Earlier this year I visited Patagonia<\/a>, the American outerwear manufacturer, headquartered just north of Los Angeles.<\/p>\n <\/p>\n Patagonia has a perverse dislike of selling more products. When at a recent strategy meeting<\/a>, his executives asked founder Yvon Chouinard what he thought about their plans, he responded – according to his lieutenant Rick Ridgeway – \u201cI\u2019m kinda worried that you\u2019re training all those consumers out there to buy a bunch of shit they don\u2019t need.\u201d<\/p>\n <\/p>\n At the other extreme is Jack Welch, ex-CEO of General Electric, whose tenure was marked by GE\u2019s uncanny ability to hit year-on-year growth targets. GE\u2019s mantra was shareholder value: to keep investors happy, it did everything possible to meet their expectations for consistent growth.<\/p>\n <\/p>\n Then, in 2009, less than two years into the credit crunch and the worst financial crisis for generations, Welch recanted. He told the Financial Times<\/a>: \u201cOn the face of it, shareholder value is the dumbest idea in the world.\u201d<\/p>\n <\/p>\n Chouinard and Welch could not be more different – one, a laid-back hippyish adventurer and the other, a turbo-charged golfing super-executive.<\/p>\n <\/p>\n Their companies look pretty different, too. Patagonia has just become a \u201cbenefit corporation\u201d<\/a>. This is a new corporate form, available in California and a growing number of other US states, that obliges companies to take account of non-financial interests, such as social, environmental or community objectives, as well as shareholder demands. GE was and is a stock market bellwether.<\/p>\n <\/p>\n Yet I don\u2019t believe Patagonia and GE\u2019s objectives – or the challenges they face – are as far apart as they look.<\/p>\n <\/p>\n Yvon Chouinard even had his own revelation – like Welch – at a critical point in the company\u2019s early history when a consultant pointed out to him that his best course of action would be to sell the company for $100m and spend the proceeds on environmental causes. Instead he decided \u201cthe best thing I could do was to get profitable again, live a more examined corporate life and influence other companies to do the same\u201d.<\/p>\n <\/p>\n I think both companies recognise they need to ensure – out of self-interest, in the interests of others, or through a mixture of both – that they continue to grow and that their growth should be \u201cgood\u201d – or at least as good as it can be.<\/p>\n <\/p>\n Two conditions are essential for good corporate growth: it should be for the long term, and its benefits should be shared. Even quite large companies are subscribing to these objectives.<\/p>\n <\/p>\n Jack Welch\u2019s reversal represented a partial and belated recognition that the pursuit of short-term financial targets had helped contribute to the financial crisis.<\/p>\n <\/p>\n Most chief executives I talk to want to get off this treadmill. Cynics may say that they simply want to avoid the scrutiny of owners, who have a habit of sacking chief executives who underperform, and continue taking away big pay awards. After all, telling the shareholders that you only want to be measured by what happens over a three-year period, rather than a three-month one, gives you an extra two years and nine months before you\u2019re found out.<\/p>\n <\/p>\n But I think there is a growing realisation that \u201csustainability\u201d is far more than a box into which companies put their environmental and social responsibility initiatives and then forget about them so they can get on with boosting profits. \u201cSustainable growth\u201d is really the only way that companies can ensure their survival.<\/p>\n <\/p>\n This concept is being taken far beyond the company itself. Large corporations are realising that by expanding their responsibility beyond that of their own narrowly defined self-interest they can actually create fertile conditions for their own future prosperity – and that of their customers and shareholders.<\/p>\n <\/p>\n Michael Porter, the Harvard business academic, and his business partner Mark Kramer called this \u201cCSV\u201d – \u201ccreating shared value<\/a>\u201d – to distinguish it from allegedly old-fashioned CSR, or corporate social responsibility. They have even written that this approach constitutes a \u201chigher form of capitalism\u201d. But how the concept is marketed is less interesting than what it consists of, from Hindustan Unilever\u2019s \u201cShakti\u201d network<\/a>\u00a0of poor female entrepreneur-distributors to Vodafone\u2019s mobile banking service in Kenya<\/a>.<\/p>\n <\/p>\n Do companies boast about these projects for PR effect? They do. Will all of these initiatives endure? They will not. Like all markets, these new ones could eventually become subject to diminishing returns. Investors may choose the higher return available elsewhere – pursuing \u201cbad growth\u201d and \u201clower forms\u201d of capitalism.<\/p>\n <\/p>\n While Unilever is reaping the plaudits of Harvard professors, it has not yet answered adequately the question of what will happen if and when its underlying profit starts to falter, its share price slips, and investors start to demand whether such projects aren\u2019t simply too costly.<\/p>\n <\/p>\n I\u2019m under no illusions that it will be hard to harness growth to goodness – even for companies with the best intentions.<\/p>\n <\/p>\n Later during my California trip, notwithstanding Yvon Chouinard\u2019s warnings about not buying unnecessary items, I went shopping at Patagonia\u2019s Santa Monica branch. Having duly agonised over whether we really needed the item in question, I paid and handed over my contact details, including an email address. Every week since then I\u2019ve received at least one, sometimes two, messages from Patagonia urging me to buy more from their online store.<\/p>\n <\/p>\n But it seems to me churlish to attack efforts to grow \u201cwell\u201d just because they come from corporate entities. Growth increases average incomes but that average increase can conceal vast inequities and widening income gaps. These companies have recognised not only that growth is good – that\u2019s a treadmill no chief executive wants to step off – but that \u201cgood\u201d growth benefits the community and the corporation and contributes to the long-term sustainability of both. That has to be worth encouraging.<\/p>\n <\/p>\n AUTHOR:<\/strong><\/p>\n Andrew Hill is an associate editor and the management editor<\/a>\u00a0of the FT. He is a former City editor, financial editor and comment and analysis editor. He joined the FT in 1988 and has also worked as New York bureau chief, foreign news editor and correspondent in Brussels and Milan. Andrew was named Commentator of the Year at the 2009 Business Journalist of the Year Awards, where he also received a Decade of Excellence award. This blogpost is adapted from his speech to the seventh William Pitt Seminar<\/a>\u00a0– \u201cWhat\u2019s so good about growth?\u201d – organised by Pembroke College, Cambridge.<\/p>\n","protected":false},"excerpt":{"rendered":" Earlier this year I visited Patagonia, the American outerwear manufacturer, headquartered just north of Los Angeles. 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