SUMMER 2013
V O L . 5 4 N O. 4
Why Making Money Is
Not Enough
By Ratan Tata, Stuart L. Hart, Aarti Sharma and Christian Sarkar
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REPRINT NUMBER 54420
OPINION
Why Making Money
Is Not Enough
The world urgently needs businesses that have a higher purpose than profits.
BY RATAN TATA, STUART L. HART, AARTI SHARMA AND CHRISTIAN SARKAR
Companies
need a purpose that
transcends
making
money;
they need
sustainability
strategies that
recognize that
you can make
money by
doing good
things.
THE PROBLEM WITH industrial capitalism
today is not the profit motive; the problem is how
the profit motive is usually framed. There is a persistent myth in the contemporary business world
that the ultimate purpose of a business is to maximize profit for the company’s investors. However,
the maximization of profit is not a purpose; instead, it is an outcome. We argue that the best way
to maximize profits over the long term is to not
make them the primary goal.
Profits are like happiness in that they are a byproduct of other things. Happiness, for example, can
stem from having a strong sense of purpose, meaningful work and deep relationships. Those who focus
obsessively on their own happiness are usually
narcissists — and end up
(Continued on page 95)
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OPINION
Why Making Money Is Not Enough
(Continued from page 96)
miserable. Similarly, companies need a purpose that
transcends making money; they need sustainability
strategies that recognize that you can make money by
doing good things rather than the other way around.
Purpose is not about corporate strategy or tactics;
these are both means to ends. Purpose is also not
about social responsibility, which is simply a tool for
managing reputation. Purpose is not
even about corporate mission, which
might be nothing more than an aspiration to dominate a particular
marketplace. Rather, purpose is a
spiritual and moral call to action; it is
what a person or company stands for.
Many traditional industrial corporations have been constructed
around extrinsic motivations like
financial reward or recognition or
fear of reprimand or losing one’s
job. It has long been known that
extrinsic motivation can only take you so far:
Weaving intrinsic motivation into the fabric of an
organization’s culture is therefore crucial. There is
mounting evidence that employees throughout
the world are hungering to find and bring their
values to work. But they have not felt comfortable
in doing so, as it may not appear “businesslike.”
We believe it is possible to build and lead companies that retain a deeper purpose. For example,
the Tata Group had been conscious of its spiritual
purpose from its start in the 19th century. Founder
Jamsetji N. Tata believed that acquiring wealth was
not the primary purpose of life; he considered that
his company’s mission was to help the communities in which it operated. Even today, despite the
growing wealth of the Tata Group, company leaders
are not featured in the listings of the richest people
in India or the world. This is because two-thirds of
the shares of Tata Sons, the holding company of the
group, belong to the Tata Trusts, one of the largest
and oldest Indian philanthropic foundations.
Twenty years ago, when the movement for
corporate sustainability first started to gain momentum, people spoke in terms of the need for
fundamental change over the next decade or two.
Now, two decades later, there is some good news
and some bad news. The good news: A few corporations and entrepreneurs have begun to experiment
with transformational strategies. Indeed, “clean
technology” has become a fashionable investment
category, and “base of the pyramid” business models targeting products and services to the world’s
poor have become common.
Now for the bad news: We have not yet begun to
fundamentally change the trajectory of the global
economy. Indeed, over the past two
decades, we have added more than
two billion people to the global
population and further intensified
our ecological footprint on the
planet. The science is clear: We have
overshot the carrying capacity of
the planet, and serious repercussions are now inevitable.
There is no more time to waste.
For companies, the time has come to
launch “corporate lifeboats” — such
as new business experiments in
next-generation clean technologies and serious business initiatives in the underserved space at the “base
of the pyramid.” Now is the time for corporations to
transform their operations for sustainability — and
to strategically design, incubate and commercialize
socially inclusive businesses and environmentally
beneficial technologies, particularly in developing
countries. We are in urgent need of sustainable business practices and technologies that are profitable
for companies and simultaneously deliver economic, social and environmental benefits for the
developing, as well as the developed, worlds. We are
in urgent need of companies that have a greater purpose than making money.
The science
is clear: We
have overshot
the carrying
capacity of
the planet, and
serious repercussions are
now inevitable.
SLOANREVIEW.MIT.EDU
Ratan Tata is the former chairman of the Tata Group.
Stuart L. Hart is the S.C. Johnson Chair in Sustainable Global Enterprise at Cornell University and
cofounder of the Emergent Institute in Bangalore,
India. Aarti Sharma is the founder and managing
director of the Sustainable Value Alliance LLC, a consulting firm based in Woodridge, Illinois. Christian
Sarkar is founder and CEO of Double Loop Marketing, based in Houston, Texas. Comment on this
article at http://sloanreview.mit.edu/x/54420, or
contact the authors at [email protected].
Reprint 54420.
Copyright © Massachusetts Institute of Technology, 2013.
All rights reserved.
SUMMER 2013 MIT SLOAN MANAGEMENT REVIEW 95
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