Economic Benefits Meet Social Outcomes
“The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy.” – Michael E. Porter
Will capitalism’s next untapped frontier be about addressing social problems? In a world full of social challenges, government, non-profit organizations and Foundations are working hard, but progress is often slow and halting. So why would a profitable business want to enter this space?
This is a question often asked of Ken Gauthier, an Engineer turned Community Catalyst when he speaks about Urban Matters, a social enterprise that emerged from the engineering firm Urban Systems. He says he gets as many questions around the ‘why’ Urban Systems (which already has a charitable Foundation arm) saw value in also creating a social enterprise as he does the ‘how’ of Urban Matters’ methods.
Daunting Social Issues
There isn’t space here to belabour the myriad of problems faced in our world, but a quick summary is in order. Today’s issues are more complex than our ancestors would have dreamed. In 2016 we have a plethora of “big hairy multi-sectoral monsters”—tangled, convoluted societal problems that span industries and the globe—from pollution, poverty and stilted economic development, to poor access to water, not enough healthcare, inadequate nutrition, deforestation; and the list goes on.
Traditionally the folks trying to solve these problems are NGOs, non-profits volunteers and government. Corporations may write cheques, but that’s often the extent of their involvement and this Bandaid approach is often a flop.
So why aren’t we eliminating any of the problems? Because most of those on the front lines simply don’t have the resources and capacity to deal with such large and complex issues. This is where a traditional for profit business—whose whole existence depends on efficient systems—may be able to step in with different tools at the ready.
Ken gets pretty passionate when he talks about the idea that traditional businesses can make the world better while uncovering new markets and turning a profit. And he says the profit is the secret sauce; the thing that makes the solution scaleable and self -propelling.
And it’s also about sowing seeds and looking ahead. It’s about ensuring a strong healthy future client base and tackling problems upstream.
Enter Conscious Capitalism
Typically, when businesses solve a problem, they make a profit. That profit allows the solution to grow. The equation is straightforward: Business creates wealth and resources when it meets needs at a profit. But if a businesses’ traditionally narrow focus on profits can be expanded to include bettering the common good, we have a win-win. The business gets to enter new markets. The world gets to benefit.
“Today’s issues require all hands on deck,” says Ken. “And when there’s a market to be served, business knows how to find a way. There is a fundamental opportunity for profit and good work here.”
“Business outcomes depend on healthy society, period. The relationship between profitable business and a healthy society is direct.”
Take two examples:
1. Coca-Cola is Everwhere… But Medicine Isn’t?
No matter how remote a village you find yourself in, if you want to buy a Coke you’ll find one. Coke has a downright dazzling distribution system—one of the most robust in the world. The cola titan is an expert in inventory control, product storage, security and marketing.
Buying a Coke anywhere is pretty easy, but buying life-saving medicines isn’t. In developing countries, one in eight children under the age of five will die. The number two killer is diarrhoea, a preventable condition that can be treated cheaply at home with the right medicine. ORS (oral rehydration solution) is the treatment of choice—it’s cheap and it works. But in developing areas, it’s hard to get your hands on it. And this medicine can be the literal difference between a healthy child and a dead child.
So one aid worker in Zambia had a lightbulb moment. What if through the use of clever packaging, ORS could be transported through the Coca-Cola system. The result of his effort: A wedge-shaped container called an AirPod that fits between the bottles in a coke crate. A pilot project called ColaLife is currently underway to test this idea. The project has been set up so that everyone who is a part of the system, from wholesalers to distributors to retailers, will make a profit when the medicine sells. Piggybacking on Coke’s infrastructure has given this life saving idea legs it would have never otherwise found. To learn more visit colalife.org
2. The Greening of Wal-Mart
When you think of Wal-Mart, do you think environmental saviour? Probably not, but you might be surprised at the strides this retail behemoth has made in greening its stores. From reducing wasteful packaging, improving its trucking fleet, to altering the way it chooses suppliers and more—Wal-Mart is helping the environment in no small way, and putting a lot of money back in its own pocket.
So what does improving energy efficiency and boosting sustainability look like in the context of a $400-billion retail empire? It involves adopting a very slick business strategy. It means saving mountains of money on packaging and shipping, and bolstering your reputation in the eyes of consumers. In other words, it’s a win-win. It’s also a great test case for the business of sustainability.
In one example Wal-Mart put pressure on its suppliers to shrink the size of laundry detergent bottles. In three years that saved 125 million pounds of cardboard, 400 million gallons of water and 95 million pounds of plastic—and a lot of money. It also allowed more products to be stocked on the shelves. Current estimates put the cost savings incurred by packaging reduction in the hundreds of millions and the reduced carbon footprint is also huge.
So, where does that leave us? We think there are a lot of very good reasons for a for profit business to consider expanding into the social enterprise space. One of the best reasons is opportunity. Opportunity to discover new markets, reach new clients and make profit in innovative and undiscovered ways. And ultimately, opportunity to build a legacy and to simply make things better. We think that’s worth considering.
Urban Systems agreed, and boldly stepped into this space with the creation of the affectionately named “Urban Matters”, a social enterprise with a mission to do good in the world and be self sustaining. If you’re thinking of launching your own social venture or want to know more, Urban Matters would love to hear from you.