In an article published in The New York Times in 1970, Milton Friedman wrote about “the social responsibility of business.” In his article, he explained his opinion that the only business’s social obligation consisted of “to increase its profits” Friedman characterized those who had the opposite viewpoint in the New York Times as “puppets of the intellectual forces that are undermining the foundations of a free social system” and their opinions are an “fundamentally subversive belief system.”
Friedman’s views on monetary economics prevailed in the final quarter of the 20th century and it is not an exaggeration to state that in the majority of developed countries they continue to be a key factor in the development of economic policies.
His opinions regarding corporate social responsibility however, seem to be less than ideal. Nowadays, more than 90% of large companies have programs specifically designed for Corporate Social Responsibility (CSR). Many CEOs discuss their organization’s commitment to a variety of philanthropic, employee involvement and other charitable initiatives whenever they can.
The limitations of altruism by itself
While this is certainly positive, it is not without reason that, as Friedman said “the business of business is business”. CSR is an excellent thing in the sense that it helps to improve business practices but the more significant chance for business is to discover ways to make use of their networks and their capital, their employees and their technologies to create efficient market-based, sustainable methods that can to improve society overall and the under-served or low-income populations specifically.
So long as CSR remains primarily charitable in its motives, it will never be considered to be a core to business . It is also unlikely ever to grow or solve long-term social issues.
Finding the most practical markets-based, sustainable approaches is at the root the concept of Social Innovation. They shouldn’t be an obstacle to the process of earning money and should be a supplement to it. They’re not an instance of corporate charity. They focus on the most important aspects of business strategy, for example, how do we identify new markets, design new products, and increase sales? How can we improve and improve the resilience of supply chains? What can we do to find fresh sources for talent? What can we do to increase our capital access? How can we create new partnerships that aren’t part of our existing networks to help us connect with a wider customer base?
The most difficult decision for the modern CEO isn’t whether or not to leverage the company’s assets and resources to create opportunities to foster social innovation. It is evident that their most important customers see this as an essential aspect of corporate management. The best talent, particularly the millennium generation are drawn to companies that take care of environmental and social issues, customers would like to purchase from these companies government officials want to develop tax and regulatory structures which encourage these companies even shareholders acknowledge that building brand names and reducing the risk of non-financial loss are key elements to maximize the value of their shares. The main issue is not whether or not to adopt social enterprise innovation, but how to go about doing it.
How do you achieve it
The new World Economic Forum study ” Social Innovation: A guide to achieving corporate and societal value” examines a variety of firms and is not focused on the question of why instead, but on the process. The study’s findings and case studies offer an interesting look at an array of real-life examples of how companies can implement social innovation. They answer questions such as how can opportunities be discovered? How can the company structure itself to maximize its chances of success and increase the chance of scaling? What is the loop of learning? What is the best way to measure success? What is the role played by partnerships?
One of the best ways to approach CSI is to think about the ways companies can leverage their capital access. I’ve spent the last 5 years in the UK Social Finance industry. I’ve witnessed firsthand the ways in which the imaginative use of capital investment can help large corporations stimulate innovation that is beneficial to society and profitable. They are able to invest in areas that are relevant to their daily business. As with any successful investment banker, they will utilize their core competencies, networks and individuals to improve the likelihood of financial success for their investors.
A great example is one great example is the Telefonica accelerator, which is known as Wayra. The program was originally created to fund innovative digital or mobile solutions to serve the company’s current or potential customers, the program was extended in 2013 to help the growth of socially inventive startup ventures. The partnership was formally known as Wayra UnLtd. partnership offered seed money as well as coaching and mentorship, and , perhaps, access to the global network of Telefonica of more than 600 startups and 60 partnerships spread across 17 countries.
Resolving a social problem was the primary requirement for granting the program. They have addressed important issues like how do increase road safety and decrease the number of deaths attributed to youngsters in the UK How do you assist parents in finding the best local school options for their children, and how can you create accessible technology that is accessible to the visually impaired and blind. After receiving initial backing from Telefonica numerous investors have raised significant amounts of capital. The company has gained from innovative concepts and insights, and, often, their financials have been more successful than those of the conventional commercial Wayra accelerator.
Centrica is a great example. Their CEO in 2011 challenged their top potential employees to think of ways of taking their existing CSR initiatives to a more advanced, more strategic and effective level. This led to the creation of IGNITE which is a social investment fund that invests in energy-related companies which provide new ways of sourcing and generation, supply and service of energy, particularly for people who are struggling with their bills.
Another instance is Barclays. In 2012, they established their Social Innovation Facility to catalyse social innovation across the various divisions. Recognizing that it can be difficult for business units to prioritize social innovation, the facility offers additional funds in addition to each line of business in order to encourage concentrate on innovative ideas and concepts that have social as well and financial benefits. The facility has enabled Barclays to help with initiatives that range from removing obstacles to healthcare access for the financially weak in Zambia and providing additional aid to financially struggling students from the US and collaborating together with Grameen and Care International to facilitate mobile banking to communities in Uganda.
The lesson that these examples demonstrate is that no matter what sector you are in – energy, telecommunications banking, or another industry – there are opportunities for companies to use capital and know-how to create a positive impact. These are strategic possibilities, not charity ones. They are not charity. They are investments of capital. The results aren’t only impacting the bottom line of the business, they impact the lives of the most vulnerable people in our communities.
Although Friedman might have been correct in his assertion that the purpose of doing business was business,, there are many different businesses around the world that are proving that this notion isn’t necessarily incompatible with the investment into Corporate Social Innovation. They are even proving this isn’t a “fundamentally subversive doctrine” but rather a way of conducting business that meets both the social and commercial goals of their various clients.