THE 21ST CENTURY IS PROVING A BOOM TIME for philanthropy, social enterprise and corporate social responsibility (CSR). Two of the world’s richest men, Bill Gates and Warren Buffett, are vying to give away their fortunes. Innovation is blossoming in clean-tech and socially minded businesses. And companies are increasingly boosting efforts in CSR as consumers demand more ethically sourced goods.
John Elkington, founder of CSR consultancy SustainAbility and bestselling author, says: “The willingness of people to help very much depends on their perception of the risk to themselves and the extent to which they can develop some degree of empathy. Television, the internet, foreign travel and issues like the tsunami have opened our minds to the fact that there are huge numbers of people who don’t have the capacity to live like people in the developed world do.”
The amounts people are willing to give have ballooned in recent years, spurred on by the generosity of a select few. Gates famously upped the ante with his fabulously wealthy foundation, which is aiming to give away US$3 billion a year by 2009, more than any other foundation anywhere.
Elkington says: “The new economy period was driven by a set of entrepreneurs. Bill Gates in the very early stages, and more recently [Larry] Page and [Sergey] Brin at Google. They made huge amounts of money very, very fast. Unlike the Carnegies and the Rockefellers they did not wait until they died to give it away, but did it while they could take an active interest and a role in the area of philanthropy and venture philanthropy.”
The former Microsoft chief executive is a prime example of a corporate hero who has left the business world in order to focus on his charity work. The hope is that he can foster the efficiency of the private sector in his foundation, which focuses on global health challenges.
Brin and Page remain at Google, but they are increasingly blurring the line between the for-profit and non-profit worlds. Earlier this year, the internet giant unveiled US$30 million in grants and investments to fund efforts to create systems to help predict and prevent disease pandemics, to empower the poor with information about public services and to create jobs by investing in small- and medium-sized businesses in the developing world. This came on top of previously announced initiatives to accelerate the commercialisation of plug-in cars and make renewable energy cheaper than coal.
A similar pattern can be seen across the globe. One of Europe’s hottest business executives of the 1990s, Percy Barnevik, has switched his focus from commercial interests to poverty relief. The former chairman and chief executive of Swiss-Swedish engineering group ABB, and former chairman of drugs giant AstraZeneca, quit the corporate world to found Hand in Hand International, which extends small loans to poor women, giving them the means to lift themselves out of poverty. In the five years since launching, the charity has spawned almost 500 mediumsized businesses in the impoverished southern Indian state of Tamil Nadu, as well as 100,000-plus family enterprises. Barnevik makes a point of stressing that he is simply applying strict business practices to his charity work.
These high-profile career U-turns have, in turn, spurred on a new generation of innovators and entrepreneurs seeking solutions to social and environmental problems. Their version of philanthropy is profoundly capitalist, with investment in disruptive environmental technologies and social enterprises to both make a profit and better the world.
Elkington says: “A growing interest in issues like climate change, and a growing frustration with the speed at which big multinationals can address these issues, has encouraged people to look elsewhere for solutions.” He has created an organisation to introduce innovators to big companies, policymakers and investors. Volans was launched in April with the aim to “integrate the worlds of social and environmental innovation with business-driven wealth creation”. Elkington adds that the organisation has offices in both London and Singapore because Asia is going to be the next big growth market for entrepreneurial solutions to these big issues.
Elkington believes the likes of Muhammad Yunus, who won the Nobel Peace Prize in 2006 for championing the cause of microcredit, have boosted the profile of social entrepreneurs around the globe. Yunus’ Grameen Bank has now formed a joint venture with French multinational Danone to sell nutritious food to the poor. This is part of a broader growing trend for major corporations to seek out partners in order to integrate CSR into their way of doing business.
C.K. Prahalad of the University of Michigan’s Ross School of Business, and Jeb Brugmann, a sustainable development specialist, highlight oil giant BP’s arrangements with NGOs to distribute stoves in rural India and Dutch bank ABN AMRO’s collaboration on microfinance in Latin America with ACCION International, an NGO that is itself beginning to develop a multinational business.
They wrote in the Harvard Business Review: “CSR started as a way for companies to gather intelligence about NGOs and manage their reputations. It has wound up providing them with the tools they need to pursue business opportunities in untapped markets.” These corporations have recognised the business need to focus on CSR and are increasingly formalising their activity in the area. More than 3,200 have signed up to a United Nations initiative known as the Global Compact. This was launched in 2000 after then UN secretary-general Kofi Annan challenged business leaders to join an international voluntary initiative to support universal environmental and social principles. But the scheme has been criticised for having no teeth. Companies need only to sign up to ten broad principles, which many subsequently ignore.
John Ruggie, the UN secretary-general’s special adviser on business and human rights, has conducted a major review of business and human rights with a view to drawing up international standards of responsibility and accountability for businesses. He reported to the Human Rights Council in 2007, but requested another year to assess “the major legal and policy measures that states and other social actors could take, together with views and recommendations about which options or combinations might work best to create effective remedies on the ground”.
“Asia is going to be the next big growth market for entrepreneurial solutions to a range of different social and environmental issues” - John Elkington
In the absence of definitive standards, companies are increasingly finding their own way of focusing on the so-called triple bottom line of “people, planet, profit”.
A 2007 report into corporate community investment, based on a study of more than 100 large Australian companies, says that: “business commitment, scope, focus and diversity of corporate community investment activities in large Australian companies continue to increase and deepen. Corporate community investment continues to progress from an activity on the periphery of business to a core business activity.” The study notes that 93% of companies surveyed were driven by the business case for investment in the community. Christine Charles, global group executive of sustainable development at Newmont Mining, has said that short-term investors often considered CSR as anathema to profitability because a company spent money without any direct returns, but long-term investors recognised it as a sign of intelligent foresight.
At a conference on corporate responsibility and sustainability hosted by the Committee for Economic Development of Australia in Melbourne earlier this year, Charles said: “I think one of the things shareholders want to look at is, do you (the company) understand the environment you are in? Can you get projects permitted? Can you have sustainable operations? And they are all things that are at the core of corporate responsibility.”
Other motives cited in the report include building a positive brand reputation. Westpac, for example, uses its CSR policy as a marketing tool, notably with its “Every generation should live better than the last” campaign. It is not clear, however, whether this focus will last under new chief executive Gail Kelly.
A spokeswoman for the bank said in a statement: “Sustainability is and will remain a core part of how we do things at Westpac. It is central to how we go about our business. [It has] delivered the bank a very meaningful competitive advantage that will continue to be an integral part of our brand proposition going forward.
“But there is no doubt that under [Kelly], Westpac has a heightened focus on customer service. So it wouldn’t be a surprise to see… aspects of this reflected in our marketing.”
Companies said they were also strongly motivated by staff demands for them to be involved in these activities. Rob Hunt, the managing director of Australia’s Bendigo Bank, cites the less tangible concept that healthy businesses thrive only in healthy communities.
“We feel the [community] investments made are enabling us to produce much improved outcomes for all stakeholders, while still providing an excellent platform for continuing the creation of shareholder value on a more sustainable basis.
“Because of the strong commercial base to the model, we are confident it not only generates a sustainable solution, but also provides a strong source of local revenue – revenue that then can be leveraged, match funded, or directed to substantial community projects, with the resultant multiplier benefit to the local economies.”
Ultimately CSR may become so fully entrenched in business that companies will no longer need a head of CSR. Elkington says: “It’s rather like quality; in the end it becomes part of the way people do business. But the vast majority of companies in the world are not yet aware of most of these issues, or even dealing with them.
A fraction of companies worldwide are doing something as basic as annual sustainability reporting. So huge rafts of new companies are going to come into this space.”
But he is pragmatic about the short-term future of the sector. “We are headed into a recession that is going to go far deeper than people realised. We are closer to the ’80s than people think we are. At that time what suffered among many other things were the departments that companies had set up to deal with environment, health and safety. The pressures didn’t go away, but the departments did.
“Exactly the same pattern will be seen in relation to CSR. CSR is going to go on a global diet over the next few years. The people doing that sort of work in companies will be under pressure.”
“A fraction of companies worldwide are doing something as basic as annual sustainability reporting. So huge rafts of new companies are going to come into this space.” - John Elkingto
As part of the organisation’s CSR initiative, CWT India, along with sister companies in the worldwide group and their employees, donated significant sums of money for the rehabilitation of the tsumani-affected people in India. CWT India – in collaboration with the Confederation of Indian Industry (CII) – created two Cold Storage fish auction centres for the tsunami-affected areas of Poompuhar and Parangipettai in Tamil Nadu. This rehabilitation and reconstruction project provides long-term assistance to people in the affected area.
The programme provides displaced local fishermen with a common facility to store and auction their fish, as well as giving the homeless fishermen a consistent and profitable livelihood. The Project started in February 2006 and was completed in April 2008.
