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.