Can business solve social problems?
In 2007 with a ‘Marshall Plan’ for Ukraine, we argued that it could:
“An inherent assumption about capitalism is that profit is defined only in terms of monetary gain. This assumption is virtually unquestioned in most of the world. However, it is not a valid assumption. Business enterprise, capitalism, must be measured in terms of monetary profit. That rule is not arguable. A business enterprise must make monetary profit, or it will merely cease to exist. That is an absolute requirement. But it does not follow that this must necessarily be the final bottom line and the sole aim of the enterprise. How this profit is used is another question. It is commonly assumed that profit will enrich enterprise owners and investors, which in turn gives them incentive to participate financially in the enterprise to start with.
“That, however, is not the only possible outcome for use of profits. Profits can be directly applied to help resolve a broad range of social problems: poverty relief, improving childcare, seeding scientific research for nationwide economic advancement, improving communications infrastructure and accessibility, for examples — the target objectives of this particular project plan. The same financial discipline required of any conventional for-profit business can be applied to projects with the primary aim of improving socioeconomic conditions. Profitability provides money needed to be self-sustaining for the purpose of achieving social and economic objectives such as benefit of a nation’s poorest, neediest people. In which case, the enterprise is a social enterprise.”
Publishing our strategy plan in a popular web journal was a defensive tactic. Our founder saw the risk of it being hijacked by one of Ukraine’s oligarchs.
What it argued about sacrificing profit to benefit the poorest and neediest would soon be repeated by Bill Gates, describing the concept of Creative Capitalism.
At Davos 2009, Gates was at the Philanthropic Roundtable to discuss creating more effective social programs in Ukraine. “Business should focus more on solving social problems” said Richard Branson.
“A philanthropic meeting point organised by the Victor Pinchuk Foundation in Davos during Annual Meeting of the World Economic Forum, Davos Philanthropic Roundtable is aimed at developing philanthropy in Ukraine and increasing effectiveness of social projects. Main theme of the Second Davos Philanthropic Roundtable, entitled “From Philanthrocapitalism to Philanthrocrisis”, was the impact of the economic crisis on philanthropy and perspectives of philanthropy development.
“The key speakers at the event were the dignitaries who have significantly contributed to the development of a new model of philanthropy: 42nd President of the United States Bill Clinton; former Prime-Minister Of Great Britain Tony Blair; businessman and philanthropist Richard Branson; Laureate of 2006 Nobel Peace Prize Muhammad Yunus; actor and founder of the One Foundation Jet Li, founder of the Bill and Melinda Gates Foundation Bill Gates and also Victor Pinchuk, the Roundtable organiser, public leader and businessman. Matthew Bishop, Chief Business Editor of The Economist and co-author of the book “Philanthrocapitalism: How the Rich Can Save the World” acted as a moderator of the discussion.”
To many , the names of Muhammad Yunus and Tony Blair have connections with social enterprise. Yunus was advocating Social Business. Bill Clinton was the recipient of the 1996 position paper.
Then the Vatican chipped in. Chipped in to the conversation that is, not the funding. With Caritas in Veritate, Pope Benedict wrote:
“This is not merely a matter of a “third sector”, but of a broad new composite reality embracing the private and public spheres, one which does not exclude profit, but instead considers it a means for achieving human and social ends. Whether such companies distribute dividends or not, whether their juridical structure corresponds to one or other of the established forms, becomes secondary in relation to their willingness to view profit as a means of achieving the goal of a more humane market and society. “
“The strengthening of different types of businesses, especially those capable of viewing profit as a means for achieving the goal of a more humane market and society, must also be pursued in those countries that are excluded or marginalized from the influential circles of the global economy. In these countries it is very important to move ahead with projects based on subsidiarity, suitably planned and managed, aimed at affirming rights yet also providing for the assumption of corresponding responsibilities. In development programmes, the principle of the centrality of the human person, as the subject primarily responsible for development, must be preserved. The principal concern must be to improve the actual living conditions of the people in a given region, thus enabling them to carry out those duties which their poverty does not presently allow them to fulfil. “
Then along comes Harvard, with Creating Shared Value:
“CSV is about mobilising the entire budget of the corporation to create social value”
Then we hear that CSV means that corporations can profit by solving social problems.
In one camp we have what is described as #profitforpurpose and in the other #profitwithpurpose, or ‘doing well be doing good’.
The former I described in #LongTermCapitalism as ‘The New Bottom Line’ . The latter descibed in the Guardian as “The New Bottom Line”
Confused yet?
Weighing in on the side of the former is professor Mark Ritson:
“A true band purpose doesn’t boost profit , it sacrifices it”
On the latter, it’s #PepsiCo and #performancewithpurpose
#capitalism #purpose #purposedriven #marshallplan #poverty #hunger desperation #chaos #PepsiCo #socialenterprise #socialpurpose #sharedvalue #CSV #CSR #business #philanthrocapitalism
