Challenges facing humanity in 2021 are many and varied. From climate change to the global pandemics, and from social inequality to food insecurity, there are so many aspects of the modern world that are far from ideal.
How long can the world’s economy and society function when working in such disparate, isolated ways? And how should global economics change to truly reflect this urgent need for collaboration and balance? The concept of economic mutuality could be the answer.
Explaining the innovative concept of Economics of Mutuality
The Economics of Mutuality (EoM) is a revolutionary management innovation. Developed through almost two decades of business practice and academic research by Mars, Incorporated and the Said Business School at Oxford University is about empowering corporations to improve how they perform by meeting the wider needs of the social and economic ecosystem.
In other words, it’s about business and academia working together to find a way forward for a global economy that has taken enormous amounts of strain over the last few years.
By restoring the relationship between businesses, the environment and the people that make up the global society, EoM makes a sustainable and symbiotically supportive future possible. It’s not about replacing capitalism in its entirety, rather it’s about showing companies how to adopt a responsible form of capitalism — one that will be better for their bottom line and for the world.
Capitalism in a solely profit-gathering form doesn’t work long-term. While a very small number of people will always be able to make a lot of money from the traditional form of capitalism, it allows for no sense of fairness and balance. Capitalism at its core doesn’t make allowances for repairing damage done by industry, for example. Nor does it see a need to ‘give back’ in any meaningful way.
Creating a new era of purpose driven capitalism
Above all, EoM methodology can totally transform companies at their core in a tangible way. EoM goes way behind the often surface-level approaches of ESG (Environmental, Social and Governance) and CSR (corporate social responsibility). This because ESG and CSR are driven almost entirely by regulation and compliance. EoM transforms the very core of the company.
Three important ideas form EoM:
1. Strategy is purpose driven as a priority.
2. Internal business unit ecosystems are structured around purpose in order to unleash untapped value and resources.
3. Performance management is enhanced across every form of capital (financial, natural, human, social) in order to move towards a holistic way of creating value.
To operate within the principles of economic mutuality then, a business must implement these three ideas. According to the team who devised the strategy, this must go hand in hand with four major shifts in management across the business as follows.
1. Shift from a company-centric strategy to a purpose-driven strategy
Business leaders must move away from the implicit purpose of maximising profits towards an inspirational and realistic purpose. The purpose should position the business as a leader and champion of a major cause that will solve challenges.
2. Shift from a competitive mindset to a collaborative ecosystem
The traditional linear value chain is predicated on competing with rivals. Shift the business away from this kind of competitive relationship with stakeholder groups. Instead, work with all potential partners in ways that are innovative and geared towards mutual capabilities and the elimination of systemic breakdowns.
3. Shift from only focusing on financial capital towards balancing multiple different categories of capital
Financial capital has always been the focus point for capitalism. Move the business away from measuring performance by these short-term financial gains. Instead, measure performance and success in other metrics, such as natural, social and human capital. These are the real signposts of long-term successful value creation that is mutually beneficial and holistic.
4. Shift from the idea of having trade off between purpose and profit and align them instead
Rather than measuring progress by input and profit, move towards putting purpose at the heart of all management and incentive programmes.
A new normal needs a new way of improving our world
EoM is a new way of thinking about the whole way that we do business. From what we want to get out of it and how we really impact the wider environment and economy, it’s a methodology that incorporates meaningful change.
For the world to meet the UN’s Sustainable Development Goals (SDG) by 2030, major systemic change must happen. The pandemic has set the fight against poverty back by several years. The World Economic Forum (WEF) estimates that in 2020, COVID-19 pushed a further 100 million people beyond the poverty line. Furthermore, according to the UN, we can expect to see levels of poverty in some global regions at a level not seen for more than 30 years.
COVID-19 has set the world back in its move towards the most basic sustainable goals. Now is the time that Governments and the corporate sector urgently address the protection of long-term health, education and physical infrastructure. Until the pandemic, there was definite progress in making a more level and prosperous world. Poverty levels were reducing and child mortality in developing countries was declining.
However, even before the pandemic, many countries were not in any way on track to meet the SDGs by 2030. More than a year into an unprecedented pandemic and the world is facing a global recession, more than three million people are dead and there has been a reversal in convergence trends between advanced economies and developing countries.
A holistic collaborative approach towards a better future
Lockdown measures around the world have significantly damaged economies. People have been deprived of income and reduction. It could be that there is substantial long-term economic damage from the pandemic, even as the world begins to ease away from the worst of its impact.
Under the new circumstances we all live in, it’s vital that business takes its place in the march towards progress. Governments will need to find a way to balance long-term objectives and short-term needs, and between upgrading infrastructure and supporting people.
Businesses can foster the same kind of growth through EoM. We need to all understand exactly how our business activity impacts the world around us and take positive steps to mitigate this.
For more information on the Economics of Mutuality see here.
Tom Keya is a lawyer, business development consultant and analyst with an interest in finding better ways to work together through connectivity and impact investment.
Originally published at https://londonlovesbusiness.com on May 25, 2021.