The 4 Ways Big Corporations Flirt with Socially Responsible Business
Tuesday, November 22, 2011
The last decade has given rise to many experiments by companies to incubate socially responsible business models. Large financial institutions have become hosts to microfinance divisions (Citi, Morgan Stanley). Energy companies have experimented with base-of-the-pyramid business models for emerging markets, aligning social utility (access to energy) with business strategy (long term growth). And social enterprises like The Body Shop and Ben & Jerry’s have been acquired by major multinationals. L’Oréal bought the Body Shop in 2006 and Ben & Jerry’s became part of Unilever in 2000.
On the whole, however, many of these experiments have failed. Morgan Stanley had to abandon its microfinance unit. The Body Shop and Ben & Jerry’s have both been accused of “mission drift” since being acquired. BP sold much of its alternative energy business, while other energy companies have had to dissolve their access to energy programs.
So what can we learn from this period of experimentation? Is corporate flirtation with social enterprise just a passing trend? What models for incubating social enterprise are out there and at what point does socially responsible business start to become the lifeblood of a company?
Recently, we spoke with a social intrapreneur heading up a renewables business within a large energy company. His ambition is to transform the oil and gas industry. He admitted, however, that most days he feels quite marginalized. “We aren’t perceived as core business. We’re sort of this ugly stepchild,” he said.
The challenge social enterprises face within corporate multinationals is immense. Many social enterprise often don’t conform to traditional ROI criteria. Most of the time socially responsible businesses are betting on long-term strategies or “market shaping” opportunities, or they may simply tradeoff profit in some instances to enhance social impact. Moreover, outsider investors often penalize companies who are too innovative in this space. For one, BP’s renewables portfolio was heavily discounted. So what’s the best strategy?