At an impact investing meeting at the US State Department last week, I was probably the only one in the room who didn't know that only 3 percent of the world's assets/funds were engaged in what's often referred to as "social innovation" or "impact investing." It's apparently known as the "97 vs. 3" dilemma. But whatever you call it, it was news to me and an obvious shortcoming to driving sustainable change, I think.
Why are micro finance funds, NGOs and foundations the only ones playing big in this space? How will we ever get enough of these great ideas and programs to scale if we only approach them as philanthropic endeavors? Let me be clear: I have HUGE respect for the groups that were in the room. We are in fact already partners with many of them! But, despite the good intentions and great work, the truth is that philanthropy -- in the broadest sense -- can rarely make the long-term impact business can. I think of it this way -- as the president of the Kraft Foods Foundation, I have about $100 million in cash and in-kind we can invest each year. But as Kraft Foods INC, my company has literally billions to invest in the things we need to buy. Effectively directed, what is likely to have a greater impact -- millions or billions? I think the answer is obvious. But clearly this point isn't obvious enough or that 97 percent of assets wouldn't be on the sidelines of impact investing.
That said, while it hasn't happened yet, I'm happy to say the tide seems to be turning and much of the world seems to be coming to this same conclusion -- including many of those here at Davos today. The discussion is gradually beginning to shift from "doing well by doing good" to "doing well by achieving shared outcomes -- outcomes that have both social and business benefits at the heart of their design." This may sound like mostly semantics to some of you but I think it's an important shift. I think it tells business that doing good is important BUT that it's OK to be transparent and upfront about what you need to get out of a partnership in order to make it work for your business and therefore be something you'd want to keep funding and growing. It wasn't that long ago that critics of big business would point to a program a company was funding and say, "but look, see what they are getting out of it" like that was a bad thing. I completely disagree. I think it's a good thing if a social outcome can be achieved while providing a business benefit, and I'm really glad others are beginning to come around to that point of view too. It's the ultimate win/win isn't it?
In fact, I experienced an example of this changed thinking just yesterday. A man was in a social entrepreneurs meeting next door to my meeting of the Consumer Community Steering Board. When he heard there was someone from Kraft Foods next door, he came over because he said he really wanted to talk with us about buying ads on his show -- a cartoon show designed to help create a "new normal" of religious understanding and acceptance among children in the Middle East. He understands, as I understand having worked in public education on economic reform in Russia back in the mid-90s, that "educating" people, especially about values, etc., is not nearly as powerful as engaging them through means and mediums they enjoy and can relate to. But regardless of his particular concept and whether it might be a good choice for one of our brands, what really resonated with me was that right off he said he didn't want sponsorship. He said -- and I quote -- "I only want Kraft to go into this if it makes business sense for you all." By getting his show out there, I am sure good will be done. But he understood that for the partnership to really work, it must make "business sense" for both sides. That's exactly what I'm talking about, and I was delighted to see that he clearly got it and was acting on it.
This is just one small example. What's even more encouraging is that I'm seeing this thread across many of the sessions at Davos this year. I see it in the call for more and unprecedented public/private partnerships. I don't think this is a coincidence. I think it's because people are now recognizing that even if you have a great solution to address a critical global issue -- hunger or poverty or obesity for example -- if you want to get that solution to scale and then maintain it, you need market-based models. You need companies at the table and in the value chain.
The fact that every business, public or private, must answer to its ultimate owners and must in some way make a profit -- and make it happen "fast," in relative terms -- is not a negative. Indeed, I think this market pressure can be used as a positive. When businesses behave as businesses, they help ensure that whatever they do generates an economic benefit. And if you then apply that mindset to something a company needs to buy that can also do some good in the world -- like sustainable agriculture in the case of Kraft Foods -- then you can create something that makes a real and lasting difference for millions. It isn't easy. It still takes time. But it is most certainly doable. And, it's about the only model that'll get you there.
So what do you think? Is it time we get this 97 percent off the sidelines and into the big game? I say it's past time. Get in there! What are you waiting for?
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