Social good by the slice
You love pizza. Why not be purposeful about it? A new company called Naked Pizza agrees. Naked Pizza’s mission is to demonstrate, by example, that fast food can be part of the solution in the global epidemic of obesity and chronic illness by, 1) proving that an unhealthy and popular fast food can be made healthier and tasty, and, 2) making a business case for investment, profit and scale. Naked Pizza’s corporate social responsibility strategy is textbook, or in this case, business book—Do More Than Give: The Six Practices of Donors Who Change the World to be exact. Naked Pizza now shares company with GE and other large companies that are opening up new business markets by blending social good with the bottom line.
According to Do More authors, Crutchfield, Kania and Kramer, one of the six best practices of highly effective donors is to blend profit with purpose. Businesses have a lot to offer as vehicles for social progress, and donors can engage business tools in three ways:
1) They can tap corporate know-how to create direct social impact: They can utilize the knowledge, skills and abilities of employees, as well as company systems and processes; intellectual property such as patents and trade secrets; and other assets. For example, GE used their industry know-how to upgrade thirty-seven clinics and hospitals and retrained local staffs in poor communities in Africa, Asia and Latin America, all without charge. GE continues to open a new clinic every month as part of its $90 million annual budget for philanthropy.
2) They can create shared values through profit-making initiatives that serve social objectives: In the GE example, senior executives saw a tremendous range of opportunities for their business. The company invested $6 billion to develop new, inexpensive products and treatments that meet the health needs of low-income populations around the world with a goal of reaching 100 million new patients every year. GE partners with Grameen Bank, the microfinance institution, to build a sustainable rural health model, reducing maternal and infancy mortality rates by 20 percent.
3) They can use their investment capital to further their social impact: The authors report that catalytic donors are using their vote and their cash to further social issues through “impact investments.” The authors explain a strategy called “shareholder advocacy,” where a foundation can purchase shares of stock in a company in which they wish to have policy influence. For example, the Nathan Cummings Foundation, whose interest in the environment prompted them to purchase stock in Smithfield Foods so they could file a shareholder resolution requesting complete disclosures of environmental impacts. They filed annually, eventually gaining 29 percent of the shareholders’ votes, and the company began to negotiate with the foundation. The foundation brought in their grantees for expertise, which led to the company’s commitment to track and report environmental indicators relating to its farms.
Even more immediate social impact can be accomplished by foundations offering low- or no-interest loans to grantees, which has been done for decades. These loans qualify as program related investments, which means foundations can count these loans as part of their payout requirements. This strategy allows foundations to “recycle” their funds because they can be used multiple times to achieve social impact.
Another example of impact investing is when foundations or donors are willing to be the lead investors in a socially responsible business solution to attract other venture capitalists. Kiva is a great example—in 2010 users lent more than $100 million in microloans. The Packard Foundation similarly was the first investor to the table in their case, taking the risk and lower return in order to fund a sustainability project, which eventually attracted substantial venture capital from traditional sources.
For more examples about blending profit with purpose, visit Joe Waters’ blog www.selfishgiving.com.