Dear DK

I think that the concept of CSR, (through the European Directive on Corporate Social Responsibility), has in fact become a legal obligation for the private sector. In my last post to you I mentioned the Triple Bottom Line, which was originally the building block for the private sector to integrate a sustainable approach to their activities, and hold them accountable, and encourage more transparency to their shareholders etc etc in terms of products development.

I find it extremely interesting when people pressurise companies to be involved in more 'philanthropic' activities. I have worked cross sector on several environmental issues, including, environmental liability, sustainable waste management, Integrated Product policy, etc etc. Having worked for the CBI, UK Government and the Green Alliance (NGO), I became very aware of the different perspectives from each sector on the issues above. Business is Business, however, over the last ten years, and with, particularly international environmental protocols being enforced and ratified by several countries; the New Approach Directives initiated by DG -- Environment (European Commission), the private sector has now begun to understand that their marketability and standing within the public domain, is very much linked to how they are perceived to be a socially responsible sector. Many companies are looking at ethical investment; eg IKEA, Shell etc. They re-invest in community activities, awareness of environmental issues etc. I’m not saying that they are saints, but they are attempting to address social issues, as a matter of necessity to increase their profile with their customers.

Stakeholder dialogue, always used to exclude business, which I could never fathom, as they are so key, in terms of wealth creation in a society. You need to get the private sector on board in addressing the economic/environmental/social impact of their activities, and how this can be addressed. After all, what is the doctrine used in terms of Sustainable Development? Environmental, economic and social aspects. A holistic approach is valid of course, but it has to be an INTEGRATED approach, which takes all these factors into account.

There are the regulatory mechanisms (eg, CDM promotion); voluntary mechanisms 'take back options, for consumer products (I'm thinking producer responsibility etc) and then of course the initiatives that companies take themselves -- IKEA is addressing child labour in their Asia operations and promoting educational awareness etc.

Governments also have a responsibility. I find it odd that the GoI has signed a contract with the US to develop Civilian nuclear energy, and yet, at the same time, India is a signatory to the Kyoto protocol, which explicitly excludes Nuclear energy as a sustainable option.

CDM is seen as a business opportunity, not just for the private sector in India/GoI but also the NGO sector. I'm not a big fan of micro-finance, as working in rural development here in India, I feel that it is not always the best option to encourage economic opportunity at the rural level. Also, we have to be realistic, what is sustainable in the West is not in the East. There is a context for this concept of sustainability-with the knock on effect, that if the private sector is to become ever increasingly philanthropic, then they should base this on a needs based criteria with every situation or environment where they operate.

The private sector has had to become more socially aware, transparent and accountable. With increased access to information, the layman these days has become extremely aware of who is doing what and how. Plus, NGOs are almost dictating social and environmental policy at the National and International levels. In my experience, the trick is to convince them that a good idea was theirs in the first place (eg having a social conscience) -- and can benefit them in the long run -- works every time!

K

DK,

Thanks for yet another stimulating post. Well as far as accounting is concerned, it’s been quite a while since we incorporated human beings as assets in the Corporate Social Balance Sheet! The Human Resource Accounting is a well-recognized component of traditional accounting now. It’s recognized all over the world now that people are the greatest assets of a business. Hence there’s a need to value them. But there are conflicting views on how do you “value” people. By valuing people in numeric terms, we reduce them to mere pieces of equipment or stock-in-trade, so goes an argument!

However, I feel the raison d'être of a business will always remain the enhancement of its stock value. Altruism is certainly a laudable objective for a business. But I doubt if the social good can be incorporated in the mission statement of a business enterprise otherwise than as an ancillary or extracurricular activity. In India, corporations were recently up in arms against the government’s move to introduce a compulsory job quota for the downtrodden sections of the society. Philanthropy or Affirmative Action can not be undertaken at the cost of the quality of the products and services that an efficient organization produces/renders.

Affirmative action can be in the form of setting up vocational centers for poor students and helping them pursue quality courses with cheap loans. But relaxing your recruitment standards to accommodate a “backward” candidate over a meritorious and more deserving one will prove disastrous for globally-respected companies like Infosys and TCS.

The concept of Blended Value will certainly sound good in a University or Business School class room. It is easy for eggheads to pontificate from their academic pulpits about the need for businesses to do their bit for society. But step into the real world of business! It is about competition! It is raw, ruthless and cut-throat out there. It takes years for even a small business to get going. And as a business grows, prosperity for all is a natural corollary. Look at the millions of dollars/rupees the corporates pay as taxes every year. At least the government tells us that our taxes are spent on well-being of the society as a whole! Look at the jobs the MNCs create. Infosys in India has made thousands of millionaires out of paupers, thanks to the phenomenal rise in its stock price it brought about by virtue of its excellent performance.

Societal benefits are automatic spin-offs of corporate growth. I don’t know how a company can maintain simultaneous focus on two different goal posts of social welfare and enhancement of its stock value. “Blending” the two goals, in my view, has the risk of leading to “Blurring” of perspectives resulting in conflict. The company can alternate its focus once in a while. But the more vigorous focus ought always to remain on doing what the businessmen know best to do—doing business!

Another alternative, popular here in India, is setting up charitable trusts or NGOs with the companies’ directors, etc as the trustees and the general public/society as the beneficiary. The companies can make tax-deductible, periodical contributions to the Trusts. But the Trusts should have a separate set-up, their activities completely delineated from the activities of the business.

Profit-earning, social value addition and environmental value addition sure can be, and ought to be, taken care of simultaneously. A business entrepreneur should have the capability of assessing the social and environmental impact of his business, just like a social entrepreneur, as we discussed the other day, should have some sense of economics involved in his job. Indeed all three go hand in hand.

On deeper analysis and insight, Blended Value Proposition, does seem to have the potential to become the ideal business model of the world in future. You are headed for disaster if your colas contain a deadly cocktail of pesticide residues, no matter what the performance of your company’s stock is on the bourses!

I agree that the next iteration or a paradigm shift for capitalism is due. BVP would require the development of a new single performance matrix—blending the three performance matrices of economics, society and environment. It would indeed be like driving a chariot of three horses! The MBA courses of the world would need to drastically revise their curriculums to train wannabe managers in so piloting the chariot that all three horses move in a synchronized gallop!

Sanjeev

Dear DK,

I think that what you are suggesting with a "blended value" approach is right on target. It is the hope we need for the future if we want to save our planet. It's honest - reminding us that giving and receiving are intertwined. It's conscious - requiring us to remember that our actions, however seemingly small, impact the whole. It's liberating - demonstrating to us that our choices do make a difference! :)

No one person or organization (profit and nonprofit alike) is all one thing. There is a mixture of selfish and selfless intentions within us all. Being conscious of this is the first step in learning to make choices that acknowledge our interconnectedness and value all of life.

This blended approach can be taken on an individual level right on up to the largest organizations. All the best to you with The Philanthropia. Thank you so much for all your efforts. Full speed ahead!

Love, Kristin

It's great to hear founders of philanthropic foundations, and folks with extensive NGO/non-profit experience talking like this.

I REALLY look forward to the day when I hear CEOs and CFOs of say, Exxon, talking like this.

As you yourself said, talking to the founder is a completely different experience than talking to the board of share-holders.

The model we have does keep them separate.

Even the Gates/Warren initiatives, which basically are aimed at making sure charitable contributions are put to effective use (as opposed to ending up in the war-chest funds of an African dictator, for example) is a much needed step in the right direction.

I would love to see the "Triple Bottom Line" or "Blended Value" quotient (what's the formula for that, anyway?) be a primary consideration of corporate interests everywhere.

But it will only happen when corporations do not perceive it as being an additional risk to the their bottom line.

For example, every IT engineer who works on the network of even medium-sized companies knows how extremely difficult it is to get the company to keep current with its technology, and this should be a no-brainer in terms of increasing efficiency at the company. Yet is it is still next to impossible to convince the share-holders to upgrade regularly, or replace antiquated equipment that needs repair frequently, or clumsy-klutz software that was originally installed 15 years ago.

I myself have worked in a very well respected corporation (whose name I won't mention)
where the sales force (yes, the people directly responsible for bringing customer money to the company day in/ day out) was using a 12-year old, command line only software. Sales reps had to make their customers wait to transfer information by writing it down, switching programs, then re-entering the information because the software was so old it did not even have cut-and-paste capability. No one in the sales room had a mouse attached to their computers because the software dated from before the days before the mouse became a wide-spread tool. This was in the year 2000, mind you.

I asked questions such "why don't we upgrade?" No way, costs too mich. OK, could I telnet in and save the company the expense of providing me with a desk and phone and a bunch of other employee-related expenses? "We've looked at that, and decided it would cost too much to implement a telecommuting solution." Oh really - it costs you too much for me to TELNET in over the internet using my own computer? Apparently so.

I can just imagine the slammed door I would have faced if I started trying to talk to them about "Blended Value".

So I appreciate all the enthusiasm and willingness you have to start an awareness of these issues in the corporate boardroom.

But man, it's uphill struggle. Bless you for taking it on, however.

Dear DK,
I read your amazing post two days ago, but I wanted to read it again before writing.
I admire your vision and your successful enterprises. You have proved that humanitarian causes and profit are not mutually exclusive.
Thank you.
Love,
Donatella

Dear Kamini,
I am so impressed with your experience in this field.
Donatella

Dear DK,
Thank you for the beautiful poem. I agree that we all have to work together.
I still appreciate the much needed inspiration. I know my dharma and on that path -- while I express my qualities -- it is wonderful to see clear signs that I am not hopelessly idealistic. Your achievements make it clear that each of us can reach our highest potential.
Love,
Donatella

Dear DK,
And may we walk, Awake and Joyfully ... before we rest into sleep!
With Love,
~ Kate

Funny you should mention "awake" Kate, I just posted something to that effect on my blog yesterday...psynchronized!!

You are well versed with the great poets of all time, DK.. Rumi, Frost...

"A gentle breeze is blowing by,
and whispering your name;
and I smile with recognition,
happy to hear it again."

I used this part of Frosts, in one of my award winning poems "When He Sleeps." It was difficult to use, as I had to of course post-quote that paragraph... but, it won contests all 3 times!! lol

North

Thank Donatella and DK for your kind words! K :-)