Does capitalism need an extreme makeover?

In an era defined by a burgeoning gap between the rich and the poor, stagnant wages and faltering support for free markets among younger voters, the question has been raised with increasing regularity — and defies easy answers.

Britain's recent vote to extricate itself from the European Union, as well as the protectionist sentiment embraced by both presumptive major party U.S. presidential nominees, have been interpreted by some as an erosion of a postwar economic consensus that once embraced the virtues of globalization. In the midst of a surging tide of populism, one author has come up with a solution: force companies to adopt socially sustainable solutions — and grade them on it using a tailored balance sheet that awards credits and demerits.

A balance sheet that elevates social responsibility over profit is part of the "Common Good Economy" (CGE) — the brainchild of Austrian author Christian Felber. He explained that his program is intended to blunt the sharp edges of a free market system that has seen a surge in extreme poverty, environmental degradation and other negatives that erode public support for capitalism.

"Populism is getting stronger, inequality is exploding and democracy is eroding, and ... relationships and feeling of community is getting lost," a state of affairs for which he faulted both governments and businesses, Felber told CNBC in a recent interview.

The "invisible hand" of the free markets popularized by Adam Smith in his seminal tome "An Inquiry into the Nature and Causes of the Wealth of Nations" has become antiquated, Felber argued, and simply "doesn't work. The Common Good balance sheet is a way to see that Adam Smith's dream comes true," he added.

The CGE's approach has already been adopted by more than 400 companies, most of them in Europe, Felber said. Its approach is similar to the Global Reporting Initiative (GRI) whose standard links business activity to sustainability, and is used by Microsoft and PepsiCo, among other giants.

"The common good will improve relationships, diminish inequality and improve the environment because it's part of a company's goal and part of an economy's goal," Felber said. He added that applying CGE could result in the "fundamental reorientation" of the world's economy.

"The proposal is to strive directly for the good of the economy ... the common good, the welfare of all," he said. "It means business and investment and economy as a whole are aimed at improving" a range of socially beneficial outcomes, he said.