“Socially conscious business”, “Values-driven approach”, “social entrepreneurship”, “Social purpose corporation”, “Benefit Corporation”, “Mission-driven business”, “Business for Transformation (B4T)”, “Triple Bottom Line”, Corporate Social Responsibility (CSR)”. These terms and others like them prevail in our world today. What do they mean? How do they connect? Are they relevant?
This series of two blogs will explore these questions and will be centered around these themes:
- What does it mean to be socially conscious”?
- Isn’t ‘business is business’ and ‘charity is charity’?
- How does one structure a socially conscious business?
- How can a socially conscious business be sustainable and really change the world?
What does it mean to be socially conscious?
The term ‘socially conscious’ has been used in many contexts – from Marxist economic philosophy to eastern religious karma. It was used by philosophers such as David Hume and Adam Smith and can be said to have a wide interpretation. It has been used in conjunction with everything from investing to art, to antiques and politics.
For our purposes however, social consciousness is considered to be the attribute of sensitivity toward and sense of responsibility regarding injustice and problems in society. Consciousness is connected to awareness of individuals within society. To be aware is to care about social issues and act upon that awareness. A socially aware person values human rights and does something about it. (http://www.wikihow.com/Develop-Social-Awareness)
Not everything that claims to be socially conscious is useful and relevant as this website reveals (http://www.cracked.com/article_19123_6-socially-conscious-actions-that-only-look-like-they-help_p2.html). One must be careful when planning and executing actions which could be harmful or useless, especially in the international arena.
All of this is in contrast to the historic purpose of business which has been stated in various ways, such as to provide profit for stakeholders; or to fulfill a need; or to provide needed goods and services. These factors are important, but do not take into consideration the social conditions related to the profitable business or who is most needy, or what goods and services. A socially conscious person links those issues with the For-Profit business.
So, a socially conscious business is one which focuses on social, spiritual, and economic conditions, and seeks to address those conditions in the best possible way within their business model. A social entrepreneur is a business startup person who “…is not content just to give a fish or to teach how to fish. They will not rest until they have revolutionized the fishing industry.” (Bill Drayton, CEO and founder of Ashoka). Some would take the fish metaphor even further and say that their cause is to provide access to the fishing ponds, for those who find fishing inaccessible. Such a person is socially conscious.
The next section on this subject addresses the relationship between business, a charity and a socially conscious (or responsible) business.
Isn’t business ‘business’ and charity ‘charity’?
It is one thing to understand business and how wealth is created (Deut. 8:18) and at the same time, care about the conditions of the world, by making donations to a favorite charity, but it is something else to force the two modalities into one integrated whole. Isn’t the term ‘social entrepreneurship’ an oxymoron? The words don’t seem to fit together.
It is common knowledge that NGOs, religious organizations, Not-For-Profits, and other philanthropic groups, do a lot of good in the world. However, they are dependent on grants, donations, and government contracts. This is a very different income stream from business. They do not create wealth, but just move it around.
If an organization is all about building something “socially conscious” that is focused on social, spiritual, and economic development (typical fare for traditional philanthropic NGOs and NFPs); how does that relate to standard business? Doesn’t traditional capitalistic economics assume the trickle-down effect of wealth, thus, precluding the need to think directly about social conditions?
Some of the confusion stems from the historic and regulatory perspective that ‘business is business’ and ‘charity is charity’. Typically, corporations seek to measure success in terms of profit and a return to shareholders. Social entrepreneurs, however, have a motive beyond profit – they want to solve social problems, create and sustain social value, and bring a positive return to society. The social good may have to do with internal employee conditions, community development, or social dysfunction.
“Historically, United States corporate law has not been structured or tailored to address the situation of for-profit companies who wish to pursue a social or environmental mission. While corporations generally have the ability to pursue a broad range of activities, corporate decision-making is usually justified in terms of creating long-term shareholder value. A commitment to pursuing a goal other than profit as an end for itself, may be viewed in many states as inconsistent with the traditional perspective that a corporation’s purpose is to maximize profits for the benefit of its shareholders.
The idea that a corporation has as its purpose to maximize financial gain for its shareholders, was first articulated in Dodge v. Ford Motor Company in 1919. Over time, through both law and custom, the concept of “shareholder primacy” has come to be widely accepted. This point was recently reaffirmed by the case eBay Domestic Holdings, Inc. v. Newmark, in which the Delaware Chancery Court stated that a non-financial mission that “seeks not to maximize the economic value of a for-profit Delaware corporation for the benefit of its stockholders” is inconsistent with directors’ fiduciary duties”1
So, the terms ‘entrepreneurship’ and ‘socially conscious’ primarily define a coming together of two extremes: on the one hand, the corporation solely focused on profit; and on the other, the Not-For-Profit or NGO focused solely on social impact. There is a trend today to develop enterprises which seek to simultaneously profit both society and themselves, with an emphasis on transforming societies. For some, this is perhaps a faster route to economic growth, justice, and prosperity.
Social entrepreneurs, therefore, offer an altruistic entrepreneurial business that allows for benefits for all of society; a maximization of social satisfaction. The product is social capital.
“As more and more people become socially conscious, there is a shift in business thinking whereby companies and brands are realizing that their products and services should be developed with sustainability and corporate social responsibility in mind. It’s also more appealing for the new generation of socially conscious consumers (Millenials and Generation Z).”2
- Benefit Corporation, “Wikipedia”, November 27, 2014
- Valerie Forgeard, “What is Socially Conscience?” Brilliantio, April 6, 2022
Larry W. Sharp, BAM Support Specialist, IBEC Ventures