How can you ‘do good’ and maintain a successful and sustainable company? A recent survey by Fortune revealed that 44% of chief executives thought tackling big social problems should be integral to their overall strategy, writes Ken Favaro for Strategy+Business.
It’s an opinion that appears to oppose the view of Nobel-Laureate economist Milton Friedman, who in the early 1960s said that every business’s sole social responsibility was to grow its profits.
Favaro unpicks these two, apparently contrasting, views to stress the strong link between the necessity to be successful and the ability to ‘do good’ for your community or the wider world.
Understanding these connections is how you can make an informed choice about whether you will consider positive social impact when developing your strategy.
1) Be aware that in a competitive climate your customers and employees can choose who they buy from and where they work. Therefore, to produce a good strategy, your company needs to:
- know who its target customers are;
- offer products or services that customers are prepared to pay for; and
- have the ability to sell and deliver your promise of value.
A socially irresponsible business will eventually be brought down by public opinion but, equally, a socially responsible business cannot survive if it has a bad strategy.
2) Doing well means a company is already doing ‘good’ – if it is creating fairly paid jobs, providing taxes for government services, supporting retirement funds, making capital for investment, and wealth for philanthropists. This confirms Milton Friedman’s view.
“He argued that it’s the responsibility of government representatives – and the people who elect them – to set the guardrails for businesses, ensure they have level playing fields, help people who are left behind, and steer all members of society (citizens, companies, charities, churches, and global and local institutions) to work together on solving the world’s problems, social and otherwise,” writes Favaro.
3) Some leaders have demonstrated that doing good can be the road to commercial success. Customers know that when they buy a particular product or service they are also backing a social cause. For example, Fair Harbor makes some of its swimwear from waste plastic and whenever it sells a case of its beer brand, Patagonia plants a tree.
At Dave’s Killer Bread in Milwaukee, the owner Dave Dahl has a criminal record, as do more than 30% of his employees. He uses this truth to demonstrate that offering stable employment helps to turn people’s lives around.
Other, larger concerns, such as IBM and Microsoft, initiate in-house training programmes for deprived young people and give funds to local housing schemes.
The common factor is that by doing well, these businesses can ‘do good’ using the fruits of their success.
What you need to decide as an organisation is whether:
- you want to link your products or services to a specific social beneficiary, or
- you choose to invest profits in specific causes to boost perception of your company’s social responsibility, expand your customer base, stand out from the crowd or improve efficiency.
Favaro says “No” isn’t a bad answer, unless you could have said “Yes”. Either strategy is an opportunity to do good, whether in a wholly socially responsible way or to promote commercially success.