A lot has been said and written about whether corporations can or should “save the world.” The world does not need to be saved, so to ask if corporations can save the world begs the question. The “planet” does not have education, health or environmental problems, it is people who lack proper education and health care systems, and suffer horrible natural and man-made disasters. Should corporations invest in finding solutions to these socio-economic problems? Definitely.
Corporations should not lose sight of their primary reason for being in business – to generate profit by providing great products and services safely and efficiently. Companies that are earning profits have the cash to invest in solutions to these problems as well as in finding preventive measures. Successful companies contribute more than just philanthropic donations to programs; they create employment opportunities that can lift people out of poverty and dependency. As the proverb says, “Give a man a fish and you feed him for a day, teach him how to fish and you feed him for a lifetime.”
BP is frequently held out as the poster child for corporate social responsibility gone wrong. BP neglected to safely and efficiently operate its oil producing business; instead it diverted management attention and millions of dollars toward image campaigns. Corporate responsibility should not be blamed for BP’s failure. It was corporate irresponsibility that led to the neglect of the company’s core business. This neglect is indicative of a deeper problem – management either never understood or else forgot the reason for being in business. It is possible – even necessary – for corporations to have stellar balance sheets as well as invest in solving socio-economic and environmental problems.
Ben and Jerry’s, the Body Shop International, and Tom’s of Maine have shown that operating profitable businesses makes it easy to invest in social issues and vice versa. “Main stream companies” such as Microsoft, American Express, and Pfizer have a track record of contributing to programs that provides education and health services for the poor. Disasters such as September 11th terrorist attacks have always brought about increased giving by individuals as well as corporations. What the drive-by media and celebrities have done is turn private funding of social and environmental programs into a public display, and elevated the pet peeves of certain individuals into international issues, for example, global warming, animal rights versus individual rights, and nature worship.
Smart business owners know that investing in the communities where they do business or plan to do business is simply good business sense. They also know that destroying the infrastructure of an area can wipe out an entire market. But not all business owners are smart or forward-looking. By the same token, a community of social welfare recipients cannot sustain a growing for-profit business, which explains the dearth of businesses in poor neighborhoods. Consumers will not live voluntarily in areas where the drinking water is contaminated and the air is over-polluted. Thus it’s in the best interest of corporations to assume some responsibility for sustaining viable business communities by contributing to the education and health of their consumers.
There are several ways to accomplish this and the ten suggestions outlined in the article are excellent. However, there should be a dividing line between a corporation’s core business and its philanthropy. The primary focus of corporations is to develop and market products and services that earn the highest possible profit. By accomplishing this, the corporation generates the cash flow that makes it possible to invest in philanthropic issues.
Then there’s Steve Case’s “sector building” model, in which for-profit businesses are created that seek solutions to social and medical problems that would otherwise be handled by non-profits or government. The co-founder of AOL is “trying to blur the lines” by moving philanthropic projects into the for-profit sector. If he succeeds, this new business sector would cause some non-profits to close, but it would be good for the economy in the long term. This initiative would hopefully reduce the amount of money that government gives to non-profits. These philanthropic profit-generating businesses will have “recurring revenue streams.” This is a better strategy than having the government fund these programs from a seemingly bottomless pit with money extorted from individuals and businesses, and borrowed from the privately owned Federal Reserve Bank.
Social Welfare should not come from government, as stated by Tom Borelli, senior fellow at the National Center for Public Policy Research, nor should corporations be coerced into “saving the world.” And not because “companies are ill equipped to tackle the world’s problems”, according to Borelli, but because there are no current corporations whose core business goal is to provide solutions to the world’s social and environmental problems. Steve Case’s venture aims to fund and create for-profit companies that would focus on finding solutions to these problems. The private sector is equipped to find solutions, since most of the creative and financially-savvy people are in the private sector.
Corporations have always contributed to social welfare programs – both voluntarily and involuntarily, and they will continue their philanthropic giving, regardless of whether it is called “corporate social responsibility”, “corporate responsibility”, or “corporate citizenship.” But corporations that act irresponsibly by diverting their primary focus of attention from their core business responsibility to “trying to save the world” will ultimately fail – and deserve to fail.
Tags: social welfare, social welfare program