Beyond Capitalism: Not-for-Profit Business Ethos Motivates Sustainable Behaviour
Beyond Capitalism: Not-for-Profit Business Ethos Motivates Sustainable Behaviour
By Donnie Maclurcan and Jennifer Hinton / theguardian.com

For-profit capitalism has created social and economic inequality; successful not-for-profit businesses including Mozilla and the Big Issue point to an alternative path

At the heart of the failing capitalist system is the “for-profit” ethic. Based on the myth that humans are mostly selfish and competitive, the for-profit ethic says the best way to incentivise innovation and facilitate economic activity is to appeal to people’s self-interest.

This manifests in the for-profit business model, central to the current economy, where owners and investors go into business expecting a portion of a company’s profits in the form of dividends, options or shares. In essence, capitalism ensures that we live in a for-profit world.

This way of conducting business has led to socioeconomic inequality, with capital gains and company dividends the largest contributor to income divides. What else could we expect when private profit is seen as the driver of economic activity and profit maximisation is the priority of most big businesses?

Furthermore, the social stratification that results from global financial inequity is tied to ecological devastation, driving our ongoing march towards full systems collapse in the next 50 years.

Failure to address root problem

The most commonly suggested alternative to this dysfunction is greater market regulation. But while regulatory measures are critical in responding to social and ecological challenges, they can only do so much given that a heavily regulating state is politically divisive, disempowers citizens and can suppress real innovation. Furthermore, with politicians so commonly “in bed” with big business, regulatory reform is often just window-dressing.

Others argue for “conscious capitalism”, and see avenues such as B Corp certification and “shared value” as the best ways to get there. But while these avenues bring attention to important questions of sustainability, such approaches fail to address a root problem.

Although new forms of for-profit business seek to balance people and planet with profit, they continue to treat profit as an end in itself, rather than a means to an end, encouraging the destructive greed inherent in a system that relies on the privatisation of profit.

Nor can capitalism’s innovative potential come to the rescue. Not only are the levels of innovation required to avoid collapse totally unrealistic in a growth-based system; it’s the for-profit ethic that created the very problems we now face.

Seeking alternatives

What, then, might be the alternative? Fortunately, the dominant story about human nature is changing. Research increasingly shows that, under the right conditions, human nature has a tendency towards co-operation(pdf). We’re witnessing the rise of a workforce increasingly motivated by purpose, and we’re realising the potential of an existing business structure called not-for-profit (NFP) enterprise.

There’s a rising tide of entrepreneurial companies globally that have business plans, make profits and pay good wages, yet are legally incorporated as “not-for-profit”. They are a bold response to the common misunderstanding, compounded by use of the words “non-profit” and “charity”, that not-for-profit entities cannot be successful businesses.

In the UK, examples of prosperous NFP businesses include accommodation provider YHA, energy firm Ebico, furniture company Green-Works, the Big Issue, the Breadshare Bakery, and the Cowheels car-club. Around the world, well-known NFP businesses include South Korea’s Hansalim, Bangladesh’s BRAC and Mozilla in the US. Under law, 100% of any profits these businesses make must be reinvested into the business or community. So, not-for-profit really means not-for-private-profit; no more incentivising selfish behaviour.

A not-for-profit world

How then might a world look in which every business was operated not-for-private-profit? It would still involve a thriving market. Government, banks, money, loans and interest would remain. But within a not-for-profit framework, these things would have vastly different consequences.

When banks can’t privatise profits they have no shareholders, owners or partners that they need to keep happy with dividends and private returns. They have no reason to exist other than to provide high-quality financial services to their customers, and they have little to distract them from this mission. They are built to be more transparent and more efficient.

Rather than siphoning wealth away from people and communities who take out loans, all profits are allocated according to the NFP’s social mission, enabling the generation of real community wealth. Now imagine the entire financial sector being not-for-profit. Imagine the entire retail sector being not-for-profit. Imagine all manufacturing being not-for-profit.

Capital requirements are falling dramatically, and large capital investments are proving less and less necessary to seed innovation, enabling the emergence of NFP businesses such as car manufacturing company Wikispeed and solar power plant designer Zenman Energy. Furthermore, new forms of capital raising are now available to emerging NFPs, such as crowdfunding, revenue-based finance and community bonds. When the market exists to meet human needs, government requirements for taxation diminish, making good wages and purposeful work all we need for the economics of enough

By changing the nature of incentive and ownership in business, the NFP world model enables companies to make truly sustainable decisions, in turn promoting a less consumerist society. The NFP world also fosters a more equitable economy because it has an inbuilt redistribution of wealth, with companies required by law to reinvest, rather than privatise profits.

While the informal not-for-profit economy has kept human civilisation running since time immemorial, through care-giving and forms of non-monetary exchange, the emergence of the formal not-for-profit economy is now fully under way. To fund the work they do, NFP institutions areincreasingly generating their own income, as opposed to the traditional non-profit approach of depending on grants and philanthropy.

Increasingly entrepreneurs are seeing the benefits of establishing businesses as NFP, through structures such as the UK’s Community Interest Company limited by guarantee. And there is renewed focus on successful, age-old business structures that most commonly exist as “not-for-profit”, such as consumer co-operatives in the food, healthcare, insurance, housing utility and finance sectors.

The rise of NFP enterprise is catalysed by the advantages NFP businesses hold in the marketplace, which have proven largely resilient to deregulation and recession. Not-for-profit businesses don’t have to pay dividends, and can often offer lower prices, primarily because they are not-for-profit.

They may gain tax exemptions and have the ability to receive tax deductible donations. They more easily draw on the support of passionate volunteers. And their propensity for flatter organisational structures cam facilitate productivity and innovation. Moreover, in a world with risingdemand for ethical products and services, organisations that focus on fulfilling human and ecological needs are ahead of the game.

Combined, NFP advantages are resulting in a greater market share. The NFP sector in the US grew significantly faster than the for-profit sector between 2001-2011, and this from a base of 1,259,764 organisations.

For the first time in modern history we have the structures, capabilities and impetus to evolve to an NFP world, in which the best energies and drivers of good business are harnessed for our collective flourishing.

Donnie Maclurcan and Jennifer Hinton are authors of the forthcoming book How on Earth: Flourishing in a Not-for-Profit World by 2050 which can be pre-ordered here. Professor Maclurcan will share these ideas in afree public lecture in London on 6 October, 2014

4.0 ·
3
What's Next
Trending Today
The Daily Show's Trevor Noah Talks With Conservative Host Tomi Lahren
14 min · 10,349 views today · "Tomi" host Tomi Lahren gives her take on the Black Lives Matter movement and explains why she lashed out against Colin Kaepernick for his national anthem protest.
This Short Film Plays Out Like an Epic Movie That Will Shake Your Soul - But the Movie Is Real, and We are The Actors
6 min · 7,130 views today · For next year, we need a resolution capable of confronting the crisis we face, and making a future worth fighting for. This short film looks back on the crisis and confusion...
Bernie Sanders: Carrier Just Showed Corporations How to Beat Donald Trump
Bernie Sanders · 4,498 views today · We need a president who can stand up to big corporations, not fold to their demands.
How Mindfulness Empowers Us
2 min · 3,606 views today · Many traditions speak of the opposing forces within us, vying for our attention. Native American stories speak of two wolves, the angry wolf and the loving wolf, who both live...
Escape! From the Cult of Materialism (2016)
50 min · 3,439 views today · Does the philosophy of materialism work to destroy our identities, experience, and environment? Join narrator Daphne Ellis on a radical romp through the evidence and decide for...
Who's Really to Blame for Fake News? Look in the Mirror, America.
Neal Gabler · 3,027 views today · Consider for a moment the oxymoronic concept of “fake news,” which we have been hearing so much about lately. This isn’t your typical disinformation or misinformation —...
South Koreans Are Really Good at Protesting
2 min · 3,005 views today · South Koreans organize some of the largest and most peaceful protests in the world. Here's what makes them so good at protesting.
Today I Rise: This Beautiful Short Film Is Like a Love Poem For Your Heart and Soul
4 min · 2,529 views today · "The world is missing what I am ready to give: My Wisdom, My Sweetness, My Love and My hunger for Peace." "Where are you? Where are you, little girl with broken wings but full...
Corporate Giants' "Sustainable" Palm Oil Revealed as Sham
Nika Knight · 2,227 views today · Nestlé, Kellogg's, Procter & Gamble, Unilever and others are linked to child labor and forced labor in Indonesia
A Tribe Called Red and Saul Williams Offer a Powerful Prayer for Standing Rock and Beyond
5 min · 1,374 views today · Music video for "The Virus" by A Tribe Called Red, featuring Saul Williams and Chippewa Travellers.
The 6 Grand Illusions That Keep Us Enslaved
Sigmund Fraud · 1,130 views today · For a magician to fool his audience his deceit must go unseen, and to this end he crafts an illusion to avert attention from reality. While the audience is entranced, the...
The Most Mind-Altering Photograph of All Time
4 min · 1,028 views today · Carl Sagan narrates the story of the Pale Blue Dot, the one place we all call home. 
The Truth About the Alt-Right
11 min · 1,026 views today · Our comprehensive investigation into the Alt-Right movement, including its origins, its relation to the Trump campaign and broader implications for the future. Read more: What...
EU Energy Targets Will 'Increase Greenhouse Gas Emissions'
Nafeez Ahmed · 849 views today · New renewable energy plan undercuts itself by boosting dangerous wood-burning industries
Why You Should Stop Using Most Antibacterial Soaps
3 min · 837 views today · Antibacterial soaps could be doing a lot more harm than good - here's why.
The Difference Between Empathy and Sympathy
3 min · 835 views today · What is the best way to ease someone's pain and suffering? In this beautifully animated RSA Short, Dr Brené Brown reminds us that we can only create a genuine empathic...
John Lennon's "Imagine," Made Into a Comic Strip
John Lennon. Art by Pablo Stanley · 824 views today · This is easily the best comic strip ever made.  Pabl
Answering the Call: The American Struggle for the Right to Vote
75 min · 741 views today · Watch an exclusive and limited time online screening of Answering the Call, presented by Films For Action. If you enjoy watching, consider purchasing a DVD copy for a friend at...
How a Land High in the Western Himalayas Can Help Us Understand The Crisis of The Modern World
9 min · 657 views today · This is a clip from The Economics of Happiness. Watch it here. It's a brilliant film that was easy to put at the top of our list of the top 100 documentaries we can use to...
Gabor Mate on the Myth of Normal
4 min · 577 views today · Physician Dr. Gabor Mate began his interview by addressing the 'myth of normal' that divides us into the normal and the abnormal with pathological traits. Dr. Mate mentions...
Load More
Like us on Facebook?
Beyond Capitalism: Not-for-Profit Business Ethos Motivates Sustainable Behaviour