Ethisphere’s Top 2010 Ethical Company Picks

One of the biggest challenges facing the social entrepreneurial movement is a matter of definition. All business has some manner of social implications, and it can usually be argued that even the dirtiest, least socially-responsible firms provide some measure of social good (in the form of job opportunities, GDP, etc…). While in some instances it can be clear what makes for genuine social commitment, in most circumstances the level of social engagement for any given company lies somewhere on a continuum. Therefore, if we hope to be able to best reward those companies who are doing good work, it’s useful to have unbiased sources out there who work to evaluate and rank the activities of different businesses with regard to their commitment to social change or particular causes of interest to socially minded consumers. The folks at Ethisphere are engaged in doing just this very thing, evaluating companies for their commitment to ethical practice and social commitment in business. What’s even better than the fact that they have just released their list of the top ethical companies for 2010? The knowledge that these companies outperformed their competition when compared to the market as a whole!

For Social Enterprise Inspiration, Look to India

A couple weeks back, there was a great deal of skepticism floating around regarding plans within the Indian government to make quantifiable units of corporate good, “CSR credits”, and allow them to be sold in the market.  While most commentators have panned the idea as unrealistic, a few have also remarked that it is startling to hear such a proposal coming from an emerging economic power.  The underlying theme is that the Indian government wishes to institutionalize in their economy some of the core principals of the social enterprise movement, a very progressive and forward-thinking goal for one of the world’s rising economic superpowers.

For those of us left  surprised and perhaps a bit encouraged by the announcement, another piece in the Harvard Business Review today may help to explain the culture in which CSR credits could be imagined.  Peter Cappelli discusses how the focus of successful Indian businesspeople tends to be much more social than in their Western counterparts.  The piece highlights how India is taking the initiative in this area, and reminds us that social enterprise is a growing theme in business worldwide, not merely limited to progressive countries in Europe.

Legal Defense from Shareholders for Social Enterprises

Last week in an interview with Pete Mortensen, I alluded to laws that give shareholders power to sue their directors or board members if a company makes an executive decision that may reduce profit of the corporation.  Taken at face value, these laws seem reasonable, allowing those whom are investing in a company to have influence over it’s direction.  However, a problem arises when one considers the transient nature of the investment of many shareholders in an era of day trading.  Namely, these laws can be used to punish corporations that reduce profits in the name of higher ethical standards, or whom try to take long-term sustainability issues into consideration.   These sorts of laws can be millstones around the necks of publicly traded companies who may deviate from the “profits at any cost” model of business.

Fortunately, there has been increasing recognition of the negative effects of these types of laws and some states are working to reform this legal precedent.  NPR reports on efforts to protect socially-minded business decisions from shareholder backlash in seven states.

Wired to Care: Author Interview with Read4Change

As the corporate multinationals expand and industrialization makes its way to the furthest corners of the globe, it is easy for the producers and consumers of a supply chain to become disconnected from eachother.  What is lost when your everyday products and foods are made halfway around the world?  Dev Patnaik and Pete Mortensen make the case that all too often empathy goes missing, and they elaborate their point in their recent book: ‘Wired to Care‘.

‘Wired to Care’ focuses on how empathy can help a company to thrive, when it is applied in directing the focus and products of a company, or when it is cultivated throughout the ranks of a company’s employees.  Patnaik and Mortensen use numerous case studies to illustrate how using empathy can lead to better product design, more employee engagement, better customer feedback, and increased company revenues.

I was fortunate enough to have the chance to participate in a conversation with Pete Mortensen regarding his book, through the Read4Change event this evening.  Read4Change is an online reading group focused on books involving social betterment, sustainability, and their connections to business.  Here are a few highlights from our conversation.

Read4Change (R4C): [In business,] what do you think is holding empathy back [from instilling a higher degree of achievement, reducing conflict, and improving sales models]?

Danny Ducat (DD):  Do you think that price considerations (particularly supply-side) are  a strong counteracting force that prevents empathy from being institutionalized (e.g. reduced costs via outsourcing)?

Pete Mortensen (PM): I’m not sure that empathy is being held back so much as there is an over-reliance on the use of policies and data to run our world.  Companies can get by for now without empathy, but they’ll run the risk of hitting the wall eventually.  If price was all that was considered, American business would vanish tonight.  That said, long-term thinking is structurally excluded from publicly held corporations.  Quarterly earnings wreak havoc [with implementation of empathy measures and long-term thinking].

DD: Similarly for boards/investors that can sue their company for not maximizing profits?

PM: There’s a good number!  There is a sort of a bonus chapter [to Wired to Care] over at ChangeThis! that covers this topic: http://changethis.com/56.04.WidespreadEmpathy

DD:  Your book and its concepts are particularly interesting in light of the globalizing forces we currently see in the world.  It seems as though the need for empathy is a factor that would promote businesses to  follow a local strategies.  Do you see the business need for empathy as a substantial force that could resist some globalizing trends by providing financial incentive?

PM:  I think empathy is a factor that can promote growth and preserve value in commoditizing markets. Empathy can show how to justify charging more and compete somewhere other than costs . [So, yes], consider GE’s big goal to make the U.S. once again a net exporter. Adding jobs specifically within the USA.

R4C & DD: [It seems that there are some battle lines that have been drawn in the sand between business and progressive/sustainability movements.  What are your thoughts regarding the need for the business communities and public service/health/sustainability movements to cooperate?]

PM: We’re in a place where business-minded people need more social [empathy], and where social minds could use more business sense.  We talk at Jump Associates about finding people who are 1 part capitalist, 1 part technologist, 1 part humanist.  Single groups believing they have the answer slows change.  It’s the reason I find the term “designthinking” annoying.  Are non-designers idiots?

R4C:  How do [you] feel about CSR and cause initiatives?

PM: I’m ambivalent. They are well-intentioned, but they shouldn’t make up for bad core business practices.  Business can deliver change, not charity.

DD:  Some CSR movements in business are encouraging employees to get out and volunteer at various organizations.  Do you think that this is an effective way to promote “widespread open empathy” in a business?  Or are targeted approaches (e.g. meetings specifically with clientele) much more effective ways to encourage empathy that will further a company’s goals and bottom line?

PM:  Depends on empathy for whom. If customers are well-treated but [the neighboring] community is in trouble, then volunteering may be better.  Mining companies are integral to look at regarding this question.  Often, there is great empathy for metal/fuel buyers, [yet they] sometimes hurt the community.  What would it be like if a coal company could make a mining town a safe and great place to live?

DD:   Interesting point.  Do you think it is possible for a mining company to compete and be empathic?  Are some businesses inherently unable to use empathy as effectively as others?  For example, are businesses operating in markets for cheap commodities able to utilize empathy?

PM: I do think so. But exactly how isn’t clear just yet.  There are added implications for sustainability. … [As one example,] Clorox isn’t perfect environmentally, but it’s better to support positive actions than wish bleach off of the earth.  Anyone can use empathy effectively, but it varies in importance.  Empathy is most important for strategies of differentiation.

DD:  Along those lines; do you see promise in the social enterprise movement?

PM: I’m intrigued by it.  I’ve yet to see a Blockbuster business start up as a social enterprise.  I need to see the profit potential.  I’ve seen more traditional businesses change to make big social impacts.  Oh, I should mention that I do love Tom’s Shoes.  They seem the closest to a good business model that also does good as a movement that I’ve seen.

Peter Mortensen is communications lead for growth strategy firm Jump Associates. He is the co-author of Wired to Care: How Companies Prosper When They Create Widespread Empathy.

Merging Lines of Social Enterprise and CSR

I’ve been on a bit of a Corporate Social Responsibility kick (CSR) for the past couple weeks, and as I’ve been thinking more and more about the movement and as I’ve started putting my thoughts into words, I realized that I may not have provided adequate explanation to habitual readers of this blog as to why I’m suddenly so interested in this topic.  A recent article in the Wall Street Journal, and an even more accessible blog posting on Thought Rocket help to illustrate my thought processes.  In a nutshell, the definition of CSR is undergoing some rapid changes lately and in some of its newer reincarnations it appears to be suspiciously similar to the concept of social enterprise.

While this isn’t really a surprise, seeing as how the two movements have always had some similar ethical foundations, it is worthwhile to note that the two movements typically start at opposite ends of the business development model.  Whereas the term social enterprise tends to refer to businesses that were launched with the concept of directing positive social change, CSR tends to imply new programs within established corporations with social or philanthropic aims.  These businesses were frequently not founded with the idea of addressing a deep rooted social problem as they were with making a profit.  As a consequence, it’s not uncommon to hear CSR initiatives discussed in a cynical light – it’s easy to see how these efforts may appear to be just marketing or greenwashing.  Indeed, as Thought Rocket puts it, the CSR ‘team’ of some companies can be that “one corporate social responsibility guy who is supposed to be the moral compass for the company, like a chaplain in an Army regiment.”

What is interesting is to see how the economic downturn in recent months is affecting CSR programs at many companies.  While many CSR initiatives in the past have relied heavily on charity, economic pressure has placed strains on these budgets, and the amount of corporate charity has declined.  What arises instead is the need for companies to contribute to efforts that advance both social goals and the longevity of the company, so called “corporate sustainability”.  Which of course is the basic tenant of a social entrepreneur to begin with.

Of course, whatever you choose to call it, the changing attitude is welcome.  Furthermore, budding social entrepreneurs may wish to take a second look at some of the new CSR initiatives, in some cases these corporate programs may be laying important groundwork, or highlighting pitfalls for new entrepreneurs interested in tackling a problem in a related area.

India’s CSR Credits? Can You Sell “Good” as a Commodity?

Last week, India’s government announced that they were considering making Corporate Social Responsibility (CSR) a commodity, to be traded on an open market.  The move has drawn analogies to the cap-and-trade concept of carbon credits, where the amount of greenhouse gas emissions within the country are locked in at a given level, then the rights to “pollute” are traded like any other commodity.  In the case of CSR credits, India appears to be mulling the possibility of requiring companies that are deemed to be particularly socially irresponsible to purchase CSR credits from those companies, charities, or organizations that are more socially conscientious.

The announcement has drawn ample criticism from commentators involved in CSR, and for some good reasons.  Of primary importance, it seems nearly impossible to come up with a specific numerical value for any one socially minded effort, much less to be capable of comparing the value of two different programs in absolute terms (say, shelter for the homeless and increasing accessibility of vaccines to vulnerable populations).  I personally wonder how much value a company would ascribe to a CSR credit, in the cap-and-trade system, companies are purchasing something tangible and there is a limit on the availability of that resource.  With CSR credits, it seems that one might have a nearly endless supply of potential organizations claiming to be generating CSR credit, coupled with an intangible value of owning said credits, except for bragging rights.  Which raises ironic visions in this commentator’s head of “morality” being sold on the open market for fractions of cents per share.

But skepticism aside, the announcement has at least drawn some chatter and does highlight a growing awareness of the need to innovate for new approaches to hold businesses accountable, within India and abroad.  It also highlights what some see as a growing divide between the social awareness of corporate impact in developing countries compared to some western nations.  While I won’t be holding my breath for the success of this particular plan, it does suggest that attitudes about “business as usual” are rapidly changing.

Report Highlights Need for Transparency in Transparency Efforts

This week’s New Scientist features an article highlighting the failure of consumers to correctly identify companies that are involved in environmentally conscious practices versus those who are merely “greenwashing” (or those not bothering with a green image at all).  New Scientist used data obtained from Trucost and Earthsense to estimate the environmental impact of larger companies relative to their budgets.  Public opinion of the involvement and attention of these companies to environmental matters was then surveyed, and the two data sets compared.

Unsurprisingly, there was some confusion in the perceived environmental intent of a given company and its actual real environmental impact.  However, the real surprise was in the degree of the disconnect that was discovered.  In fact, there was virtually no correlation between a companies’ actual environmental footprint and the perceived impact of those companies.  This depressing news is, at least, pleasingly illustrated in the New Scientist’s interactive scatterplot, with estimated environmental impact of a company (as a percent of their budget) graphed against public perception.

While it may be tempting to simply tsk and move on about our business, I believe that this report is an indicator of a much more systemic problem.  Namely, the movement for greater corporate responsibility (in both the environmental and social spheres), has been primarily focused on getting companies to be more transparent about their work practices and product pipelines.  This side of the CSR (Corporate Social Responsibility) movement is, of course, very commendable and important, but becomes wasted effort if the information that is disclosed is not reaching the public.  Indeed, this report highlights a wide gap in the movement, one that calls for new leaders and ideas in the area of translating CSR data to the public.  In essence, adding transparency to our transparency reports.

While we wait for these leaders to arise, we may take some solace in the resources that we do have, such as the recently published list of 500 companies ranked by environmental impact, released by Newsweek.

Ideas Worth Watching – TED 2010

Many of you may be aware of the TED Conference, an event occurring since 1990 where some of the most innovative people gather to give their ideas or share their stories related to Technology, Entertainment, and Design.  All of the talks are strictly limited to 18 minutes in length and span a huge range of topics.  While the conference is certainly not limited to concepts of social enterprise, there are several this year that are relevant.  Furthermore the schedule is almost always worth looking at, as many of the talks are likely to enlighten, inspire, and perhaps even inspire an Idea Worth Spreading in yourself.  One of this year’s TED conferences is occurring now, with talks scheduled in Long Beach and Palm Springs.

For concepts related to social enterprise and social good, we recommend checking out some of the following speakers – we will link the talks as they become available:

Peter Eigen – Founder of Transparency International. (watch his TED Berlin speech)

Nicholas Christakis – Harvard Professor and author of Connected, discussing the invisible lines of connection holding all members of society much closer than we suspect.

Kevin Bales – Humanitarian and author of Ending Slavery: How We Free Today’s Slaves.

Bill Gates – Founder of the Bill and Melinda Gates Foundation – see him talk about moving to zero emissions energy technology by 2050.  (also view his 2009 TED talk)

Mike Feinberg/Dave Levin – Founders of the educational network KIPP.

Esther Duflo – MIT Professor of Economics, and co-founder of the Jameel Poverty Action Lab.

http://www.ted.com/talks/peter_eigen_how_to_expose_the_corrupt.html

One Young World

A little bit further from home, but in keeping with our post last week, buzz this week is focused on One Young World, a summit that kicked off today in London.  One Young World is a gathering of youthful (25 years or younger) leaders meant to represent each of the countries of the world.  Over a thousand representatives from over one hundred countries will gather to and address such global crises as climate change, poverty and economic justice.

If this sounds nice and all, but perhaps a tad on the dreamy-eyed and unrealistic side, consider some of the heavy-hitters that are leading the discussion: 3 Nobel Laureates to start.  Kofi Annan, former Secretary-General of the UN, Desmond Tutu, activist and humanitarian, Muhammad Yunus, founder of Grameen Bank and microfinance.  Many other leaders within the humanitarian, political, and social enterprise sectors will be speaking with the delegates.  While it may be unlikely that any world-shaking ideas will be formulated over the course of the 3 day event, the delegates aim to gather intellectual capital and resources for creating effective social programs/businesses upon their return home.

Ultimately, One Young World hopes not only to be a forum for reform, but also to establish a network of active and talented young individuals across the globe.  It is hoped that this program may be useful in empowering the leaders of tomorrow, and that these individuals can be collected in their efforts.  And when a small group of thoughtful, committed citizens come together….  Well, you know the rest…

A New Web Tool for Transparency, Personalized CSR?

Zoosa is one of the latest websites to enter the social media fray, targeted towards becoming the Facebook of social impact.  Mark McGlade, founder and CEO of the Zoosa company, developed the site as a way for those involved in the social entrepreneurship movement to get connected and learn about the activities of others.

“Zoosa aggregates social enterprise resources (news, blogs, tweets, & opportunities) to create a single destination for professionals to learn about and get involved in the clean-tech, education, and nonprofit sectors.”

The site also aims to host a comprehensive list of job offerings within non-profit and socially minded businesses, as well as volunteer and internship opportunities.  The site will also be a promotion platform for these organizations to promote the work and impact that their organizations are having.  Indeed, just to set up an account, Zoosa queries the user to provide answers to a wide array of probing questions; anything from the percentage of their income they donate to charity to the number of kilowatt hours of energy they use a year.  The answers are then displayed on the front page of the user’s public profile, the sort of nitty-gritty transparency those in the CSR (Corporate Social Responsibility) movement frequently drool over.

Of course, just opening a personal, individual account also prompts some of the same sort of probing questions, right down to “Do you compost at home?”.  In setting up the skeleton of my own account, I alternated between feelings of embarrassment (that I was doing so poorly in this or that area), and feelings of immodesty (that I should be disclosing such private matters for just anyone).  It was an interesting exercise, to disclose the impact of my life in a manner not unlike that which the CSR movement wishes to make standard for businesses.

Of course, the website is still in Beta, and it is uncertain how much it will take off.  Furthermore, there are those who already look upon the site with a critical eye, questioning the value of a site that encourages “promoting the self-glorification of our acts of philanthropy”.  Indeed, I too share some split ambivalence in a design that actively encourages a sort of neo-hippie bragging about ones’ personal carbon footprint/volunteer activities.  It is an uncertain feeling that is not much helped by the fact that I cannot find a profile on Facebook, LinkedIn, or even Zoosa, for founder Mark McGlade!  Nor will the profiles developed on this website be of much use if there isn’t some oversight and verification of the self-provided answers on social impact, at least for the larger institutions.

Yet, on the other hand, I have a strong desire to see some sort of tool emerge that aggregates knowledge of social responsibility within different organizations and companies.  A one-stop shop to dig up the dirt, or unearth the good deeds, of a company you are uncertain about.  If this site also has the side-effect of bringing up some uncomfortable questions about how we conduct our own day-to-day existence, perhaps it is all for the better?