David Dodwell’s article, “Capitalism is in crisis. It cannot be business as usual for very much longer” (September 23), put forward that capitalism needs a “painful reset” to change focus from economic growth to improving livelihoods.This followed an editorial in the Financial Times in August on why major companies have committed to “explicitly elevating broader interests such as those of employees, the environment and customers” by redefining corporate purpose beyond profit. 

These are progressive – and in my view long overdue – perspectives on responsible business. What they articulate is not only welcome but much needed, as we are already seeing cracks in the foundations of capitalism. The real question now is, what will change?For the rhetoric of the new Business Roundtable pledge signed by 181 CEOs – to “lead their companies for the benefit of all stakeholders” rather than only shareholders – to become reality, more companies must join in a global effort to reboot capitalism. A starting point is full transparency. Like financial statements, companies must publicly state their impacts on people and on the planet. Without full transparency, we cannot align capital to sustainable business practices nor hold companies accountable.

Most major companies – such as those in the Business Roundtable – disclose their sustainability impacts. Indeed, 93 per cent of the top 250 global companies by revenue report on sustainability, of which three quarters use the Global Reporting Initiative (GRI) framework.

Yet, with the acute problems faced by the world, we need more and better reporting of impacts, from all businesses. Only with universal and high-quality disclosure will we be able to turn words into actions.

As noted by the Financial Times editorial, focusing solely on shareholder returns creates incentives to pay less tax and threatens the corporate “licence to operate”.

We at GRI, as an independent international organisation that helps businesses, governments and others understand and communicate their sustainability impacts, agree.

Improved disclosures across … environmental, social and governance topics is now needed

In response to widespread societal demands for transparency, GRI will publish a first-ever global standard for country-by-country tax disclosures later this year. Even during its development, this tax standard has achieved broad support, including from major investment institutions.

Improved disclosures across the spectrum of environmental, social and governance topics – including recognising the sustainability impacts and relevance of issues such as tax payments – is now needed. A transition to a new way of doing capitalism – a system reboot – can only succeed if companies disclose their impacts, accept the accountability this brings and act in the interests of all stakeholders. Business, people and the planet will benefit if they do.

Originally posted at South China Morning Post