The Idea in Brief
The big idea: The key to becoming a contemporary corporate leader is to take on responsibility for externalities—what economists call the impacts you have on the world (like pollution) for which you are not called to account.
The argument: Thanks to trends in three areas—the growing scale of companies and their impacts, improvements in sensors that measure impacts, and heightened sensibilities of stakeholders—the demands to operate responsibly are dramatically increasing. The stark difference between the tobacco industry’s irresponsible refusal in the 1980s to acknowledge lung cancer risks and the food industry’s swift actions two decades later to remove trans fats from products comes down to a willingness to internalize externalities.
A better approach: An externalities framework allows you to respond rationally and in ways that are simultaneously defensible to all stakeholders. By focusing on your company’s own footprint—societal problems that really can be laid at your doorstep—you can establish priorities, set measurable goals, and take action.
Rarely do before-and-after business cases present such a neat study in contrasts. Compare the recent actions of the key players in the food industry with those of the tobacco industry two decades earlier.
