The authors argue that the corporate world and the world that it serves are ready for the next evolution of corporate virtue: 'virtuous capital'. Annual budgets and sustainability reports provide some hints about a company's true character, they say, but there is something that is far more telling: capital commitments. They show how 'virtuous capital', as indicated on a balance sheet, speaks volumes as to a firm's long-range commitment to making the world a better place. They provide four avenues for leaders to focus on going forward, including risk reallocation, different forms of ownership and government incentives.

In 2007, Chuck Prince, then the CEO of Citigroup, made a notorious comment about the subprime mortgage market: "As long as the music's playing, you've got to get up and dance. We're still dancing." Soon after, the financial system crashed, and that remark came to be seen as a cavalier justification for excessive risk taking by the bank. But authors Martin and Kemper raise another possibility: Prince may have been painted into a corner, because Citigroup's stock was indefensibly overvalued. The only way the bank could earn the unrealistically high returns shareholders expected was through ever more dangerous activities. The overvaluation trap was first identified by Michael Jensen in a 2005 article examining the dot-com bubble. He noted that it often affects entire sectors and that in response to it executives tend to adopt two strategies: investing in hot, hyped technologies (as Global Crossing did with fiber-optic cable) and glamorous acquisitions (Nortel's downfall). And when investment opportunities start to dry up, firms may turn to financial manipulation (think WorldCom) to prop up their overpriced equity. Martin and Kemper point out that today companies in the pharmaceutical and oil sectors are caught in this same trap. Their market caps are spectacularly high. But massive spending on R&D is not producing more new drugs, and ever greater investment in oil reserve exploration is only exacerbating the glut of supply. The dance may be ending for both industries, and their executives need to figure out new and more-realistic narratives for value creation.

Business is the engine of the developed economies that devour a disproportionate share of the world's nonrenewable resources and produce a disproportionate share of its emissions. We see it, therefore, as both a cause of and a solution to environmental degradation. But how, exactly, can business contribute? To answer this question, the authors explore two schools of thought. According to one, consumers and companies should do more with the resources they consume, become savvier about recycling and processing their waste, and dampen their appetite for consumption in general. This worldview achieved perhaps its clearest expression in the works of the 19th-century economist Thomas Malthus. Although the Malthusian view exercises a powerful influence, it is by no means uncontested. An alternative philosophy, which flows from the work of the 20th-century economist and Nobel Prize winner Robert Solow, appeals to our natural optimism by arguing that environmental and other problems can always be resolved through the exercise of human ingenuity. It's not hard to see that these two philosophies make uneasy bedfellows. The Malthusian view encourages a tendency toward regulation and restraint, while the Solovian view underlies much of the advocacy for deregulation and the promotion of growth. But if we are to make real progress in solving the world's environmental problems, the authors write, we will have to apply both philosophies.

The Virtue Matrix, first introduced in a 2002 Harvard Business Review article, is a tool developed by the lead author that provides a concrete, actionable framework for creating a corporate citizenship strategy. The goals of CSR have long been poorly defined and unclear, and as a result, many companies are uncertain of the rules or the benefits of doing what is 'right'. The authors argue that as regulations become tighter and solutions more difficult, the capacity of firms to innovate in this arena will become increasingly valuable. The best organizations, they say, will stand out by fully complying with the laws of their industry and jurisdiction; meeting the highest level of current non-regulated norms; having projects underway in the 'strategic frontier' of the Virtue Matrix; and being an active participant in 'structural frontier' projects as well. In addition to describing the four quadrants of the Virtue Matrix in detail, the authors show how companies can protect the best of what currently is - the civil foundation - and contribute to the expansion of what could be, through activities on the frontier.