Friday, January 28, 2011
The notion startles some folks, especially those on my side of the equation! Non-profit leaders resist the idea of corporate profitability as a legitimate result of a company doing work to advance social good. In my view we've got to shift our thinking in order to move toward sustainable solutions to the tough problems, challenges and issues that we face in urban America.
Perry Yeatman, Senior VP at Kraft Foods, Inc and President of the Kraft Foods Foundation, gets it right in today's issue of The Huffington Post. Read the essay and give me your reactions.
Doing Good and Making Money Can and Should Go Hand-in-Hand
At an impact investing meeting at the US State Department last week, I was probably the only one in the room who didn't know that only 3 percent of the world's assets/funds were engaged in what's often referred to as "social innovation" or "impact investing." It's apparently known as the "97 vs. 3" dilemma. But whatever you call it, it was news to me and an obvious shortcoming to driving sustainable change, I think.
Why are micro finance funds, NGOs and foundations the only ones playing big in this space? How will we ever get enough of these great ideas and programs to scale if we only approach them as philanthropic endeavors? Let me be clear: I have HUGE respect for the groups that were in the room. We are in fact already partners with many of them! But, despite the good intentions and great work, the truth is that philanthropy -- in the broadest sense -- can rarely make the long-term impact business can. I think of it this way -- as the president of the Kraft Foods Foundation, I have about $100 million in cash and in-kind we can invest each year. But as Kraft Foods INC, my company has literally billions to invest in the things we need to buy. Effectively directed, what is likely to have a greater impact -- millions or billions? I think the answer is obvious. But clearly this point isn't obvious enough or that 97 percent of assets wouldn't be on the sidelines of impact investing.
That said, while it hasn't happened yet, I'm happy to say the tide seems to be turning and much of the world seems to be coming to this same conclusion -- including many of those here at Davos today. The discussion is gradually beginning to shift from "doing well by doing good" to "doing well by achieving shared outcomes -- outcomes that have both social and business benefits at the heart of their design." This may sound like mostly semantics to some of you but I think it's an important shift. I think it tells business that doing good is important BUT that it's OK to be transparent and upfront about what you need to get out of a partnership in order to make it work for your business and therefore be something you'd want to keep funding and growing. It wasn't that long ago that critics of big business would point to a program a company was funding and say, "but look, see what they are getting out of it" like that was a bad thing. I completely disagree. I think it's a good thing if a social outcome can be achieved while providing a business benefit, and I'm really glad others are beginning to come around to that point of view too. It's the ultimate win/win isn't it?
To read the entire essay click here.