes sense not only for reputation and risk management, but for revenue generation and competitive positioning. Investors and companies that fully integrate climate considerations into their strategies, cultures, and operations will be best positioned to create shareholder value.

Business, as Hart points out, is a powerful agent of change and is well equipped to forge the way to a more sustainable future in conjunction with government and a strong civil society. However, he points out the inherent short- and long-term tensions within companies, which still have to balance forward-looking sustainability initiatives with legacy investments and old (and often-unsustainable) habits.

There are, of course, limits to the ability of traditional business to deal with sustainability challenges by themselves. Now, more than ever, our societies need new models to address systemic, long-term challenges like the climate crisis, poverty, pandemics, water scarcity, and demographic shifts. This will involve more business and government innovation, social entrepreneurship, public-private partnerships, and more effective civil society participation.

The age of sustainability has arrived, but now we must drive it fully through our economic system. To do so, markets will have to continue to evolve to take into account the full environmental and social externalities of business in order to enable the efficient allocation of capital to its highest and best use. The regulated carbon markets in Europe, worth $25 billion in 2006, are a good example of how capitalism can powerfully address environmental challenges when a price signal exists—in this case, the price of a ton of carbon dioxide. Only as markets improve their ability to price externalities, will we see capital allocated more effectively to sustainable development. This shift will require nothing less than a complete change in mindset—one that views our planet as a long-term investment, rather than a business in liquidation.

Al Gore Chairman Generation Investment Management

© Copyright Pearson Education. All rights reserved.

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Table of Contents

Prologue : capitalism at the crossroads
Ch. 1 From obligation to opportunity 3
Ch. 2 Worlds in collision 31
Ch. 3 The sustainable value portfolio 57
Ch. 4 Creative destruction and sustainability 85
Ch. 5 The great leap downward 107
Ch. 6 Reaching the base of the pyramid 135
Ch. 7 Broadening the corporate bandwidth 163
Ch. 8 Developing native capability 185
Ch. 9 Toward a sustainable global enterprise 213
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