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How Shareholders Win When Companies Change the World

“FEW TRENDS COULD SO THOROUGHLY UNDERMINE the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”

So wrote the late Nobel Prize–winning economist Milton Friedman in Capitalism and Freedom, his 1962 paean to limited government and unfettered markets, which has influenced some three generations of readers and counting. Friedman’s concerns, it seems, were pragmatic as well as principled: “If businessmen do have a social responsibility other than making maximum profits for stockholders,” he asked, “how are they to know what it is? Can self-selected private individuals decide what the social interest is? Can they decide how great a burden they are justified in placing on themselves or their stockholders to serve that social interest?”

Such questions, posed decades ago, are worth pondering—in large part because they continue to divide people today. They are at the very center of the great debate over what role companies should play in our free-market society: Should capitalism be “just” or “conscious,” as many contend … or should its aim be just the conscious pursuit of profit?

Read: How a Big Bank Fueled the Green Energy Boom

At Fortune, we’ve concluded that trade-off is a false one, or at least unnecessary. Companies can and often do serve the social good by ambitiously pursuing their business objectives; indeed, such efforts can be a boon to their operations, and ultimately to shareholders as well. To illustrate this fact, for the fourth straight year, we’ve highlighted dozens of such companies in our Change the World list. Consider Hilton, which has shaved a billion dollars in costs over the past decade by reducing its energy and water waste. The fast-expanding hotel chain now generates 30% less carbon emissions on a square-foot basis than it did in 2008, thanks to its aggressive sustainability program.

To answer one of Friedman’s questions, “self-selected private individuals” (also known as corporate executives) did make a judgment as to what the social interest might be in this endeavor—just as they determined where to break ground on each new hotel property or whether to serve free coffee and doughnuts in the lobby. And all of these collective business decisions haven’t seemed to hurt business any. The chain had 10 million more guests in 2017 than in the year before.

Hilton shareholders, it’s worth noting, have gotten an upgrade too. The stock is up 23% over the past year compared with the S&P 500’s gain of 16%, and shares have outpaced the market since Hilton’s IPO in 2013.

Supermarket chain Kroger is simultaneously working to eliminate food waste and feed the hungry, while its shareholders get fat: The stock is up 27% over the past year. Bank of America is helping to finance earth-friendly, low-carbon businesses through so-called green bonds—a market it all but created in 2013. Shares are up 28% over the past year, and the stock’s returns have been twice as good as the S&P’s over the past three.

Then there’s Adidas, which is recovering plastic from the oceans and converting them into chic $200 shoes. (Hey, it’s a business.) And that stock, by the way, is up an annualized 44% over the past three years running.

In each case, these businesses are doing what great businesses do: meeting an unmet need and making money doing it. Don’t get fooled into thinking this is charity (though these companies do some of that as well). No, this is good, old-fashioned capitalism. When it comes to problem solving, it just works.

Plenty of seemingly intractable problems remain, of course. One of those involves cobalt, a key mineral in the lithium-ion batteries that power our ubiquitous smartphones, electric vehicles, and more. As Viv Walt writes in her unflinching special report, “Blood, Sweat, and Batteries,” the cost of mining that cobalt is often paid by some of the poorest people in the world.

Perhaps with the right business model, we can change that too.

A version of this article appears in the September 1, 2018 issue of Fortune with the headline “Profit For Progress.”