Profit is Not a Dirty Word

Balancing economic, social and environmental sustainability

I help organizations turn their values into successful business models

20 years+ career including corporate communications/organizational development, public/community relations, sustainability and CSR

Corporate executive Co-founding board member of the Sustainable

Business Network of Washington (SBNOW) Sustainable Business blogger for Huffington

Post

John Friedman

www.sbnow.orgtwitter: @JohnFriedman

And the verdict is . . .Capitalism doesn't need defending, and nobody worth listening to claims profit is a dirty word

You are living in an alternate universe, nothing at all like one we live in where capitalism is founded on greed, ruthless exploitation of workers, including the poorest in 3rd world countries, and rapacious of the earth's resources.

How wrong can one be? Capitalism at the expense of someone else's freedom is not right no matter how happy it makes you.

You are correct. Capitalism thrives when the economy thrives.

I suppose it is necessary to use words like 'sustainability' in a post like this, but it seems a bit fantastical. Capitalism works as long as energy is cheap and the promise of unlimited growth can be fueled by commensurate unlimited resources. Capitalism - as a vestige of civilization- will follow Nature into catabolic collapse.

Capitalism is an economic, not a political model

Culture (nationality, faith, etc.) define how capitalism is implemented

Individual wealth creation – the ability to earn and retain capital – is a tremendous force for change

Short-term thinking is inconsistent with long-term best interests

Capitalism: Economic System

Brand Finance

7

On Average 70% of market value comes from:

Intangible Assets

90% for technology companies

Monks/Lajoux, Corporate Valuation

S&P 500 Companies

80% of market value comes from:

Intangible Assets

8

Burlington Northern Santa Fe: Market value: $29.2 billionBalance sheet assets: 103% of market value ($30.3 billion)Goodwill: None

Caterpillar: Market value: $49 billionBalance sheet assets: 95.9%Goodwill: 44.1%

United Health Group: Market value: $79 billionBalance sheet assets: 52%Goodwill: 48%

Apple: Market value: $58 billionBalance sheet assets: 19.8%Goodwill: 80.2%

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50 Best Performers of 2005Business Week

Microsoft: Market value: $279 billionBalance sheet assets: 33.7%Goodwill: 66.3%

Best Buy: Market value: $26.3 billionBalance sheet assets: 39%Goodwill: 61%

Starbucks: Market value: $27.8 billionBalance sheet assets: 12%Goodwill: 88%

Goldman Sachs: Market value: $61.7 billionBalance sheet assets: 1.1%Goodwill: 98.9%

10

50 Best Performers of 2005Business Week

Relationship with◦ Customers◦ Employees◦ Owners/Investors◦ Suppliers◦ Competitors◦ Communities◦ Government agencies/regulators

Intangible Assets

To improve company valuation,Improve CSR relationships!

Good CSR Relationships Lead to a Sustainable Corporation

Therefore…

The Theory of the Moral Firm(self interest considered upon the whole)

ReputationalCapital

SocialCapital

FinancialCapital

PhysicalCapital

HumanCapital

ConversionProcess

Output(Goods/

Services)Customers

$$$Sustainable profits; maximum

value

INPU

TS

RETURN ON CAPITAL(preserve adequacy of capital inputs)

There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

That responsi bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.

Milton Friedman, 1970, New York Times Magazine

The Social Responsibility of Business is to Increase its Profits

The Theory of the Moral Firm(self interest considered upon the whole)

ReputationalCapital

SocialCapital

FinancialCapital

PhysicalCapital

HumanCapital

ConversionProcess

Output(Goods/

Services)Customers

$$$Sustainable profits; maximum

value

INPU

TS

RETURN ON CAPITAL(preserve adequacy of capital inputs)

Capitalism: A Force for Progress

Individual Wealth

Changing Societal Norms

Self Determination

Community Benefits

Freedom

A Force For Progress

Moral CapitalismSteven B. Young

The culture that follows upon successful economic growth is a global one, rooted in American consumerism ... that subverts traditional elites and values.

Global business is the carrier of this culture, responding to consumer demands. It is legitimate for business to deliver what people want, but at the same time business should take care that local cultures are not permanently asphyxiated.”

Business has a responsibility to moderate its impact on those communities, which can hardly protect themselves against the intrusions.

Business has an obligation to promote progress

Business must be respectful and protective of local cultures

Business has an obligation to promote progress

Business must be respectful and protective of local cultures

Increasing access to information is creating an ‘empowered’ consumer for a more conscious capitalism

Capitalism is the best way to advance conditions for the individual, communities and societies

Empowering individuals, communities and societies from within is vastly preferable to imposing from outside

Conclusions