Yesterday I took part in a live debate on social enterprise and CSR on the Guardian Social Enterprise website – happily coinciding with an article of mine they’d kindly published. I was joined on the panel by, amongst others Temi Odesanya from Social Firms UK, Marcus Jamieson-Pond, an experienced CSR professional and founder of Convergence Network and David Connor of Coethica and 3BL Media.
Temi and Marcus I know – they both do great things and I know our philosophies on these matters are closely aligned. Marcus, in particular has been very receptive of the concept of shared value supply chains. In the debate i suggested that “at best, [shared value supply chains] could be like outsourcing your entire CSR department and not paying for it”. To which Marcus replied:
“Perhaps that’s the answer? I was talking to Acre resourcing this morning, who said that there is something in the air and that maybe in 5 years time CSR roles will have disappeared. Going back to the point of cash is king – if corporates were told that they could strip out the overhead of their csr team and programme and deliver it through the efforts of those people providing services, I suspect you would be trampled in the rush to sign up.”
Temi, meanwhile, pointed me to this great report from Wates, one of the true poster boys of really living the Shared Value Supply Chains ethos.
But it was David that directed me to perhaps the most interesting piece: “The Single Bottom Line” by Daniel Altman and Jonathan Berman from Dalberg. Lots of good stuff in there, along the lines I’ve been discussing in this blog – namely treating all social activity undertaken by the company as contributing ultimately to their financial bottom line and arguing that “the single bottom line keeps companies doing what they are good at and improves the overall efficiency of investments in society’s wellbeing”:
“Furthermore, a return to the single bottom line does not imply that companies’ involvement in activities that create social benefits will diminish. On the contrary, we argue that these activities will become more common as companies make a case for them in terms of the single bottom line.
…Using the single bottom line will help companies to avoid misallocating resources and, with fewer unproductive projects on their balance sheet, likely increase their appetite for activities that create social benefit.
Using the single bottom line also makes investments that generate social benefit more sustainable. If companies view social initiatives as cost centers rather than contributors to profitability, then these initiatives are likely to become procyclical, being cut in downturns and then reinstated when balance sheets are flush again. Their budgets will be arbitrary rather than being linked to a rate of return. As investments expected to be competitive and profitable, by contrast, social initiatives will enjoy more durable support from executives and become a core part of corporate operations.”
This all makes intuitive sense and actually is arguably closer to my interpretation of ‘Shared Value’ than Michael Porter’s version. I want businesses to be able to focus only on the single, financial bottom line. And for social businesses in their supply chain to offer social value that contributes to it. Using the Dalberg approach allows businesses a means of quantifying the value social suppliers offer – and social businesses a clear sales message.
But as pointed out in this very fair critique – there’s quite a major caveat in all this… the need longterm reporting and incentives.
“Executives targeting profitability with a sufficiently long time horizon will make investments that generate social benefits because these investments serve the interests of their companies… When executives’ time horizons are sufficiently long, social benefits will arise automatically from these investments.”
This, still, is the overarching sticking-point with all attempts in this field. Time horizons currently simply aren’t sufficiently long.
They cover this by saying:
“Despite the current slavish focus on quarterly earnings reports, a company’s market capitalization still represents – in theory – the expected value, in today’s money, of all of its future profits. Under this conception, embraced by textbooks and investors (especially institutional investors) alike, a big change in profits some years into the future might be expected to have the same weight as a small change in profits today. In other words, the time horizon for a company’s decision-making should be infinite.”
But is that REALLY the case?? They mention Nestle and AXA who only publish results annually – but I’m sure the internal reporting and incentives are still short-term.
The single bottom line approach again highlights the debate around businesses profitting from social value. This came up again in the Guardian debate. To my mind, this philosophy – that it’s somehow immoral (as an individual or business) to profit from delivering social good – is what drives large numbers of social businesses to the point of bankruptcy and also causes big businesses to deliver CSR initiatives that are completely unaligned to their corporate mission.
Even Wates in their work insist on the social enterprises they work with be constituted as a non-profit-distributing organisation…. It must make their goal of having strong, resiliant social businesses in their supply chain harder to achieve.
Shared Value Supply Chains 