Social Impact

There is little doubt of the growing trend towards the creation of alternative enterprise models different from the traditional top-down shareholder-driven, financially-oriented shareholder variety endemic in modern Western economics.

As we are aware, shareholder structured organisations traditionally have offered as little legal obligation as is required of them, to what we would nowadays call their other stakeholders. Namely wages to employees, payments to suppliers, supplies to customers and, if absolutely necessary, tax to their Government. And worse, even if there is an acceptance that this model is not entirely equitable, fair, open and honest they are still allowed to pay little more than lip service to societal responsibility, with superficial CSR policies and ineffective environmental regulatory control. And why not?

Many of these organisations were created, built, developed and sustained by private individuals with private enterprise and a huge degree of personal risk. They originally put in their resources, time, energy and funds and they should be allowed to reap their respective rewards. Many of us who have tried to plough the entrepreneurial furrow alone will understand that this simple risk and reward model of the capitalist regime was effective for those lucky few who were successful. For those not, the system offered a simple choice: work for someone else or not at all. Community was something for their social or spare time and the environment was a Government/national issue beyond the remit (and responsibility) of privately owned capitalist enterprise.

Since the back end of the 1990′s, however, and I am aware that some far-sighted individuals and organisations have been operating this way from earlier than that, companies began to account for and manage their relationship with their respective local and non-local environments and communities. The awareness of the effects of harmful by-products, production waste, the depletion of material resources, and overall pollution of the planet moved hand in hand (whether by need or by choice) with a gradual move towards a stakeholder model.

The stakeholder model, and there are various, creates a structure whereby the organisation considers the value and impact of the parties affected by operational activities in addition to the shareholders themselves. Increasingly employees, customers, the supply chain and communities (and those affected by the whole operation and not just those locationally adjacent) in which the company operates and the environment from local to global. All are potentially considered as reasonably and equitably as possible.

But a model can only be truly assessed by its effectiveness, as can organisations, by its sustainable results. The shareholder model did an extremely effective job at increasing capital wealth and in creating financial growth, especially for those in the controlling positions, namely shareholders and senior executives. After all, this was its true purpose. Just as a good idea can only be considered a great one if it delivers its aims, so can a model. Simply expecting a ‘stakeholder models to the rescue’ scenario is naive and ineffective. It is a start, and theoretically speaking a giant leap, but the proof of these entrepreneurial puddings is in their eating.

The stakeholder model as a vehicle for sustainable growth is increasingly practised but, and with particular reference to those ecologically oriented deliverables, the far ranging implications and results of this more expansive approach are yet to be completely understood. Increasingly it is being proven that it is possible to consider employees, customers, suppliers, communities, and natural environment responsibly whilst still generating satisfactory financial results and all at the same time as producing sustainable products and ecologically sound supply chains (or networks). Such enterprises as these are highly efficient, have low costs and pollution levels and deploy alternative renewable energy sources, all of which can be accommodated into any business model, if the intent is present and the vision is clear and the parties supportive

It is vision that is the starting point. In ‘Caledonia’ by Dougie Maclean, he espouses an ethos of ‘a belief in self and country’. I would take this a little further, or actually a little closer. I would suggest an ethos of a responsibility for self and for society. I am aware that whatever the model and the roles contained within it that there lacks a single and uniform definition. What is community? Where is it, who is it? With increasingly diverse and disparate supply chains, internet supported transactions, communication and knowledge-sharing, an enterprises community is almost impossible to define but for me, society brings it closer to home. If you exist you are part of a society. Responsible citizenship cannot happen without responsible citizens and this introduces the second condition, and by far the single most important one, that of responsibility.

Do you need incentive to be responsible?

Do you need to create different levels of personal responsibility based randomly upon where you are sitting and who you are communicating with, at any one particular moment?

Do you need regulations and controls to define your behaviour?

If the answer to any of the above is yes, no matter what the business model, you are avoiding the key issue to all life: personal responsibility. You have the values and you have the choice. you can, at any moment, choose whether to be responsible for your actions, or not and this is completely true independent of whether you are at work, rest or play, so let’s not get too hung up on models. What is important, however, is the knowledge and mutual trust that the stakeholders within business enterprise understand and accept that the vision will be delivered by supportive strategies and responsible transactions. This approach, of personal and social responsibility, may be an anathema to the 90s ‘loads of money’ exponents but so what? What was, is and will be, you will create.

Returning to the shareholder for a moment. Their historic raisin d’être was to lend money to make money. For themselves. The mere fact that these ostensibly capitalist institutions are now re-modelling and marketing themselves as ‘ethical investors’ shouts loudly of their recognition that we, the entrepreneurs of today and the future, require more from them and that we have more choice. This recognition is in itself is a step forward but one that adopts the traditional approach. They loan, you borrow. They charge, you pay. You struggle, they watch. Surely there is something better, an ‘adjacent possible’, as one of my colleagues, Chris Cook of the UCL Research Institute calls it. And there is. There are business funding and refinancing models that treat shareholders as stakeholders, no more or no less significant than the other business stakeholders and because they are ‘inside the bubble’, along with the other parties, then adversarial contracts and conflicting objectives can be kept to a minimum.

A final word on social enterprise. I have written about this expansively before, so suffice to say that still today there is not enough commercial in social enterprise and not enough social in commercial enterprise. There are still too many good ideas masquerading as valuable ones relying on external funding, loans, grants and good will. Not only are they operating with commercial ineffectiveness but they are attracting and swallowing up funding and support for those genuinely competent organisations that have social responsibility in their respective visions but also within the actual operational strategies. These are the sustainable organisations of the future, these are the responsible entrepreneurs of the future.

Whilst social impact needs to be built into any and all enterprise structure irrespective of the model, so does commercial responsibility need to be managed more effectively in any and all ‘social enterprise’ organisations.

This article was published in the3rdimagazine on 2 September 2013

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