Business
Every business is a social business

Profits are becoming the key to effective, charitable social change

Burgess COMMENTARY
Peter Burgess I like to see contributions like this. It is an indication that society is thinking more in the right direction now than in the relatively recent past. However, I would argue that this and similar thinking is not radical enough by a mile to make much of a difference to the dangerous outcomes we can expect a couple of generations down the road.

The idea that business has a social purpose can be tracked back to Adam Smith, and of course it was central to the founding of the company that is now Unilever. However, the 50 years that I have spent as an adult, the performance of big business entities has been driven almost 100% by financial analysis and essentially 0% by social impact analysis and environmental impact analysis.

Worse, the corporate world has used technology to improve productivity, and then allocated 100% of improved productivity to owners (return to investors) and not a jot to return on labor.

And even more worse, the corporate world has built supply chains that are 100% good for corporate profit with disastrous consequences for what used to be their homes countries (lost jobs) and pretty disastrous consequences for a lot of people working in the supply chains ... the race to the bottom ... awful workplace conditions, low wages, dangerous factories etc.

The US and Canada have a profitable economy when measured in money ... but the per capita carbon footprint of both the US and Canada indicates a level of irresponsible at leadership levels that is mind boggling at this time in the 21st century.

A little bit of government regulation and modest increments in social business activity is not going to do enough to change the trajectory of corporate behavior. Something more dramatic is needed, and this might be the emerging new metrics that are starting to integrate the profit dimension of business with the social impact and the environmental impact dimensions. Slowly but steadily important investor groups are starting to 'get it' and that will be a game changer. My experience with metrics to change behavior has been very positive. Peter Drucker famously said 'You manage what you measure' and I would add that 'If you change the way the game is scored, you change the way the game is played'.

So ... good. This article is in the right direction, but the idea is too limited and will not deliver the change that is going to be needed.

Exciting times

Peter Burgess ... TrueValueMetrics.org ... Multi Dimension Impact Accounting
Peter Burgess

Profits are becoming the key to effective, charitable social change

Charitable organizations have lost their monopoly on effective social change. According to the 2014 Generosity Index, an annual survey by the Fraser Institute of private monetary generosity in the United States and Canada, donations to charitable causes are declining precipitously. Over the past 30 years, corporate contributions to charities in the U.S., as measured by percentage of pre-tax profits fell from a high of 2.1 in 1986 to about 0.8 per cent in 2012. It is a time of crisis for charities – organizations are losing significant amounts of corporate funding and social programs are at risk of being cut back or eliminated entirely.

MULTIMEDIA

Canada's top 100 non-profit organizations (registered charities)

A scene from the “PuppySwap” commercial. More than 180,000 animals are taken into shelters across Canada each year, according to a 2012 report from the Canadian Federation of Humane Societies. Of those, roughly 60 per cent find homes.

PERSUASION Why the Humane Society wants its PuppySwap ad to horrify you

MULTIMEDIA Business leaders warned about 'staggering' global wealth gap

Corporations interested in social change want more than a tax receipt and their name on a plaque. Increasingly, they’re looking for sustainable social change at the lowest cost in the shortest period of time and have lost confidence in the ability of charities to deliver on this new imperative. Ironically, this approach is the territory of business itself and social implications of profitable businesses are re-defining the landscape of social change.

The opportunity to apply the principles of business to social change has never been timelier and the dilemma of whether or not it is appropriate for businesses to benefit from solving social problems is fading fast. “The historical division between social and non-social business and ‘purpose’ vs. ‘profits’ is artificial and antiquated,” said Deborah Mills-Scofield in a 2013 Harvard Business Review article titled, Every Business Is (Or Should Be) a Social Business. “At some point, in deciding which supplier to use, in engaging your work force, and in getting your product into users’ hands, relationships with people matter. Improving these their experiences always improves the outcome for your company.”

Last month, it was announced that survivors and family members of the 1,129 garment workers who died in the 2013 Rana Plaza factory collapse in Bangladesh are seeking $2-billion in damages from Canadian grocery giant Loblaw Cos. Ltd. Kevin Groh, the company’s vice-president of corporate affairs, noted that Loblaw is working to improve working standards in Bangladesh and has directed $5-million to local relief including support of the International Labour Organization’s fund for long-term compensation to workers and their families.

The Loblaw’s response to the tragedy reflects an approach that doesn’t go far enough in creating opportunities for people in Bangladesh to profit from their relationship with the company in a way that also improves socio-economic conditions. In addition to largesse, improved standards and better oversight, Loblaw could take real leadership by helping capitalize locally owned suppliers who would have a stake in operating ethically and profit from doing so.

Consider the pharmaceutical industry, a sector where corporations in the business of health have been routinely targeted as being unethical. Big pharma invests billions of its profits in researching and developing new therapeutic drugs that may, or may not, be approved by governments. If they are found to be effective, patients benefit, pharmas re-coup their investment and generate profit and, ultimately, medicines are manufactured by generics at a lower cost. This is a business model that keeps people healthier, saves lives and reduces costs because it is profitable.

There are three things corporations should consider doing differently to generate more profit in ways that also result in social change.

• 1. Changing donations policies to allow some of the capital that is currently allocated to charitable organizations to be invested in profitable businesses that address social issues. By doing so, corporations can increase their base of capital and improve their ability to address social problems they have identified as priorities.

• 2. Developing new businesses that are specifically designed to generate a profit and solve social issues. The Loblaw opportunity outlined above is a good example.

• 3. Partnering with other business that can help scale initiatives. For example, shoe company TOMS partners with Visualiza to help a hospital in Guatemala that provides private care and free vision services for the poor and helps increase access to more than 100,000 people that need eye surgery but are difficult to reach and treat.

Today, making a profit is an essential ingredient of effective social change. Despite giving less to charities, corporations have the opportunity to play a more important role in solving social problems and to make more money at the same time.

The top 100 non-profits in Canada

http://www.theglobeandmail.com/report-on-business/rob-magazine/top-100-non-profit-organizations-registered-charities/article17298702/