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Judith Samuelson

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Look to Business Operations, Not Philanthropy, for Social Impact

Posted: 03/07/2012 4:07 pm

The Committee to Encourage Corporate Philanthropy just celebrated International Corporate Philanthropy Day to inspire global business to grow its philanthropic investments. While I share the desire to encourage good works by business, philanthropy is not the strongest starting point.

Philanthropy by corporations, individuals and foundations does a tremendous amount of good. Many important social movements -- from the Civil Rights movement to the advent of micro-enterprise -- have gained traction because of long term support from philanthropists, and at its best, philanthropy can seed innovation and take the kind of risks that lead to important investments. However, to borrow from Al Gore, there is an "inconvenient truth" about philanthropy: If the impact of business on society is measured in oceans, corporate philanthropy would barely fill a bucket of water.

Let's talk Henry Ford. Ford's legacy is not just the endowment created in his name -- it's the automobile. Think Bill Gates, Sam Walton or Warren Buffett. The impacts and consequences of their business genius are felt -- for good and for ill -- every day, in every corner of the world and in every sector of the economy. What might be possible if we were to unleash this business genius on problems of consequence? Where do we start?

I suggest three important challenges to both educators and business leaders alike. First, there is a need to re-elevate our public narrative about the purpose of business, to embrace the interdependence of business and society. Second we need to cultivate business leaders to realize this vision -- to extend time horizons and consider the moral as well as financial consequences of business investment. Third, we need to identify and support the innovators and change agents that reside deep inside business to work on problems that matter.

The capacity represented by Henry Ford's descendent, Bill Ford and his peers -- to work on the big problems, like how to create useful goods for consumers in an era of resource limits -- is far greater than all of the nonprofits and philanthropists working on climate change and pollution and green design combined.

What is so powerful about the business model? It's the power of innovation when constrained by the supply and demand of markets. That's what makes private sector approaches to large scale problems so compelling. If you create a useful product or service with measurable social or environmental benefits within the constraints of a fair profit, then the ability to attract capital and grow is almost limitless.

Consider an example of what is possible when leadership, values and business heft are aligned. Procter & Gamble, in collaboration with the CDC, has spent 15 years developing solutions to the lack of safe drinking water, driving the cost down to as little as one cent per liter in the process. Branded as "PUR" packets, this product addresses a problem felt by over 900 million people worldwide that is a leading cause of illness and death. The product could help almost a billion people. Who else thinks in terms of markets as large as one billion people, besides the governments of India and China?

But it starts with business purpose. With public trust in business so low, it is a good time to take a fresh look at the role and capacity of the business sector. What is the purpose of business and to whom is it accountable? Last week, the Aspen Institute hosted 25 scholars at NYU's Stern School of Business to revisit the connections between purpose, accountability and strategy. It's a start.

When companies deliver core services traditionally reserved for government -- like safe water -- they are fully engaged in human endeavors that might otherwise be called philanthropy or social enterprise. This is complex ground. Oftentimes, there are stops and starts. Partnerships with government and nonprofits, which CECP also promotes, can be critically important. Sometimes, unreasonable expectations of financial return get in the way, or the externalities can seem to swamp the benefits. But when global corporations get it right, they do not require subsidy to expand at a pace that has global impact. It's called doing business.

 

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