Caron’s comment: can profit and social change mix?

March 9, 2015 at 15:57

I recently attended an interesting seminar on social ventures. The presenters argued that the legal construct of a venture should be irrelevant, and that it was the organisation’s ability to bring about social change that mattered. Time constraints prevented a detailed exploration of some of these fascinating avenues, so I’ve been reflecting on them ever since.

The one that particularly stuck with me was the statement that if you can get corporates’ strength focused on social good, they are “arguably the best vehicle for social change because of their often plentiful resources and their ability to innovate”.

Businesses as a “force for good” is not a new concept. There have always been entrepreneurs, such as the late Anita Roddick, with a strong values-based approach to business. But increasingly we are seeing businesses (perhaps encouraged by politicians) entering the public and social arenas without their motives being clear.

I am no business basher. I do not see profit as evil, but I do believe that “motive” in this context is very important. This isn’t all about resources and innovation, it is also about commitment to those in need. If your drive and legal duty is to make a return to shareholders, however nice the social change element may be, it is unlikely to trump the imperative of profit.

The pursuit of profit can also have a negative effect on competition. For instance, what if a company is temporarily accepting risk and loss in order to corner a market? What if such practices, instead of driving innovation and change, actually narrow the options by killing off other organisations?

Meanwhile, there is an unhealthy relationship between profit and social change. On the one hand, it seems acceptable for a business to generate a return if it saves the public purse and delivers social change (and I’m afraid I believe it’s in that order of importance). However if a socially driven venture happens to make money on the back of delivering social change (including paying staff decent salaries), this is somehow obscene.

Size matters?
Businesses’ “plentiful resources” mean they can often be very large, and this is another way in which you might argue that they are the ideal social actors. Charities are frequently told to “scale up” and that “economies of scale” are the Holy Grail, offering the perfect balance between efficiency and effectiveness.
Maybe that’s true. Maybe we need to accept that it could be better to provide for the masses at the cheapest price rather than accommodating the niche or the marginal. That it’s better to help the many than attempt to help all. And indeed, sharing resources can be beneficial too (if you can get around VAT challenges). However, while we must be willing to entertain that concept, we shouldn’t kid ourselves that scale equals efficiency any more than small equals quality.

Overall, the lines are blurring between the sectors and, as long as social change is the primary driver and profit is secondary, who cares what the legal construct is? Not me. But it must be in that order – the alternative leads to exploitation, mediocrity and marginalisation.

Caron Bradshaw, Chief Executive, CFG