June 18, 2014 — Thirteen months ago, after reading a draft of my book, A Better World, Inc.: How Companies Profit by Solving Global Problems … Where Governments Cannot, a colleague said to me: “Okay, Alice, you provide many great insights and observations, but what’s your big takeaway?” To answer his question I had to zoom way out, and when I did, the answer became glaringly obvious: Only global corporations have the resources, global reach and self-interest to build a better world.
Governments are limited by borders, and the international community has failed to come to binding and actionable agreements. Non-governmental organizations and nonprofits have made great strides in advancing the human condition, but lack the resources and scalability sufficient to make transformational progress.
Corporations have the vast financial, technological and human capital; the global footprint; and the profit incentives and market forces necessary to make change on the level needed as we face so many problems at once.
My conclusion about corporations rang true based on all of my research, but it startled me to make such a statement — it felt like some sort of heresy. We all know that too often elements of the corporate sector have been responsible for creating the human rights abuses, environmental degradation and economic injustices that plague the world today — and some continue to do so.
Yet, my research provided extensive evidence that some leading companies are finding solutions to the world’s most daunting challenges — and that these multinational corporations have the vast financial, technological and human capital; the global footprint; and the profit incentives and market forces necessary to make change on the level needed as we face so many problems at once, such as climate change, ecosystems degradation and poverty, and issues around education, health care and human rights. NGOs, nonprofits and governments simply do not have all of these.
That said, the evidence also shows that companies are only successful in global problem-solving when they partner with NGOs and nonprofits, and sometimes with other companies; engage effectively with stakeholders; recognize that sustainability is a matter for board governance; and commit to accountability and transparency.
For example, Allan Pamba’s work at health-care company GlaxoSmithKline — in partnership with telecommunications company Vodafone — is saving the lives of newborns by increasing the uptake of DPT vaccines in Mozambique. By registering pregnant women on the health ministry database when they deliver their babies, alerting the mothers via text messages about the availability and importance of vaccinations, and texting reminders when it’s time for each of the follow-ups for the DPT series, GSK aims to increase the uptake for the third dose from 76 percent to 86 percent. “Seven million children die every year before their fifth birthday, many of these from vaccinable diseases,” explains Pamba. “A 10 percent increase in vaccine uptake could result in hundreds of thousands of lives saved every year.” Through this mobile-enabled vaccination program, GSK and Vodafone are providing a sustainable business solution that involves community health-care workers on the front lines and engages mothers in taking responsibility for saving the lives of their children.
Pamba grew up in Kenya and worked in clinical care in the country for government services, mission hospitals and research hospitals. “As a child, I grew up in an environment where all I saw was donated aid,” he says. “I fell into a trap of ‘give me, give me.’ As a young physician I recognized that that doesn’t work. I woke up to the fact that for solutions to be sustainable, you need to earn and buy. That’s why I support this approach. It gives people their dignity.”
Companies are not doing good just to be nice. Global problem solving is good for business.
The GSK and Vodafone model is also good for business. “We are not a charity. We are a business,” Pamba says. “But we measure our success by the volume of medicines and vaccines that we get through into the 50 least developed countries, rather than the profit we make. Our target — set in 2010 — is to grow the volume fivefold by 2015. In the short time that we’ve existed at the company, we’ve become the fastest growing unit at GSK.” For Vodafone, the mobile company generates revenues through text message traffic.
So, as you see, companies are not doing good just to be nice. Global problem solving is good for business for three reasons. First, companies like GSK and Vodafone profit, while building their long-term value. Second, companies benefit by mitigating risks. Nike, for example, is investing in the development of a global supply chain of sustainable materials for apparel and footwear since it realizes that the natural materials it had been using in the past are becoming scarcer. Nike’s commitment to sustainable materials is vital for the long-term success of its business while also being good for Earth’s ecosystems. Third, companies benefit by reducing costs. Johnson Controls, for example, is retrofitting old buildings for energy efficiency — buildings such as the Empire State Building in New York City and the Inorbit Mall in Mumbai. Energy efficiency is cost effective for business tenants and so beneficial for commercial real estate companies; it’s also good for the world, especially since 70 percent of people will live in cities by 2050, and the building sector consumes 40 percent of the world’s energy.
Investors, consumers and employees are rewarding companies for their global problem-solving strategies. Not only are socially responsible investment assets estimated to be as high as $30 trillion, but even mainstream investors are recognizing the importance of companies investing in sustainability. According to the nonprofit sustainability advocacy group Ceres, mutual funds are showing record high support for climate change shareholder resolutions. And consulting firm Ernst & Young’s 2014 proxy preview shows increased investor attention to sustainability and board governance and accountability.
None of this is to say that governments and NGOs do not have a role to play in improving the world. Indeed, they also have essential functions.
Consumers care as well. Deadly factory fires and other horrendous human rights violations tarnish the reputations of companies, while goodwill is generated by companies such as Unilever, where the CEO Paul Polman has committed the company’s mission and strategy to sustainability. Employees, too, prefer to work with a sense of purpose and for companies that are doing good in the world.
None of this is to say that governments and NGOs do not have a role to play in improving the world. Indeed, they also have essential functions. Government needs to set regulatory boundaries and hold companies accountable for their business practices. NGOs and nonprofits have been and will continue to be keepers of the flame, focusing society on pressing issues, providing experience and expertise, and ensuring that all members of society are included.
But let me be clear: The biggest opportunity we have to solve our most challenging problems comes from multinational corporations, some of which are becoming the most powerful drivers in building a better world.
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Also relevant is David Korten's book, "When Corporations Rule the World." http://www.davidkorten.org/WCRW
Transnational corporations are large institutions with global power and many of them have done some good things. It does not follow; however, that they are capable of "saving the world." Many corporations have done (and continue to do) terrible things, including preventing governments and international organizations from doing good things.
This perspective, that only business can solve our problems, does more to placate those with money and power than to bring about lasting change.
"Problems cannot be solved from the same level of thinking that created them" (Einstein).
It is not heresy to claim that only corporations can save the world. It is ideology.
Profit is the sizing up of natural and human resources for private gain. If corporations operate, according to their mandate, to increase profit, then their mandate is to employ more resources for private gain.
Yet our problems are precisely caught up in the increasing exploitation of human and natural resources for private gain. Therefore, corporations to save the world will need to become public entities, so that their gains are returned to the commons. In that process, corporations will be dissolved.
The argument should be: corporations are the only entity capable of solving our biggest problems by disbanding themselves.
But that argument does not serve the self-interest of businesses or consultants. So we arrive again at the beginning: our problems cannot be solved by the same level of thinking that created them.
I am always suspicious of "absolutes", which the "only" makes of the statement in this title.
Yes, I can accept that some corporations can and will act in ways that will produce positive outcomes for some. However, as you have all pointed out, the fact is that this is not their primary motive. Indeed, ironically, the very celebration of the incidental "good" that these companies achieve, also serves to reinforce a value system that creates and/or maintains & compounds the negative lot of so many in our world.
If I were to mimic the absolute expression inherent in this article's title, I would say that "only" when leaders & others recognise that we live in a community, not an economy, and begin to operate from that premise will we make real headway in eliminating inequity, disadvantage & horror from our world.
At this point, as I show in my book, only SOME companies are leading the way by finding solutions to global problems--doing so in partnership with NGOs/nonprofits; by engaging with stakeholders; and ensuring that the board of directors is aware of the importance of sustainability to the company's future as well as the world's. The opportunity is the SCALE at which these companies are able to address the world's most daunting challenges--because of their vast resources, their global footprints, and the powerful motive of the marketplace. It's my hope that more companies will learn from these examples.
The many examples in the book are very compelling. I'd love to hear your thoughts after reading about them.
More ominous is the issue of externalities - unless values are placed on social and environmental displacement of costs and impacts, corporations are not going to step up to the plate.
I really think that seeking a solution from the very entities that lie at the heart of the problem is in and of itself naive and misinformed. I fear it comes from a kind of groupthink, corporate feelgood MBA type faux positivity.
I would truly love to be wrong on this but as a pragmatist and realist - as well as being an optimist - I feel that this approach, as sexy as it may seem, is founded on quicksand.
"Corporations will solve global problems if people and governments force them too" is more accurate, but still probably not terribly accurate considering that some externalities, properly accounted for, make some forms of business simply, totally unprofitable, and while we may be able to make people happier, we probably won't be able to do so through continued economic growth as a primary means (http://steadystate.org/).
Let us ponder for a moment the controversial figure by Costanza et al. 1999, that the un-internalized costs/benefits of "ecosystem services" are three times the visible global economy. I fail to see how corporations, who get many of these services for free, are going to "save" the world by deciding to properly pay for costs three times to total "apparent" worth to all of them. (Of course, among the many limitations of Costanza et al.'s number is that the true marginal value of all ecosystem services is infinity, since they are irreplaceable).
Even if we don't take that number as rote, thermodynamics dictates that all systems must have limits in their total size and the rate at which they can expand. Even without oversimplifying matters into carrying capacity, there is ample reason to think that, quite simply, humans as a whole are doing too much, too fast to be sustainable (that is, we are spending down our capital, which by definition is not a winning long-term strategy). How can corporations as currently conceived possibly be the solution when part of the solution, I'm sorry, inevitably involves selling less stuff to fewer people?*
How can corporations deal with the fact that more even distribution of wealth, or let's say, food (my specialization) would be 3-5X more efficient than making more food--that is, the USDA calculates that the amount of food needed to "trickle down" to the poor is 3-5X higher than the amount of food needed to produce enough food for everyone were it distributed evenly? And that we waste 30-50% of food *could* become an opportunity for a corporation, except that the cheap food model currently is good for most corporations and the most obvious ways to reduce waste would be to either increase food cost (and decrease volume sold) or to internalize costs of waste (which would either lead to consumers buying less as they waste less, or corporations charging more if their contribution to waste were properly internalized).
I would love to know how these questions are addressed--I do hope it's not through a simple disbelief in (sizable environmental) externalities, which a colleague recently told me is startlingly common among high-level economists.
*En toto. Consumption needs to rise for the poorest, but it is nearly certain that it cannot simultaneously and continuously rise for the middle class and wealthy, too, and it is likely that the needed decreases in consumption for the wealthiest will be larger than the needed increases in consumption for the least wealthy. Certainly, a major economic reconfiguration would be necessary which would be favored by few currently-existing corporations, yet offers only limited opportunities to break in and *grow big* for new corporations.
The real takeaway in Alice's book, and in this article, is that partnerships are needed to save the world; public and private together, with a focus on delivering common goals. Naturally each will have their own priorities, but that is the beauty and elegance of strategically finding the opportunities that lie within.