2012-05-10

Co.Exist

Can Businesses Actually Make The World Better While Making Money?

Today’s corporate leaders believe businesses are better equipped to create social change than charities. But can for-profits really become for-more-than-profits?

When we think of businesses acting in the community, several images may come to mind: fundraising in the office for a charity, colleagues getting active with a day out volunteering or pro-bono services, or maybe a product line that ties sales to giving something to those in need.

Increasingly, however, today’s corporate leaders think their social action should become less about "giving" and more about "acting"—moving corporate activity into what was previously firmly charity or government turf.

A delivery service can use its infrastructure to transport goods for purchase, as well as to link up with charities and rural delivery systems to create a new network for delivering supplies for medical relief. A freight management firm can use its expertise in risk avoidance to minimize costs, as well as to consult with local government and NGOs and build a mutually beneficial partnership for improving road safety.

In a recent poll commissioned by our organization, The Social Investment Consultancy (TSIC), an overwhelming 91% of U.K. senior business leaders stated they believed businesses acting in such ways that use their core strengths would be more or effective in creating social change as compared with giving to charity. Only 9% felt charitable donations would be the most effective way for businesses to contribute.

While a stunning statistic on its face, in a sense it is not surprising that business leaders have moved towards thinking they can best contribute to social change through applying what they do best to the problem. This viewpoint fits with current thinking in corporate social responsibility practice, which has evolved significantly over the past decades from being primarily reactionary, to seeing real shareholder value in pursuing economic and social progress together.

The idea has gone mainstream. A recent Forbes Insights study of global executives found that 93% believed their company could "create economic value by creating societal value." Furthermore, 84% agreed that "companies need to evolve their giving programs from simply giving money to broader social innovation."

Yet while executives’ aspirations clearly have moved towards wanting to innovate in their approach to community engagement, are businesses actually doing this? And more importantly, are those who are doing it doing it well?

Our research and experience working in this space tells us that the answer to both questions at the moment is unfortunately, mostly no. Of the business leaders TSIC surveyed who stated they believed businesses could have a greater impact through applying their strengths for social change, only 64% reported they were currently focusing on using their business’s resources in this manner.

Furthermore, while notable exceptions exist, the social action undertaken by most businesses tends to involve searching for existing solutions and then retrofitting the business to contribute. As such, many of the businesses we meet today are nowhere near meeting their social potential. In order for them to do so, they need to begin by assessing what unique assets they already possess, and how those talents can be applied towards accomplishing social change in new ways.

So how do businesses begin to go about this? Rather than passing over charities or redoubling public or third sector efforts, we believe businesses must merge their organizational expertise with community expertise to best understand where they can have the greatest impact. This approach then enables businesses to take the lead in deciding how to creatively apply their resources and inviting charities and cross-sector organizations to contribute as partners—rather than waiting for such partners to ask businesses to help in some way.

At present, corporate cash donations represent less than 5% of all private philanthropy in the U.K., though corporations are investing huge amounts more in their infrastructure, staff, or developing in-house expertise. In order for business social action to have a meaningful impact, it thus needs to focus on creatively applying these much greater and more unique resources.

Arriving at a truly meaningful business social action platform however does require considerable energy from across the business and its leadership. It is not for the faint of heart, though companies such as Unilever have already taken bold steps in this direction through moving social impact away from a separate department or function and into how they mobilize resources and plan across their business.

We believe businesses of any size or industry possess unique talents and capacities that can be applied toward social change as much as toward making profits. We also believe today’s business leaders are ready to make the leap into the next stage of CSR—to create a world in which the distinction between businesses and social businesses disappears, and the economy becomes dominated by innovative organizations pursuing profitability, sustainability, and social progress together through their work.

The task today is to convert laudable aspirations into meaningful platforms. We hope to challenge businesses to do this thoughtfully.

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9 Comments

  • Tom Schulder

    Interesting POV, would like to hear what charities would think about this?

  • Andrew Croft

    Andrew Croft: CAN (formerly Community Action Network)
    There are many examples of business that are focused on the social benefit exclusively with the financial secondary. These are loosely termed social enterprise. One example is HCT group that runs bus services but uses its profits to run unprofitable routes for the community and train disadvantaged communities to create employment. Another brownie company has the appropriate slogan we don't employ people to make brownies we make brownies to employ people, cleverly articulating their mission. These are incredible organisations but a minority when compared to the traditional private sector. As with most concepts the realignment of the private sector would have a significantly greater societal impact than growth in the social enterprise one which means it should be encouraged.
    A good example would be related to a charity of which I am a Trustee. Thare Machi Education (TME) produces interactive DVD's to educate (in the language of the poor and illiterate) around health matters such as HIV , water bourne disease etc.... on a global basis. If De Beers or Rio Tinto as two examples were to support the dissemination of these discs perhaps through a health led programme for only employees initially there would be a happy coincidence of mission. As a commercial organisation they would seek to maximise the health and longevity of their human resource, seeking best ROI with a commercial payback. Simultaneously they would be enhancing their brand while ensuring the new wave of employees who demand a higher standard of their employer and its impact / footprint are satisfied. Consumer pull for a better way of doing business will be satisfied and this translates to market differentiation. Shareholders who feel the same or even those who just seek shareholder value on a commercial only basis will feel the benefit of this action. TME as a charity will see its mission reached through preventing death or prolonging life through education. This is the kind of win / win that exists when commercial organisations do well commercially by doing good socially.

  • Lillian Mahon

    Great article and it's definitely not mutually exclusive to be profitable and deliver benefit to society - look at Mark Zuckerberg’s letter to potential investors "Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected... we don’t build services to make money; we make money to build better services."  I'm not saying he's a saint, but I think it's time we support CEOs that have a mission beyond making money for investors!

  • Deborah Carter

    Interesting, theoretical article. Would have been much more powerful if you had given some concrete examples of this to inspire and trigger readers. 

  • Fiona Eadie

     I love the Campbells Nourish programme in Canada as being a great example of this - addressing hunger which is the organisations core strength - much more valuable than philanthropic donations

  • Kevin W. McCarthy

    Making money or making a difference
    captures the crux of the dilemma where many of us in business live. It
    isn't an "either or" question. It is a "both and" matter. Which way do
    you tilt?

    Candidly, I've been to the extreme
    "making a difference" side of the equation for many years. As such, I
    risk my business, finances, and capacity to grow. With the tagline for
    On-Purpose® being "Be Yourself. Prosper. Make A Difference" you can see
    my tendency.

    Early in my career I was money driven.
    I made lots of money at different times, but I lost lots of
    money, too – an ugly business divorce, making bad deals with other money
    hungry people created a series of get-rich quick efforts that rarely
    panned out, and so forth.

    Finding myself in too many ethical situations that disturbed
    my spirit and messed with my mind, I decided a wide berth away from all borderline business
    dealings was best. That was 1987. 

    In late April, the fruit of my decisions came home wonderfully.  I launched my first book, The On-Purpose Person, on kindle free in what we called The Great Giveaway On-Purpose.  Over 32,500 souls downloaded the book rocketing it to #1 in many categories. My database was about 4,000 names so it is the goodness of others sharing that helped this happen. 

    Julie, one of my team members, said it was like watching the ending of "It's A Wonderful Life" as all of George Bailey's friends rallied around him.  I did a blog post about it: http://www.kevinwmccarthy.com/...

    Business leaders of the 21st Century who grasp that business is a part of society rather than apart from society understand what business has always been about - making the world a better place.  Business doesn't have a monopoly on this, just the best set of tools to serve society.

    Be On-Purpose!Kevin
     

  • Smacdonald1956

    There is a great article in today's Wall Street Journal (May 10, 2012) on how President Roosevelt reached out to his political enemy - William Knudsen, the head of General Motors - to use business and manufacturing skills to meet the country's wartime manufacturing needs - using those business skills to help the public cause in a big way.  It is a natural fit.

  • Andrew HK

    Very interesting perspective... challenging the supremacy of the 'shareholder value' concept.  Good to see that companies aren't going to get a pat on the back just for greenwashing (or ethic-washing?) but are actually being challenged to be useful and creative!