Folador: The perfect company? You’ll find it in the integral economy
Professor of Business Ethics at LIUC university and member of its Business School, for many years Massimo Folador has been consulting and training on business development, with a focus on the relationship between ethics, business and the principles of what he calls the ‘integral economy’.
[legacy-picture caption=”” image=”ef5e454a-5f82-419f-bbaa-e36e13cae583″ align=”right”]Founder and director of Askesis Società Benefit, he is the author of the bestselling management book – L’organizzazione perfetta (the perfect organization) – and has recently published a book written together with theologist and historian Giuseppe Buffon: Verso un’economia integrale. La via Italiana alla Ripresa (Towards an integral economy. The Italian path to recovery) published by Guerini Next, 2020.
But what is the ‘integral economy’ and why is it being presented today as the new path to Italy’s recovery?
The integral economy, Folador explains, is an approach that aims to conjugate economic development with the needs of business, society and the environment. It’s a paradigm shift that “lays the foundations for better balanced growth, offering companies strategic tools and successful, new business practices”
The economy is increasingly turning its attention towards caring for our common home. By ‘common home’ we mean the place where we create a value that is at once economic, social and environmental.
Companies are becoming more and more active, not just in strictly economic terms, but also from a social point of view …
It could be said that the relationship between the economy and business is quite simple. But there is an underlying question that is often evaded: which economy, for which companies? Economy and business go hand in hand, so if the goal of the economy is to maximise profit, this will lead to a specific company model.
Similarly, if a company’s goal is to maximise profits, then it will reinforce a specific kind of economy. This is pretty much the model that has worked for two centuries. But things have happened in recent years. The impact on the environment of an economic approach aimed at maximising profit was one of these critical factors. The environment has become the litmus test for an economic and business model that is no longer sustainable. A second factor was caused by the 2008-2009 economic and financial crisis, the effects of which are still being felt today.
Crisis as a paradigm shift
So, was the subprime crisis an eye-opener for companies?
Many companies realised that a common good exists and it needs to be our central focus to ensure that an economic crisis does not impact everything – the environment, business and society.
Slowly, and now with more impetus due to this pandemic, we are reaching an understanding of how the economy can and must play a key role in general welfare and in safeguarding the common good. Companies, the players in this shifting economy, are gradually changing their perspective and their organisations in an aim to generate shared value rather than exclusively producing profit to be shared among a few.
Towards an integral economy: the environment, relationships, social value
Let’s get to the heart of what you have called the ‘integral economy’…
The economy is increasingly focusing its attention on caring for our common home. By ‘common home’ we mean the place where we create a value that is at once economic, social and environmental. Remember that the word economy derives from oikos, household, and nomos, management.
The economy is returning to what it should have been before the financial binge: the proper management of the dynamics relating to money, environmental context, and relationships. Econometric type analyses and experiential observations confirm that the organisations operating in the interests of development, but not integral development, do not have it easy.
However, if we want to generate value in terms of the environment, social relationships and development, then this must be based on values: solid, social values that most companies in Italy have always embraced as implicit cultural codes. That is why I talk about the Italian path to recovery, because this transformation can leverage some of our country’s past experiences to steer the economy of the future – just think of the great experience of cooperation, the Catholic Church’s Social Doctrine, Adriano Olivetti’s model, but also the Franciscan’s civil economy.
Companies are shifting from values to value: an essential transition to trigger recovery
The ‘integral economy’ is composed of people who are fully living the values of Italian culture within our companies: fraternity, respect for diversity, the common good, subsidiarity, solidarity, and the redistribution of wealth.
[legacy-picture caption=”” image=”bd6ecc3d-dd13-4922-8575-f8522f81fb5c” align=””]New companies for new opportunities
We have described the ‘integral economy’ as a new scenario. Let’s talk about how companies can adapt to this paradigm shift.
Companies have to be active in the economy in a new way. One way is to shift from values to value. As long as companies aimed wholly at producing economic value, then social, ethical and environmental values were not necessarily part of this process.
Companies today need people who find a part of their identity in their work and it is there that they create value for the company.
But as long as these values are confined to some ethical code, they will not become part of a hybrid model of business …
These values should be an integral part of how a company operates. I mean active values that lead companies of this type to create economic value while having respect for the environment, for relationships and for a market centred on the common good. The benefit corporation model is moving in this direction.
Of course, there is a lot of work still to be done in terms of accountability, business strategy and management around intangible assets. These intangible assets are increasingly attractive to the market and, in the very near future, they will make up the largest portion of global economies. The financial world is increasingly moving towards this overall sustainability…
The new value of work
After the peak of the pandemic, the topic of organisation is once again in focus: the organisation of work (remote working), of management and governance models. Could the paradigm shift start within companies rather than on a macro level?
Again, this is about values and they are also central to the organisation of work. There is a real focus on relationships, both externally and internally. Relationships are a central theme in these times, and this is not just about the relationship between business and society or business and the environment.
It is also about the relationship between business and work. Work connects all the things we have been talking about so far. If we want to create an economic value that must take economic and social value into account, then this must necessarily be based on the value of work. The value of work is simply a focus on people. As a result, organisation, management and HR models will inevitably shift towards this focus.
The social value of a company lies in the people who live within that company. The work that the company will do for those people, together with the work and the amount of time that those people dedicate to their jobs, will ensure that the company becomes sustainable and capable of producing value. The complexity companies have to face and the need to produce an integral economic value that embraces sustainability and the environment, mean that companies need people more than ever before. Companies today need people who find a part of their identity in their work and it is there that they create value for the company.