26 May 2016 In an organizational world looking increasingly at co-creation, co-production, and coordination, civil society and the business sector, despite their different voices and priorities, are exploring how they can work together more effectively.
Not so long ago, there were two distinct poles: commerce at one end, charity at the other. Each fundamentally different from the other, in terms of purpose and focus, in compartmentalized existence. If at one end there were wants, there were rights at the other… competition vs. cooperation, consumers vs. citizens, technocracy vs. politics, and market metrics vs. democratic accountability…
Yet, today, as both these paradigms, the market and social economies, are undergoing remarkable transformation, I see emerging a valuable opportunity for the twain to meet. Yes, self-interest, which in the most simplistic sense is what market economics is about, is forging linkages with the selflessness which is expected to lie at the core of the non-profit world.
In a 21st century organizational world looking increasingly at co-creation, co-production, and coordination, civil society and the business sector, with their diverse voices and priorities, are exploring how they can work together more effectively. Civil Society Organizations (CSO)-business collaborations are being seen as relationships that benefit both business customers and society, producing outcomes collaboratively that neither can produce on their own. Such synergies are producing the innovations necessary to add value to business products and, as well, address complex issues such as environmental degradation, elimination of poverty, and provision of basic necessities such as clean water.
The winds of change in both the market and the social economy are being driven by different considerations. For the social economy, there is the increasing belief that the infusion of business principles would improve efficiency and accountability, and reduce waste. For the market economy, there is a growing recognition that self-interest in extreme is detrimental to all players. There is broad agreement that the world will only be a better place if we balance social and economic objectives.
The answer does not lie in meshing the two economies to achieve a force-fit, as the failure of a number of high profile well-intentioned but flawed initiatives demonstrates. It probably lies more in getting each sector to recognize and respect the value of the other, and borrow the best from each other.
The social economy needs to recognize that calibrated and enlightened self-interest can create the incentive structures that will increase its own effectiveness. It also needs to accept its dependence on, and the value of, the time, money and direction given by the profit world – or those who have profited from it. It is undeniable that without sufficient self-interest, efficiency and effectiveness often flounder. And equally undeniable that, when self-interest takes precedence over social good, corruption can arise. The financial and organizational prowess of business can complement the ‘soft power’ of the social sector in mobilizing the community, for greater social good.
Equally, businesses need to see the social sector as a critical pillar of any economy, and acknowledge the transformative work of social entrepreneurs in leading the way to social impact.
Many corporates are now seeking to import ideas and practices from their profit world into the non-profit world. These range from simple corporate concepts of good governance and accountability to the more esoteric aspects of what has come to be called ‘philanthrocapitalism’ – the substantive use of business approaches to solve social problems. Examples of such philanthrocapitalism range from Bill Gates using his money to support economic incentives for companies and others to develop and implement solutions for areas stricken by disease and poverty, particularly Africa, to social innovators that effect large-scale social change, like Dr Mechai Viravaidya, Thailand’s Mr Condom. Social Venture Partners (SVP), the world’s largest venture philanthropy group, funds and mentors emerging non-profits to help them get to the next level. In an inspiring example of socially transformational Corporate Social Responsibility (CSR), the joint venture between Danone and the Grameen Bank in Bangladesh, apart from creating business and employment opportunities for the poor, also provides food for undernourished children in the country.
There are several successes of such synergies producing remarkable innovations across the world. CSOs understand communities better, have much greater trust with them, and can deploy low-cost structures and mobilize energy effectively. Further, as CSOs can articulate the interests of the poor, and do so in a way that makes sense for business people, and as well, understand the viability of a product from a community point of view, they are increasingly gaining a role in product development processes.
Each side can bring several important distinctive competencies, not conflicting but complementary, if the alliance is fashioned with care and mutual respect.
CSOs are effective in mobilizing volunteer energy around inspirational goals, whereas business is particularly competent at creating financial reward systems to get the desired results. CSOs are good at creating citizen-based networks for communities’ common good; whereas businesses are good at creating production networks that generate profitable outcomes. CSOs can help business nurture innovations that arise out of their distinct core competencies. While the CSO’s goals – most often some form of empowerment of identified groups or communities- are often seen aligned to those of the community, businesses’ goals are more often than not viewed by the general public with skepticism, due to businesses’ accountability to their shareholders and financial objectives.
All this points to the importance of CSOs and businesses remaining firmly grounded in their own competencies. If one becomes like the other, the very rationale for the collaboration disappears. The pivotal factor for success in such a partnership, as indeed in any successful marriage, calls for each partner to recognize and respect the other’s specialized understanding, structures and skills. This is as true for people as for organizations.
The capacity to collaborate does not come automatically. It has to be built, step by step. This includes understanding distinct goals and differences, building common vision, defining the outcomes that each party values, creating mutual commitment to achieve the goals collaboratively, and putting in place a management process to support the achievement of these goals.
Hopes are high in many quarters. A report on the ‘Phoenix Economy’ speaks of ‘a new economic order…and a new generation of innovators, entrepreneurs and investors (who are) accelerating the changes essential for delivering scalable sustainable solutions to the world.’ The report celebrates 50 organizations which have been effectively developing market solutions to the world’s most pressing social and environmental concerns.
Corporate India now understands that the enlightened long-term self-interest of corporations is a balanced approach to all its stakeholders. This means creating social value as well as economic value for its owners. It is important to embed this thinking across the spectrum, in enterprises both big and small.
At Tata Steel, which I had the privilege to serve for many years, the ethos of value creation for all stakeholders has timeless relevance, with the vision to strike a balance between economic value and ecological and societal value. While, in the initial years, Tata Steel’s social interventions were more as a ‘provider’ to society, where the community was given support for its overall needs, both for sustenance and development, the approach has shifted gradually, to making the company an ‘enabler,’ building community capacity through training programs, with more focus on providing technical support rather than giving aid.
Tata Steel’s intrinsic approach to business is that the wealth created must be continuously returned to society, smoothly melding the three elements – social, environmental, and economic – of society. Today, the company’s involvement in the social sphere encompasses vast geographies and spans a very wide range of social, cultural, educational, sporting, charitable and emergency assistance programs, through several institutionalized bodies.
Aligned with this ethos, I firmly believe that creating social value is not only the domain of social workers and the social sector, but also of corporations and the commercial world. As highlighted by The Economist, the potential for creating social value can be far greater with companies who have greater resources. Citing the example of Ratan Tata, who ‘may improve more lives than any social entrepreneur has done’ with the frugal innovation epitomized by the Nano car, The Economist pointed out that the greatest agents for sustainable change are ‘people, often working for large companies, who see ways to create better products, reach new markets and have the resources to do so.’
The long term sustainable answer to a just and kind society may thus lie in reforming the commercial world, along with expanding and enhancing the social world. In this brave new world, doing good, and doing it well, would be the guiding vision for players in both business and social organizations.
The article is an excerpt from the CII Foundation book ‘The Privilege of Responsibility: Perspectives from Corporate India’. The book has contributions from eminent industry leaders who have shared their thought leadership on themes of development, CSR and philanthropy.
The book covers issues ranging from the Trusteeship Model, Philanthropy & CSR as the sustainable way to SDGs, CSR economy & Creating Premium by Creating Value. The eminent authors, who are also the Trustees of CII Foundation Board (2015-16), have shared their outlook on corporate responsibility towards society, governing factors, the economy & business strategy of CSR, and the future of CSR in the country.
The book was brought out in April 2016 to commemorate five years of CII Foundation. CII Foundation, a trust set up by CII in 2011, works with member companies towards CSR implementation by channelizing efforts towards designing, developing and managing customized and high impact development projects. Know more on CII Foundation at www.ciifoundation.in
This article is penned down by Mr B Muthuraman, Vice-Chairman, Tata Steel Ltd and Chairman, Tata International Ltd.