The relationship between business and society has been a long but somewhat checkered one. However, in the last three decades we have witnessed some major breakthroughs in what remains an evolving journey. The notion that corporations are pitted against society is not quite true. In this era, we are witness to the birth of several entities like Gates Foundation; Dell Foundation, Omidyar Network and, closer home, the Azim Premji foundation. These are all show case examples of high impact philanthropy that got funded only because of very successful businesses.
To be fair, even before the Gates era, we had foundations promoted by the likes of Rockefeller and Ford. We also had a few business houses and corporations whose ownership was transferred to charitable trusts. The foremost among these were India’s $ 100 Billion conglomerate Tata Sons which is owned two-thirds by a cluster of trusts and the German multinational engineering and electronics company Bosch, which is 92% owned by Robert Bosch Stiftung (Foundation). Each one of these trusts has given back significantly to their constituents and society. Tata Trusts have been supporting endeavors in the areas of education, social sciences, healthcare, nutrition and much more. Likewise, Robert Bosch Stiftung has been focusing on themes such as social cohesion in Germany and Europe; migration and cultural integration and building sustainable living places.
Bosch and Tatas are not alone. Hershey’s the American chocolate maker is dominantly owned by Hershey Trust Company. The Rolex watch company is owned by a non-profit foundation which sponsors the annual Rolex Awards for Enterprise. Wellcome Trust which once owned Burroughs Wellcome, eventually sold of its holdings to GlaxoSmithKline and the trust continues with its charitable work through a formidable £ 18 billion corpus
Whilst corporate social responsibility (CSR) of the kind above is at large scale these instances are few and far between. There is no denying that modern economics, although very different from the laissez faire era, has been overwhelmingly focused on shareholder value, ignoring a host of other stakeholders that constitute society. This topic has been dwelt on in a recent Bloomberg post Toppling the Idol of Shareholder Value and is the central theme of the Coalition for Inclusive Capitalism , co-founded by Lynn de Rothschild. These attempts are like potent seeds but with long gestation periods.
More than a decade ago, Harvard professor Michael Porter along with Mark Kramer authored a seminal article “Strategy & Society; The Link Between Competitive Advantage and Corporate Social Responsibility”. Porter stressed that business needs a healthy, educated and skilled society as much as a healthy society needs successful companies, jobs, standard of living and innovation. But more than anything else he advocates the need for corporates to align their CSR activities to their business strategy and he provides a framework for creating win-win situations. To make his point, Porter provides several examples of how corporations do that. One, for example, is that of Credit Agricole that introduced innovative financing options for energy saving home improvements and audits for certifying farms as organic.
There are scores of organisations which are thinking along these lines. I would like to share with you three shining examples of how corporations are addressing this. The first is my own employer IBM which has a dynamic Corporate Citizenship department promoting CSR in a uniquely effective way. In 2008, IBM had the courage to launch its Corporate Service Corps (CSC) program around the time when the rest of the world was reeling under the financial crisis. CSC is a probono consulting shop which caters to the needs of NGOs, NPOs, government and quasi government entities in about developing 37 countries. What does IBM get out of it? Goodwill, immense goodwill and it’s this goodwill that helps emerging markets to become receptive to IBM as it expands its global footprint. Another IBM program is P.TECH or Pathways in Technology which instills vocational IT skills in high school kids which IBM introduced recently in Morocco. Why Morocco? It’s like this: Morocco has the potential to become a hub for IT global delivery in Francophile countries but the country faces a shortage of skilled IT workers. P.TECH will spawn otherwise scarce skills in Morocco leading to better prospects for its citizens and in the process make available a much needed resource base for IBM.
The second example is of the much talked about company Tesla. Inherent to Tesla’s business model is the need to save our environment. No company in the world is working to make that dramatic shift to renewable energy the way Tesla is. Tesla solar roofs allow home owners to source their energy requirements captively; Tesla Energy has built one of the largest solar farms in the world and Tesla Electric is building electric cars which such gusto that Stanford University economist Tony Seba has forecasted in his recent report Rethinking Transportation 2020-2030 that the end of petrol cars could be just eight years away.
The third example is closer to the Indian subcontinent. A few years ago, French Yogurt maker Danone built what was unthinkable i.e. a small 2000-ton yogurt plant in Bangladesh keeping social business in mind. Unthinkable because the company never imagined that anything less than 20k-tons would be economical. Danone worked on this through experimentation; abandoning its legacy processes and using a bottoms-up approach. The net effect of this was enhancing nourishment in Bangladesh and providing remarkable insights to Danone that helped them adopt direct-delivery systems and new products in France and other markets.
There is no doubt we have come a long way in this journey. In some countries like India, the recently revamped Companies Act requires companies, achieving a certain turnover or profit threshold, to set aside two percent of their average profits over last three years for CSR activities. However, regulation may not be the best means to achieve CSR. It is true that many corporates hide behind the sheen and gloss of CSR initiatives carefully crafted and projected by public relations professionals. The realisation must come from within and needs to be Board-led. It is also true that business alone cannot achieve everything; the responsibility cannot be corporate alone. But taking a partnership approach and working in tandem with society, business has the potential to transform the world.
All views expressed above are the author’s own. Shakti can be reached at firstname.lastname@example.org
‘Toppling the Idol of Shareholder Value’ offers a great POV on why it is important for corporations to establish corporate responsibility initiatives.
Great summary view, Shakti!