Giving and Growing

Business can step up by reaching out, but it needs to adopt a new approach

Shared Value

THE OLD MODEL of corporate giving involves the CEO championing a particular charity, and then writing a cheque.

The old model is broken.

Broken because it relies on the whim of the CEO, who could change her priorities at any time. And, while the generosity continues to flow, the beneficiaries of this corporate largess become dependent on hand-outs rather than learning to catch their own fish.

Broken because it fiddles shareholders, who pay the CEO to reinvest profits or pay a dividend. And, if the CEO instead uses shareholder money to champion her favourite charity, then there would seem to be a problem. Would it not make more sense to pay a dividend and allow shareholders to decide which charities to support?

Supporters of the old model will tell you that it works just fine, so long as the chosen charity prominently displays the firm’s logo on the charity’s website or at a high-profile community event.

We agree. This works. But it’s not charity. It’s advertising, it’s marketing, or it’s a PR campaign.

Call it what you will.

If you care about charity, there is a better way.

Shared Value – the new approach to charity

The new approach to charity is to tie it in with what your firm already does, and to use your existing resources and capabilities to reach out to the community (people, charities, government agencies, and existing suppliers and distributors). For example, if you run a private healthcare centre, or a pharmaceutical company, then there may be opportunities to help the growing number of people who are struggling with substance abuse problems.

The naysayers will tell you that charity is for the Church and solving social problems is a role for government (and fortunately there are already public support services for addiction), but this kind of thinking is both defeatist and short sighted.

There are three good reasons why reaching out to help the community makes good business sense:

  1. Motivation: By giving back to the community, you can create a higher purpose for the work you do and increase employee motivation;
  2. Learning By Doing: As early as the 19th century, German psychologist Hermann Ebbinghaus identified that (as you would expect) people become more efficient the more times they perform a particular task. And so, by helping the community, by doing what you do best, you are actually helping your employees learn by doing;
  3. Connections: Friendships are valuable, and you never know who you could meet by reaching out to help others.

So, take some time to consider your core values, investigate what your competition is doing, and consider your options for embracing the new model of charity.

Who do you plan to help, and why?

Why business can be good at solving social problems

By addressing social issues with sustainable business models, business leaders have the potential to provide scalable solutions

MICHAEL PORTER makes an astute observation – the world is full of social problems.

From environmental degradation and disease to unemployment and inequality, solving social problems has traditionally been the domain of NGOs, the government and philanthropists.

Meanwhile, business school professors and corporate CEO’s like Jack Welch spread the gospel that the primary goal of business is to “maximise shareholder value”.

If the relentless drive for profits happened to create social problems like pollution or obesity, then that was certainly regrettable. And the government should probably do something about that.

Traditional business thinking drew a very clear line between social problems and the world of business.

Fortunately, a new brand of business thinking has now evolved, and Professor Porter is flying the flag to raise awareness for a game changing business philosophy he calls “shared value”.

The basic idea is fairly simple; by using sustainable business models to address social issues, businesses can create social value and economic value at the same time.

As we identified back in March when we looked at Sustainable Social Enterprise, one of the core problems with traditional charities and government social programs is that the solutions don’t scale. Beholden to government budgets, political interests, or the whim of philanthropists, the very programs designed to solve our most challenging social problems remain financially constrained. Without a sustainable business engine, their wings are clipped, and many promising initiatives never even get off the ground.

The business sector has a role to play in solving social problems since they understand the power of profit.

If you provide good value for a fair price, and recoup your costs in the process, then you buy yourself the chance to do it again, and again. The virtuous cycle of value creation flows from having a sustainable business model and the resulting profits can enable a business to scale the solution.

As fate would have it, solving social problems can also make good business sense:

  • healthier employees are more productive employees,
  • a safer workplace means less downtime and fewer lawsuits,
  • reducing pollution can help a business become more efficient and productive, and
  • helping suppliers improve their capabilities can help an upstream firm to streamline or customise its own production line.

The world is full of social problems, and the opportunities to have a positive social impact are bigger than ever.

The only difference is that, this time, business can be part of the solution.