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Doing good makes good business sense

14th September 2015 By Philip Green in Small Business News

Throughout time, civilization has distinguished subdivisions of economic, political, and social activity – in other words – business, government, and society.

Although the interaction and interrelation of these three aspects has evolved over the centuries, the role of business in society has increased in priority on the agendas of nearly every CEO and Board in recent years.

We can look to history to understand how and why the role of business in society has evolved from a charity model to a complex system of shared value.

Pre industrial revolution there was little impact from business or government on societies problems; a deep sense of paternalism drove charitable activities to tackle poverty.

By the 1800’s the industrial revolution created social problems on a new scale; the government of the day were not equipped to respond. Entrepreneurs like John Cadbury, Robert Owen and Léon Harmel emerged, solving the problem of feeding, clothing and employing a great number of people, trying to improve the working and living conditions of the workers and their families.

In the 1900’s as socialism and the trade movement the government realised it had a role to play and the welfare state emerged.

By the 1970’s the economy was struggling and the conservative government of the day pushed back on benefit dependency, limiting state involvement to what it could afford.

In the aftermath of the riots in Liverpool in 1981, business leaders started a movement that would begin to understand the complex relationship between business and society. Poverty, riots, and deep unrest – none of this was good for business.

Although it is a fundamental reality of business to make a profit by providing products and services that satisfy human needs, it is the concept of sustainability and ‘how’ business makes their profits that requires businesses to look beyond their bottom-line profits and consider their environmental and social impacts.

This concept of “shared value” rests on the premise that companies must connect business success with community success in order to achieve a value that is even greater than profit alone.

By connecting success with societal improvement, companies innovate to serve new needs, gain efficiencies, create differentiation, and expand into new market opportunities.

When this happens, the unlocking of business innovation creates sustainable success. The profitability question for business becomes not ‘how much’ but ‘how sustainable’ is our growth.

Recent years have seen another powerful dimension come into play, which is pushing business to understand shared value even more. Social Media and the instant scrutiny of business by the public give business leaders nowhere to hide.

There is yet another change happening right now in this journey from philanthropy to shared value – the rise of the social entrepreneur and the scarcity of resources means society now demands fair play from business – it’s not something to be handed out when times are good but an essential part of any business leaders strategy for success.

As a business leader myself, I know doing good and making responsible decisions makes good business sense. I have seen the impact of shared value materialize in the Profit & Loss account with contract wins, reduced staff turnover, increased customer loyalty and efficiency savings.

The choice is not sustainability or profit, but an understanding that sustainability actually enhances profit. This is the future story for businesses role in society.

Philip Green
About the Author

Philip Green

Chair of Trading for Good

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