18 April 2019
A social enterprise in the catering sector offers job training to young people. Photo: HKEJ
A social enterprise in the catering sector offers job training to young people. Photo: HKEJ

How profit and social responsibility go together

We need to redefine the goals of markets and corporations to break the traditional narrow framework of corporate social responsibility (CSR) in order to benefit society.

The question is, will companies be able to maximize profit while taking part in socially responsible activities?

Can social issues translate to business success or help boost revenue? Or should companies get involved only in activities that improve both economic and social values?

In fact, some companies have been creating “shared value” economically and socially with their products and services.

For example, Nestlé S.A., the Swiss multinational food and beverage company, has rebranded its food and beverage business into “nutrition, health and wellness”.

Pearson Plc., a British multinational publishing and education company, has changed its textbook publishing brand into “better learning”.

And the world’s leading carpet manufacturer, Interface Global, has restated its mission to show “the entire industrial world sustainability in all its dimensions — people, process, product, place and profits”.

A shift to a shared-value model is key to maintaining future competitiveness.

In the past, CSR projects usually ignored cost-effectiveness and were at odds with profit maximizaton. The shared-value model takes both into account.

To achieve shared value, companies have to innovate in market positioning and product differentiation, as well as in promoting their services and markets.

Body Shop, for instance, took the initiative in banning animal testing for new products in 1976, helping win more customers.

Prudential Insurance Co. of America took the lead in 1990 in allowing life insurance policyholders to cash in part of their benefits for medical treatment, house purchase and travel.

Recent innovations such as rent-to-buy, micro lending, electronic learning and mobile banking for farmers are classic examples of the shared-value approach.

Such innovations usually offer more value to customers and stakeholders while beefing up the competitiveness and bottom lines of companies.

Once these measures are adopted by other companies, they become the new standard of business practice.

However, too many social enterprises have shut down after suffering losses for years.

Therefore, we need more for-profit and mainstream companies to achieve shared value through innovation.

A new generation of so-called “benefit companies” (B corp) have sprung up in North America.

A “B corp” is a type of for-profit entity that factors society and the environment, in addition to profit, into its decision-making process.

It differs from traditional companies in its purpose, accountability and transparency, and enjoys legal protection, taxation benefits and government grants.

There are more than 1,000 such companies in more than 35 countries.

Li Yuan-sha contributed to this article which appeared in the Hong Kong Economic Journal on Dec. 15.

Translation by Julie Zhu

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Principal of Hang Seng Management College

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