'Dirty’ Profit Views Limiting - Costello
27 November 2013 at 9:58 am
The growth of Creating Shared Value (CSV) in Australia could be hindered by discomfort with business profiting from social outcomes, experts have told the the Creating Shared Value conference in Melbourne.
It was a common theme that emerged during a panel discussion facilitated by NAB’s Paula Benson which gave Not for Profit leader Tim Costello, Shared Value scholar Marc Pfitzer, CSR Officer at Hitachi Australia Sarah Coburn and Tomorrow’s Agenda Research Director Les Hems the opportunity to share their views on issues in the shared value space.
CSV, where intent to address social challenges is embedded into core business strategy, provides business the opportunity to generate profit through creation of social value – a concept met with unease by some.
“There’s still the lack of comfort in Australia that’s its okay to make a profit,” Costello said, representing the Not for Profit sector.
“There’s suspicion as if making profit is somehow dirty…yet we’re all out here asking those who have made profit to give to us!”
Hitachi’s Sarah Coburn compared those Australian attitudes to CSV to those she had witnessed in North America.
“For Australia, one of the biggest shifts in thinking that we need to grasp on the social side is that it’s okay to see business benefit and make money out of social impact initiatives,” she said.
“Australians are a little more hesitant in that area.”
Marc Pfitzer emphasised that reception to profit was a key to moving forward.
“In this context, profit is good, profit is our engine of scale. If we recognise that, that we share common interest in these social outcomes … then we’ve got the basis for co-creating shared value,” Pfitzer said.
Costello acknowledged the difficulty in aligning beliefs surrounding the social issues and approaches that are most worthy of attention.
“Shared value certainly assumes shared values, and there’s where the discomfort continues,” he said.
“There is debate going on about how much shared value is actually shared values.”
“The choice of those social outcomes is a values choice…we cannot assume that those outcomes are valuable or valid for everyone,” Pftizer countered.
“We’re not imposing social value creation, we’re driving social outcomes cost effectively.
“It takes however shared values indeed to drive the shared value agenda forward… fundamentally we have to put the planet and people back in balance.
“We need to break those boundaries and there’s no other way we’re going to solve complex problems.”
Costello spoke of the role corporates could play in changing the world in collaboration with NGOs.
“The millenium development goals were a real watershed for this shift,” he said. “The engine [of change] actually is business.”
Yet he flagged potential hurdles to co-creation of value.
“There is push back. Everyone in the non-profit sector recognises that we are simultaneously investors and producers and citizens and consumers … the push back is that there are a number of organisations … assaulting Not for Profits’ international agencies, saying ‘you’ve lost your radical soul getting into bed with government’ and saying corporates aren’t actually where change comes from,” Costello said.
He also spotlighted corporations law and the restrictions it imposes as an ongoing driver of the suspicion surrounding profit-making in the Not for Profit sector.
He spoke of corporates being criticised by shareholder representatives in the wake of the tsunami for taking action outside their “job”, perceived to be merely distributing a dividend with which shareholders would decide what to do.
Pfitzer was confident CSV-related successes could prove wrong for those people critical of the social role corporates could play.
“We’re not asking them not to make money – [money] is one of the great drivers of innovation. When we challenge it and say we need to meet a certain return we essentially are putting ourselves under pressure to continue innovating and delivering in cost effective ways – that is the power of business.”
“Profit created by advancing social condition is inherently superior profit.”
The conference, hosted by 3 Pillars, Net Balance and NAB, followed the inaugural event held last year.
Thank you for the interesting discussion. Something that may benefit the above is to actually move away from the term 'Not for Profit' which for many many people is extremely misleading. Unfortunately it is interpreted by some quite literally which is not the case. As we know, the 'Not for Profit' only refers to how surplus funds can be distributed (ie profits cannot be distributed to shareholders or members). A Not for Profit must make a surplus or profit because otherwise it will become insolvent like any "for Profit" organisation. Certainly there can be discussion about the scale of surplus or profit but I suspect even that becomes to a degree moot if the following change were taken up. I know that there has been talk of changing the sector name to "For Purpose". Making such a change, I suspect would have many positive consequences for not only the above discussed issue but also the quality/diversity of people attracted to the sector.
There are three basic problems which stem from the argument outlined in this article: 1. Culturally in the sector as well as in the general public, people believe the term 'not-for-profit' means you can not make money. 2. Organisations do not understand the competitive advantage they have over business and how reinvesting money into their organisation adds value to clients. It is not always about offering the cheapest or free service to everyone. 3. Business can get a lot from supporting not-for-profits but they should not try to do the 'social' work themselves. We all need to recognise the tremendous working being done by organisations with a view to their expansion rather than going off on your own. There is a way all this can work, but the changes must come from within the NFP sector first. The risk is otherwise they will be over run by businesses who for all their 'social good' and 'moral drive to add value to the community' will always be beholden to their shareholders. The trick is in showing both parties how it can work for them. The answer is simple when you take it step by step and work on solid foundation, understand how everyone needs to benefit then provide the outlets for success. I have spent some time developing a framework which will be published in my book next year.
here is an interesting concept on changing the way we fund change – http://profitforothers.com/blog/changing-the-way-we-fund-change/ …