Monday
November 1
2010

Josh Cleveland

NextThought Monday: Social Enterprise on the Cover of the Economist

No, not this week and probably not next week either. But in five years, it’s going to happen.

The Economist, however, did recently run an article titled: “Companies Aren’t Charities.” The piece finds its basis in Ann Bernstein’s book, “The Case for Business in Developing Economies,” (video) which argues that the role of a company in developing economies should be confined to pursuing profit while abiding by the rules while maintaining a solid moral compass. “In poor countries the problem is not that businesses are unethical, but that there are too few of them,” the subheadline for the article states.

The argument is a familiar one to readers of market champions and CSR naysayers like Milton Friedman, the Economist’s own Matthew Bishop and more recently was the center of a University of Michigan Ross Business School forum. Create a profit by selling a good product and a corporation will prosper. In short: “Shareholders receive dividends. Employees earn wages. Suppliers win contracts. Ordinary people gain access to luxuries …” you see where this is going. Just do your business and you’ll have your social impact.

My initial reaction and maybe yours too, was “That’s not true! Companies need to do more!” But when you look at the CSR Bernstein talks about and the focus of the NextBillion community, I actually found myself agreeing with Bernstein.

No Corporate Handouts

Do what you do best: make some money, pay your taxes, and give people jobs.

Companies that are trying to appease the masses with add-on CSR programs probably should give it up. But we’re not looking for corporate handouts. In fact, I couldn’t find any articles on NextBillion arguing strictly for more charity and CSR from large companies. Nearly every research-based article, however, is focused on business models and approaches for using markets to generate returns, while providing quality, high social and economic impact goods and services to BoP markets.

NextBillion’s community is ahead of the pack that Bernstein condemns. The organizations our writers report on, the companies, partnerships, principles, and tools that we write about are focused squarely on building a business model with social impact “baked in” – not “added on.” What we want are models that do both. We’re arguing for something that is way ahead of its time. Organizations that build products with social impact and can bring real profit. In arguing for that, I think we’ve got Ann Bernstein on our side.

I’ll Buy You Lunch

What our task is in the next five years is to prove these models. SKS just showed us a bit of what is possible. Living Goods is darn close to turning a profit. Root Capital is well on its way. VisionSpring is onto something. And we have to be able to measure it. As Bernstein writes, companies know how to measure profits quite well, but when it comes to measuring social impact, not so much. When the wave hits and financial success follows, if you can measure those social returns as well, then we’ll be in the money in more ways than one.

This is the next trend that you will see on the cover of The Economist within five years. I’ll bet you lunch on it. And if Matthew Bishop writes that same article and condemns the CSR of the past while heralding the new age, let those bells ring loud.

You all are on to something here … and it’s going to be big.

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academia