Purpose + Profit: Creating Shared Value vs Social Enterprise

In 2011, Harvard Business Review published the concept of Creating Shared Value, saying this about the need for business to create greater benefit for the community: 

"Capitalism is an unparalleled vehicle for meeting human needs, improving efficiency, creating jobs, and building wealth. But a narrow conception of capitalism has prevented business from harnessing its full potential to meet society’s broader challenges. The opportunities have been there all along but have been overlooked. Businesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face. The moment for a new conception of capitalism is now; society’s needs are large and growing, while customers, employees, and a new generation of young people are asking business to step up.

The purpose of the corporation must be redefined as creating shared value, not just profit per se. This will drive the next wave of innovation and productivity growth in the global economy. It will also reshape capitalism and its relationship to society. Perhaps most important of all, learning how to create shared value is our best chance to legitimize business again."

The opportunities had not been overlooked, however. Four years earlier , a 'Marshall Plan' proposal had been delivered to the goverment of Ukraine and published in a web magazine. It made much the same argument for a social enterprise development centre, calling on forward thinking businesses to collaborate.

It is almost impossible to overstate the need for social enterprise in Ukraine. The nation is plagued by widespread socioeconomic problems and deficiencies, with a host of disparate, haphazard, uncoordinated efforts aimed at solving them. In order to understand the overwhelming critical need for social enterprise and a formal national center to facilitate social enterprise, an operational definition for social enterprise is essential.

'Enterprise is any organizational activity aimed at a specific output or outcome. Once the output or outcome – the primary objective – is clear, an organization operating to fulfill the objective is by definition an enterprise. Business is the most prominent example of enterprise. A business plan, or organizational map, provides a reference regarding how an organizational scheme will operate to produce a specific outcome: provision of products or services in a way to create profit. Profit in turn is measured numerically in terms of monetary gains, the “bottom line.”

This is the function of classic capitalism, which has proven to be the most powerful economic engine ever devised.

An inherent assumption about capitalism is that profit is defined only in terms of monetary gain. This assumption is virtually unquestioned in most of the world. However, it is not a valid assumption. Business enterprise, capitalism, must be measured in terms of monetary profit. That rule is not arguable. A business enterprise must make monetary profit, or it will merely cease to exist. That is an absolute requirement. But it does not follow that this must necessarily be the final bottom line and the sole aim of the enterprise. How this profit is used is another question. It is commonly assumed that profit will enrich enterprise owners and investors, which in turn gives them incentive to participate financially in the enterprise to start with.

That, however, is not the only possible outcome for use of profits. Profits can be directly applied to help resolve a broad range of social problems: poverty relief, improving childcare, seeding scientific research for nationwide economic advancement, improving communications infrastructure and accessibility, for examples – the target objectives of this particular project plan. The same financial discipline required of any conventional for-profit business can be applied to projects with the primary aim of improving socioeconomic conditions. Profitability provides money needed to be self-sustaining for the purpose of achieving social and economic objectives such as benefit of a nation’s poorest, neediest people. In which case, the enterprise is a social enterprise.'

This business model was introduced to the UK in 2004, when impact in Russia was described in an inteview with a leader of Crimea's Tatars.

The same model had been deployed to delivered the 'Marshall Plan' proposal 

So are Creating Shared Value and Social Enterprise the same thing? Well not quite.

In an articlei for Guardian Sustainable Business Mark Kramer declared that "Corporations profit from solving social problems" 

In an interview we'd told Axiom News that “if a lot of emphasis is placed on financial returns, the usual suspects can and will get in, figure out to how strip out the social aspects of social businesses and keep all profits to themselves.”

In an earlier article John Elkington had argued that creating shared value overlooked the problems corporations created:

"John agrees with the central message of Shared Value about the power of business to solve social problems and increase profitability by aligning its commercial and social interests, but he raises several concerns. First, he claims that we do not acknowledge the values implicit within capitalism or its destructive force in the world, and second, that we overlook the much larger systemic issues that are at the root of the social problems that Shared Value would treat separately. He points out the risks of sweeping aside sustainability in favour of Shared Value."

Below the article you may see how welcome my comment was  

John Elkington had his own brand to promote:

 

The destructive forces ol capitalism in Ukraine were all to evident and leading toward an uprising. The 'Marshall Plan' concluded:

'This is a long-term permanently sustainable program, the basis for "people-centered" economic development. Core focus is always on people and their needs, with neediest people having first priority – as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether. This is in keeping with the fundamental objectives of Marshall Plan: policy aimed at hunger, poverty, desperation and chaos. This is a bottom-up approach, starting with Ukraine's poorest and most desperate citizens, rather than a "top-down" approach that might not ever benefit them. They cannot wait, particularly children. Impedance by anyone or any group of people constitutes precisely what the original Marshall Plan was dedicated to opposing. Those who suffer most, and those in greatest need, must be helped first -- not secondarily, along the way or by the way. '

In 2008 this was followed up with a letter to USAID and the Senate Committee on Foreign Relations, describing the extent of the problems which included creating profit from institutionaled children and a trade in fetal stem cells. We needed support for an anti-corruption network for local civic activists.

By 2009 an economic crisis had hit all of when our first presentation to the Ecomomics for Ecology conference was delivered. it conclused:

"Possibly this has escaped immediate attention in Ukraine, but, economists in the US as of the end of 2008 openly confessed that they do not know what to do.  So, we invented three trillion dollars, lent it to ourselves, and are trying to salvage a broken system so far by reestablishing the broken system with imaginary money.

Now there are, honestly, no answers.  It is all just guesswork, and not more than that.  What is not guesswork is that the broken – again – capitalist system, be it traditional economics theories in the West or hybrid communism/capitalism in China, is sitting in a world where the existence of human beings is at grave risk, and it's no longer alarmist to say so.

The question at hand is what to do next, and how to do it.  We all get to invent whatever new economics system that comes next, because we must."

In 2011 USAID partnered with the British Council to create their own social enterprise development project. We applied to be partners introducting the proposal. Eventually we were told that British Council partners were expected to make a financial contribution. The British Council is funded by the FCO and in turn funds the Guardian hub on international social enterprise. Thay might explain part of the hostility.     

The inevitable revolution came and by the beginning of 2014 at Davos, even the global elite were seeing a problem with capitalism. We hear the same arguments for capitalism with both financial and social return. It was chaired by the man who made social enterprise government policy and whose Faith Foundation is supported by donations from host Viktor Pinchuk

 

This isn't the end of it unfortunately. Now there's 'Marshall Plan' in the making which involves 3 British peer. Lords Mandleson, Risby an Macdonald.  It was Lord  Mandelson who in 2009 said his department were helping firms who help others. Now the focus is on helping those who help themselves.

None of this is social enterprise, which to some of us at least isn't about profiting from doing good, which Muhammad Yunus puts well when he says " It's all about others., nothing about me"