Why business can be good at solving social problems

on October 16, 2013 | in Advice, Conscious

Michael Porter, professor from Harvard Business School, advocates that the structure of non-profits, NGOs and government assistant can never scale sufficiently to solve the major issues of the world, whereas the structure of for-profit business CAN scale.

Scale is the key that I missed in my version of this talk…

The key insight is that any philanthropic or government solution that works for 1,000 people, will then require 1,000 times more donation/funding to reach 1,000,000 people, and a million times more to reach a billion people.  We have 2.5 billion people in the world living on $2/day or less, 2 billion off the electric grid, 2 billion without access to clean water, 2 billion households full of smoke from cookstoves, etc., etc., etc.

What organizations have scale across billions, with a distribution network to nearly everyone on earth?  Coca Cola.  P&G.  Vodafone.  If only they cared more…

  • Ajit

    Michael and Pledge make good points about for-profits’ experience in scaling more efficiently, and yes if only they cared more, and yes many such large wide distribution capability organisations such as GE, Nestle, Unilever etc are starting to use their core competencies in this direction, and yes there are now many consultants that are willing to show then how, but of course at a profit for the consultant. To completely put social issues the hands of for=profits though might be questionable because they have shown that they can really non-care. Might it not be better to follow what Prof Kash Rangan espouses, that this is a team game, that it is best to get all relevant stakeholders, yes even governments and NGOs, especially where the NGO truly reflects the community, sitting around the the table first? Yes, even the for-profits have some serious limitations, and thought their behavior might be changing now, and this needs to be lauded, they have a long ways to go before they commit to caring. There is light at the end of the tunnel, corporations are showing small initiatives in this direction. There is hope.

    • Bruce Preville

      On getting for-profit corps to care:
      The Social Responsibility Amendment (SRA)
      by Michael Lerner

      Most American politicians fear to challenge corporate power not only because they need the financial support during elections, but for a deeper and more reasonable reason as well: they fear that corporations can always threaten to move their base of operations, leaving joblessness and economic devastation in their wake.

      The various branches of the progressive movement each seek to obtain some minimal restraints on corporate power. But the history of the environmental movement’s reformism demonstrates the problem here: for every single victory won at the expenditure of huge amounts of energy, there emerge three or four new areas in which unrestrained consumption and the extension of the market to every corner of the world threaten the life-support system of the planet while simultaneously developing new labor markets to pay exploitative wages. And as the ethos of selfishness and materialism generated by the market and glorified by the media as “human nature” increasingly presents itself as “common sense” to the peoples of the world, resistance seems foolish to many who decide that the best they can do is to try to “make it” — even at the expense of so many others around the world who we know will never get their share.

      While some may take refuge from the values-and love-corroding aspects of the market by attempting to build ultra-nationalist or religious fundamentalist communities around a different vision, most will passively acquiesce, convinced by the Thomas Friedman rhetoric that “there is no alternative.” But there is an alternative: to change the progressive agenda from its previous focus on “inclusion,” (making sure that those in the U.S. who had been “left out” of the rewards of the capitalist system would get a fairer portion) to a new focus on “changing the bottom line.” In its deepest sense, this strategy, which we call “a politics of meaning,” aims to change the very definition of productivity and efficiency, so that we see institutions as efficient or productive not only to the extent that they maximize money and power, but also to the extent that they maximize people’s capacities to be loving and caring, ethically and ecologically sensitive, and able to respond to the world not only in terms of how we can “use it” but also with awe and wonder.

      That’s why we at TIKKUN have developed the Social Responsibility Amendment (SRA) to the U.S. Constitution. The SRA says this: Every corporation doing business within the U.S. (whether located here or abroad) with annual income of over $50 million must receive a new corporate charter every ten years, and these new charters will only be granted to corporations who can prove a history of social responsibility as measured by an Ethical Impact Report, which will measure the company’s sensitivity to the needs of the environment, the community, and its employees. The Ethical Impact Report will be compiled by three different constituencies: the corporation itself, the workers (under conditions of confidentiality), and relevant community organizations around the world who wish to present their case about the social responsibility of the corporation.

      To prevent a huge government bureaucracy making these decisions, the SRA will create a new system of Social Responsibility Grand Juries (SRGJ) composed of 25 citizens whose task would be to read the Ethical Impact Reports and receive oral testimony from the corporation, employees, and relevant community organizations — and then assess what they had learned.

      If an SRGJ decided that the corporation should not be granted a charter renewal, it would then move to stage two: what to do with corporate resources. The SRGJ would listen both to corporate management, which could present a plan for how it was going to significantly alter its behavior in order to become more socially responsible, and it could hear testimony from other for-profit or non-profit groups that could propose how they might run the same corporation with more socially responsible policies.
      The SRGJ would then decide to either award the corporate charter to another group, and with it the assets of the corporation in question, or to put the corporation on probation for three years.

      If it gave the corporation a three year probation, the SRGJ would reconvene three years later to determine if the changes had in fact taken place, in which case it could restore the charter for the next 17 years (thus making up the full 20), or it could determine that the corporation had failed to adequately implement significant changes, and award the corporate charter to some other management group.
      Grand jurors would be selected by lot from the population, but balanced in order to guarantee racial, religious, spiritual, gender and economic diversity. Jurors would be paid (by a corporation’s charter renewal fee), would have subpoena power and could impose contempt citations and prison sentences upon corporate leaders for up to two years if they found that the corporate leaders were withholding vital information or otherwise attempting to disrupt or distort the evaluation process (for example, by trying to restrain the testimony of workers or community groups who had negative things to say). They would be assisted in obtaining information on corporate behavior by a corps of Social Responsibility agents which operated much like today’s public defenders’ office, except with funding written into the amendment and not subject to electoral shifts.

      The SRA moves away from the old demonizing of corporate leadership and instead recognizes them as another group caught in the dynamics of the capitalist market — and provides them with a way of explaining to corporate stockholders why the corporation must become more ecologically and socially responsible (“because otherwise we will lose our corporate ownership, a far greater risk than the costs of this social responsibility”). And by introducing the notion of an Ethical Impact Report, the SRA challenges market notions of how to judge efficiency, legislatures or Congress very quickly. Just as the ERA never passed, yet had a monumental impact on public discourse and understanding, the campaign for the SRA could similarly shift the dimensions of American political discussion. If liberal and progressive forces made this SRA a central item on their agenda, and talked about this as the way to create “a new bottom line,” we could provide people with a plausible picture of how it might be possible to live in a world in which loving and caring could have real social power.

      To launch the SRA: use the next few years to involve all sectors of American society in the conversation about what should be included in the Ethical Impact Report used to judge whether a corporation is entitled to charter-renewal. And popularize the notion of “a new bottom line.” And if we could have the courage to call the SRA a fundamental spiritual challenge to the ethos of selfishness and materialism, we might soon find that our SRA campaign could attract sectors of the population who feel ripped off by the spiritual deadness and moral decline of American society but who have never understood the connection between the spiritual crisis and the dynamics of the market. The SRA — an example of what I call Emancipatory Spirituality in my book Spirit Matters — could give people confidence that their own highest values might someday have a chance of shaping social reality, so that people might look upon each other as embodiments of the sacred rather than as solely vehicles for narcissistic gratification, and might look upon the world as deserving of awe and wonder and not just as a resource. It’s the loss of that kind of hope which leads people to believe “there is no alternative,” and the recreation of that hope which is likely to be the first positive outcome of the SRA campaign.

      • lunarmobiscuit

        Interesting idea… but you do know that corporations are institutions of States, not the Federal government. Thus you’d need each State to change their laws to put a time limit on incorporation.

        In the past few years, we’ve seen states make socially responsible changes to incorporation. Benefit Corporations in dozen of states, Washington State’s Social Purpose Corporation, and Delaware’s Public Benefit Corporation all now allow a company to include a social benefit/purpose in their charter.

        The question then is who decides when these companies are not meeting that charter, and what happens if not. Are you proposing that the State would seize the assets of the company if they failed to treat their workers well? Who gets to define “well”? Why 10 years? If a company is harming people today, why wait years to act? And why $50 million? What’s magic about that size? Any arbitrary limit seems ripe to be gamed. Divide the $50 million into three corporate entities, two with $25 million in revenues, and one parent with no employees to mistreat.

        • Bruce Preville

          State by state make it easier to implement change. The logistical questions you raise are good ones; they need answers and a good engagement with answering those questions and others is a good place to begin with what will make real change possible.