Social Business: an Oxymoron?

“Doing well by doing good” is a much-touted but often elusive strategic goal for a number of social businesses. The wave of scandals plaguing the microfinance industry and the spectacular failure of the SKS Microfinance IPO last year did nothing to alleviate the perception that the triple bottom line simply does not exist. But, as Proctor & Gamble discovered with their Pur brand, often a philanthropic model for a subset of products and markets translates into great business overall. Moreover, a single large corporation can often trigger change on a scale unprecedented in the decentralized world of international aid.

Recently, several press releases have highlighted P & G’s 1.4 million dollar effort to provide more than 140 million litres of clean drinking water to drought victims in East Africa using its Pur technology. Pur is a water filtration technology that purifies water at the point of use either through a physical installed system or by stirring it into the water in powder form.

P & G is a market leader in its ability to build powerful consumer brands, and boasts over $80 billion in sales. However, during the pilot launch of the product, a lack of consumer awareness about the value and potential of the product (it was shown to significantly reduce the incidence of diarrheal fatalities in test markets) rendered sales dismal, and led the company to consider cancelling the product entirely (PDF).

P & G returned to the drawing board, and adopted a non-profit model involving donations and cost-recovery pricing to aid organizations. Although this meant that the firm did not make a profit on that particular product line, the initiative generated a significant amount of consumer and investor goodwill, which in turn drove up sales on other product lines.

This is not to say, however, that socially oriented business must remain relegated to a small arm of a larger for-profit company. Even within the PUR distribution model, P & G is exploring commercial (for profit) models in Guatemala, the Philippines, Morocco, and Pakistan. Therefore, even if a non-profit model is the only feasible solution in some developing markets, other apparently similar markets may have characteristics that make a commercial model feasible. Companies can do well by doing good; it just requires a different level of understanding of consumer needs and a concurrent push to close the education gap.

CK Prahlad captured this idea brilliantly in his seminal The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. He highlights several cases in which multinational corporations adapted commercial for-profit models successfully for their “base of the pyramid” customers – simply by understanding and engaging their customers’ needs. His book is part of a broader body of literature that highlights that business solutions that deliver both profit and social gains are certainly viable – they just require a little creative thinking.

Authors
  • Anonymous

    It seems that Corporate Social Responsibility (CSR) professionals are trying to establish industry standards and policies, but don’t seem to make much progress on that front. I feel that most of their actual progress involves civic engagement and funding for non-profit PR campaigns. Sometimes this is actually “good work”, sometimes it is just “greenwashing” …the line is always blurry and always leads to an interesting debate

    • Anonymous

      Interesting point, rooMB. I agree that it’s a really blurry line between good work and greenwashing. BP’s rebranding effort to “beyond petroleum” is the classic example: “according to one group of BP shareholders, BP spent more on their new eco-friendly logo last year than on renewable energy.” (http://www.corpwatch.org/article.php?id=219)

      But Monica seems to make a great point that businesses can make profits by *selling* sustainable products for an increase in revenue, rather than just appealing to a marketing change driven by a green image. Even though Pur was a non-profit initiative at first, they’ve built brand awareness to sell the product at a profit in other countries.

      Really interesting point, and I look forward to more discussion!

      • monicavarman

        Absolutely – sometimes even the most (seemingly) earnest efforts by corporations to affect change are driven by decidedly un-altruistic motives, as was the case with DuPont’s involvement with the designing of anti-CFC policy in the Montreal Protocol (http://onlinelibrary.wiley.com/doi/10.1002/(SICI)1099-0836(199711)6:5%3C276::AID-BSE123%3E3.0.CO;2-A/abstract). DuPont was the key patent holder for CFCs, and lobbied against anti-CFC regulation for years. Ultimately, public and political pressure for such regulation escalated at a time when the company had already developed an alternative product, and so DuPont was able to emerge as the good guy by aiding in the drafting of the Montreal Protocol. Ultimately, DuPont won both in terms of receiving positive PR for its efforts and by being the first-mover in a post-CFC world. The line is certainly blurry, but even in the world of questionable CSR efforts and marketing-driven image boosting, socially/environmentally desirable outcomes can dovetail with commercially desirable ones.

        Personally though, I do advocate for a model in which companies seek to engage with their bottom-of-the-pyramid consumers as customers – whether through a commercial or non-profit model – rather than view them as CSR projects. Ultimately, these efforts will be sustainable and mutually beneficial if corporations invest some time and talent in developing commercial models that are both profitable overall and socially responsible – as P & G is trying to do with PUR, and as a number of companies have done already (http://en.wikipedia.org/wiki/Bottom_of_the_pyramid, http://www.amazon.com/Fortune-Bottom-Pyramid-Eradicating-Poverty/dp/0131467506)

  • Pingback: wood workshop signs()

  • Pingback: Para Ma()

  • Pingback: The Highest Trend Setting Designed For Her Due To Kasper Suits()

  • Pingback: http://quizilla.teennick.com/stories/16519705/how-do-hid-xenon-light-bulbs-work()

  • Pingback: car locksmith minneapolis()

  • Pingback: car locksmith phoenix()

  • Pingback: emergency locksmith Queens()

  • Pingback: apartments Boston()

  • Pingback: Red Soled Shoes()

Top