Michael Porter is a Harvard Business School professor and director of the Institute for Strategy and Competitiveness. He is a renowned writer on economics and business strategy, with over 18 books published! He founded The Monitor Group, now part of Deloitte. His theoretical proposals on shared value or his Five Forces Analysis have made him a world reference on social entrepreneurship and corporate social responsibility.
Old School Business
I don’t know if you have experienced this, but I constantly hear about how businesses thrive because they hurt, destroy and create problems on the social framework. I don’t have to think hard to find examples that back up this theory: in Spain we have encountered several cases that seem to point out how companies grow and become incredibly profitable when they “have no heart” and don’t mind creating or contributing to social problems (need examples? here and here). We can point out environmental pollution, human rights violation, precarious employment or social injustices as consequences of these business malpractices, but we don’t usually talk about issues like these as challenges to overcome through good business practices… or do we?
Michael Porter puts his finger on the problem on his Ted Talk: The case for letting business solve social problems. And no, he’s not talking about NGOs or charity; we’re talking about companies that are profitable while solving urgent social issues, not creating them. Porter examines, in a subtle yet blunt way, the dominant capitalist model: short-sighted, obsessed with short term benefits, ruthless, oblivious to social responsibilities. He shortly explains the duty separation between government and businesses: the first one is in charge of fixing social problems with the money that the second one generates. So, what happens when there is not enough money to solve social issues on the long term? What can we do when the government, charity or NGOs don’t create enough impact to solve those social issues that are urgent?
New school business
What happens then, according to Porter, is that we must rack our brains understanding and solving social problems from a profitable business ecosystem. The model where non-profit organizations or charities face social issues alone is one that we already know, but Porter remarks that their efforts don’t go far enough, or fast enough, to create real long-term change on the concerns they try to resolve; they don’t have enough resources, they are not profitable to be sustainable, they are not scalable.
The resolution of these urgent social matters tends to fall on governments and how they manage resources. Porter describes how governments or NGOs solving these problems creates a lot of social value but very little economic value. To the contrary, when companies create social problems they generate a lot of economic value and very little social value.
The key is, of course, balance: generating an equal amount of social and economic value. How do we do that? Through social entrepreneurship.
Social entrepreneurship can create a tangible impact in communities, while solving social urgent problems using a business model that is profitable and scalable. This is no fairy-tale: Porter calls it shared value. These projects are born as a reaction to the friction in the businesses-communities-government relationship, and they work to generate the maximum amount of value for themselves and for their contexts, sharing the responsibility of resolving social issues with public entities. It’s not a fantasy and we currently see social entrepreneurs fighting to prove that a new way of doing business is real, and a shift in perspective in modern capitalism can be a turning point and a way to stand out. Some examples?
- Proximity Designs: From Myanmar, this social Project develops innovating and low Price products designed to increase agricultural productivity in rural areas. They work hand in hand with ethnographers, designers and rural communities to develop these products: from solar panels to irrigation structures. Furthermore, the offer financial and energetic consulting services for farms, they promote infrastructural project generate from within the community and they even offer small loans.
- Closca: Through an innovating design, this Spanish Brand offers a helmet designed for urban cyclists: collapsible, light, safe and stylish. With the intention of promoting cyclist safety and the use of this eco-friendly transport, Closca has managed to make the number one helmet for city cycling safety and a referent in eco transport as a life style.
- Kuorum: This Company brings citizens and politicians together thanks to a digital platform where politicians from all over the world can share their projects and start open conversations.
- TuuuLibrería: : In Madrid, Salamaca and Barcelona, this Project repurposes books and gives them a second life. They encourage book exchange and the renovation of old editions with an open pricing model: you decide how much the books are worth!
- Mensos: Using bikes to transport urgent packages they reduce CO2 emissions all over Madrid. The believe in bikeshipping as an efficient, sustainable and viable business model.
- Living Goods: This company provides health-related goods: water filters, anti-malarial drugs or fever, or solar lights. Following a similar model to “Avon” they make sure their products reach the people that need them directly, creating social networks within communities that earn money operating as distributes.
Interested in reading more on social entrepreneurship? This list is excellent to get to know Spain’s social businesses ecosystem. Explore these two platforms to keep learning on the matter: Stanford Social Entrepreneurship and Ashoka.
- Forbes: How today’s young people Can Solve Global Development Challenges; Adedayo Fashanu.
- HBR: Creating shared value; Michael Porter, Mark R. Kramer.
- Forbes: The Rise Of Social Entrepreneurship Suggests A Possible Future For Global Capitalism; Skoll World Forum.