One of the most famous quotes of business in the 20th century comes from Nobel Prize Winning Economist, Milton Friedman, “The business of business is business.” As a leading conservative economist, Friedman believed corporations should largely be left to pursuing profit, which would lead to a social good, as then they would hire more people, pay more taxes, and invest/save their profit.
This approach to business has led to some of the highest inequality since the great depression, with the top 1% controlling more than 50% of global wealth, many environmental challenges, and an increasingly disenfranchised workforce. Despite these enormous disruptions, there is an increasing push by key leaders in the business community, government, and nonprofit sectors to increase the role and positive impact of business. Business leaders are increasingly talking about the triple bottom line that business needs to pursue: profit, planet and people. That is a business needs to make money to survive, but that at the same time can have positive impact on the planet and diverse stakeholders.
Business leaders, from Richard Branson of the Virgin Group, to Paul Polman, CEO of Unilever, to Arianna Huffington – all members of an amazing group, the BTEAM – are uniting to push for “a better way of doing business, for the wellbeing of the people and planet.” A global movement of over 1,800 Bcorporations in nearly 50 countries has emerged, creating a standard for a “new type of company that use the power of business to solve social and environmental problems.”
Is business for good a sound development practice or another PR gimmick?
What does this all mean for the international development and social change community? There are four key lessons I would like to highlight below.
1) We cannot charity our way to meeting the Sustainable Development Goals – The total cost of achieving all the SDGs is estimated to be greater than USD 30 trillion. Over the past few years, Official Development Assistance has been around USD 130 billion according to the OECD, while foreign direct investment in developing countries is over USD 600 billion per year. Thus, the world needs to look at business as a key way of making significant progress on the SDGs.
2) There is a push for capital for good – While many are still pursuing the highest return on capital without regards for the negative social or planetary impact, there is an increasing push of using $ for social good. The range of vehicles is ever growing, and include socially responsible investing, impact investing, and social impact bonds.
Some of the world’s leading financial institutions are moving into this area – including JP Morgan – as a way to combine profit and mission. In addition, many leading development organisations are setting up their own incubators, social investment funds to explore innovative ways of financing or growing capital for their work.
3) People need jobs – According to the World Bank, over the next decade, the world will need to produce 600 million new jobs to keep pace with the entering global youth workforce. While development actors and governments have a key role to create an enabling environment, it is largely the private sector that will need to take the lead.
4) The Era of Innovation and Disruption is here. Adopting a more market-based approach (in the right conditions) can help generate long-term funding and impact.
It is clear that there is a great era of change and disruption coming in development such as direct cash transfers, new financing tools and mobile access for real time communication with beneficiaries.
In short, business has tremendous potential to have a positive impact on the world. This is not meant to ignore its negative impact as we will always need civil society organisations (CSOs) to hold businesses accountable, as a watchdog, and to seek to prevent harm. But business as a force for good is growing. CSOs need to be part of this process, to explore how to develop new forms of revenue, business operations, partnership and innovation as a way to scale and sustain our impact.
PCDN is a social enterprise connecting the global social change community. It has over 36,000 members in over 180 countries. PCDN is based at leading business incubator 1776 in Washington, DC.