Welcome to the full Episode 5 of Sustainability Karma, India’s first and only talk show on sustainability on All India Radio.

In this episode of Sustainability Karma, Prof Stuart L. Hart, a leading corporate sustainability strategist, talks about his new book Beyond Shareholder Primacy: Remaking Capitalism for a Sustainable Future, and the urgent need for a fundamental reinvention of capitalism, driven by business leaders who can take bold actions for long-term value creation and sustainability. Prof Hart says that the core message of Beyond Shareholder Primacy is that the dominant form of capitalism today or the shareholder capitalism, which originated in the ‘70s and ‘80s in America is not the only or the best way to practise capitalism. This form of capitalism focuses primarily on maximising shareholder value, often at the expense of broader societal and environmental concerns.

He argues that this current version of capitalism is an outlier in the historical context, as capitalism has evolved through various cycles of excess, extraction, and reform over the past 400-500 years. He says that it is possible to transform capitalism into a more inclusive and sustainable system.

Saying that one of the main takeaways from the book is that capitalism has not always been practised in the way it is today, Prof Hart adds that historically capitalism has undergone cycles where periods of excessive extraction and focus on short-term gains have been followed by times of reform and reinvention, driven by “our better angels”. He believes that we are currently at a point where fundamental transformation of capitalism is necessary and within our grasp.

Referring to the actions that corporate leaders and business leaders can take within their companies, as well as the need for larger systemic changes and institutional redesigns, he says that it calls for rethinking the public equity markets, business education, and redefining the concept of value itself. He emphasises that business schools play a significant role in perpetuating the current version of capitalism and that changing the way business students are taught is crucial for this transformation.

Prof Hart’s new book builds on his previous work, which focused on sustainable business strategies for over two decades. His earlier work, including the Harvard Business Review article “Beyond Greening: Strategies for a Sustainable World” and the concept of “The Fortune at the Bottom of the
Pyramid” highlighted the need for businesses to go beyond incremental improvements and eco-efficiency. Instead, they should embrace disruptive innovation, next-generation clean and regenerative technologies, and create markets that serve and uplift underserved populations.

Despite significant progress in the greening agenda, he argues that the beyond greening agenda, which calls for more transformative changes, has not been adequately addressed. This delay has led to various crises, including climate change, the sixth mass extinction, and increasing inequality. He contends that individual corporate actions are no longer sufficient. Instead, business leaders must become agents of systemic change, advocating for public policy changes and addressing the root causes of our current economic system.

He sees business schools as a critical area for reform, as they are major contributors to perpetuating the current capitalist model. To achieve lasting change, he calls for a redefinition of value creation that aligns with long-term sustainability and societal well-being.

Reflecting on the evolution of corporate sustainability over the past 40 years, Prof Hart outlines several phases, from regulatory-driven end-of-pipe solutions in the 1970s and 1980s to the eco-efficiency revolution of the 1990s. The latter showed that businesses could reduce emissions and waste while saving costs and reducing risks, making sustainability relevant to business strategy. However, the broader impact on supply chains and product systems, including sustainable sourcing and product stewardship, is still evolving and requires more attention.

He critiques the term “ESG” (Environmental, Social, and Governance), highlighting its origins in risk mitigation for shareholders and its evolution into a broader, albeit controversial, concept. He stresses the importance of focusing on the real environmental and social challenges rather than getting caught up in culture wars over terminology.

Prof Hart concludes by emphasising the urgent need for a fundamental reinvention of capitalism, driven by business leaders who can take bold actions for long-term value creation and sustainability. He believes that with the right leadership and systemic changes, it is possible to create a more equitable and sustainable form of capitalism.