The recent article by Bremner and Grant (‘Bridging the cultural gap’) raises many important issues regarding the difference between for-profits and non-profits, with implications for relationships between the two. Understanding this terrain is of critical importance, given the growing importance of partnerships between business, civil society and the public sector as vehicles for development. Some further comments arising from the article therefore seem warranted.
The article takes as an unspoken starting point that, in development terms, business is there to provide the resource and non-profits to do the work. This view is rooted in the historical realities of corporate philanthropy as the main route through which business has consciously engaged in social (including environmental and economic development) issues. However, it is not an assumption, one suspects, rooted in likely scenarios of the future. The World Summit in Johannesburg, more than anything else, signalled the arrival on the scene of business as a major development player. Much of this role will certainly take traditional ‘business-as-usual’ forms (investment, employment, etc). However, what Jo’burg also recognized was how businesses’ role in development is changing. Business is, in short, increasingly an active participant in development planning and practices that generate targeted and managed social outcomes, as well as financial returns.
The ‘why’ of this changing role of business is complex and multifaceted, including, at times: impassioned leadership (think of Tata in India); more effective management of intangible assets (brand and reputation, motivation of employees); new business development (commercial banks moving into community/micro credit); contract compliance (water management contracts including obligations to interact with poorer communities); broader business strategy (support of anti-corruption regulations and practices as a means of levelling the market playing field); and straightforward anti-competitive practices (pharmaceutical companies giving away drugs while lobbying against deeper changes in patent legislation).
Underlying most of these ‘whys’ is the increasing role of the private sector in the delivery of ‘public goods’, which raises issues and challenges as to businesses’ competencies and legitimacy, driving them to seek a new social contract that enables them to build business models in these politically and socially explosive areas. The ‘hows’ are equally diverse and complex, depending much on context. But there is a pattern, certainly, of business engaging more deeply than ever before with both civil society and state actors in assessing, planning and implementing initiatives that include both financial and social aims.
The implications of this changing role of business in development is not, I would stress, that businesses will become (like) non-profits. We are not heading for some carefully spiced and well-blended, institutional soup. For example, business clearly has differing modes of financing and so different accountability frameworks, etc (although one suspects that differences within the business community are often as great as differences between for-profits and non-profits). These in turn drive different institutionalized aims – that of profit – from those of non-profits (or, perhaps more usefully put in this context, not-for-profits).
But it is in the sphere of competencies and functions, not just aims, that we find the clues to what business may contribute to development. Businesses’ relative strengths, for example, in the efficient delivery of products and processes, in mobilizing long-term finance, evolving new technologies, or enabling market access. These competencies spell out where business is most able to contribute to development. It is the functions of business, framed by their understanding of risk and opportunity and their underlying basis of accountability, that will define their primary impact on people and the planet as well as profit.
The key role of civil society is surely to remould the impact of businesses’ competencies and functions by reshaping both their market landscapes and their internal understanding of how these landscapes should be acted within and upon. Some of this will and should involve hard-nosed, ‘no-hostage’ campaigning, for example around life-defining issues such as access to and pricing of drugs and agricultural subsidies. In many other cases, however, a more intimate engagement with business will yield dividends (so to speak). A recent report by AccountAbility on how companies understand and manage their economic development impact, for example, highlights how much can be gained by embedding broader social metrics into business performance targets and associated voluntary and mandatory standards. Another AccountAbility report on ‘partnership accountability’ stresses the importance of innovation in building new accountability frameworks to govern the growing numbers of partnerships between business, civil society and public bodies. Business ultimately draws its knowledge and success models from society, and non-profits have a crucial role to play in ensuring that these models are aligned to social as well as financial goals.
The simple message is that we must understand non-profits’ and for-profits’ relative competencies and main pathways to impacting on development. Each have ‘core businesses’, which are not always most usefully identified through descriptions of institutional aims and related values. We must not be distracted in our deeper understanding and practice by peripheral or transitional activities such as corporate philanthropy or, equally, the growing number of service ventures by non-profits.
1 See Alliance, Vol 8, No 2, June 2003, p13.
Simon Zadek is Chief Executive of AccountAbility, London. He can be contacted at email@example.com