By Michael Smith, Initiatives of Change
Winston Churchill famously said: “The inherent vice of capitalism is the unequal sharing of blessings; the inherent vice of socialism is the equal sharing of miseries.” So if the point of economic systems is to help create personal wealth, you could argue that capitalism is working very well indeed. For some people, at least.
But the global economy is all pervasive, affecting the daily lives of all of us in one way or another, from the food we eat and the transport we use to the air we breathe and the plastic we throw away. As it fuels the ever-widening gap between the world’s rich and poor and our ecological footprint nears the point of no return, many argue that the business community should be adopting alternative economic models that help address these disparities.
At a time when the world’s richest 62 people are said to have the same wealth as the 3.5 billion people who make up the poorest half of the global population, the examples of corporations whose strong ethical values haven’t been at the expense of boardroom success could be changing the way we do business.
As a charity that works towards economic justice and environmental sustainability, our recent workshop on ‘the economics of happiness’ debated whether accountability, and ‘localisation’ of economic activity rather than globalisation, would be enough to resolve universal disparities.
So, whilst the ‘Big Six’ UK suppliers of gas and electricity answer to their shareholders rather than their customers, it’s good to know that this isn’t the same elsewhere around the world. Countries such as Norway still consider society’s most valuable resources to belong to all citizens and, as part of their commitment to equality and democracy, energy therefore remains reserved for the state.
Slovenia offers another example of how capitalism can serve the people. After 25 years of independence from Soviet domination, the EU member has moved away from its socialist roots to take a more sustainable and progressive approach to its economic development. In doing so, it is becoming a role model for an integral green economy in Europe.
Recognising how issues from climate change and migration to food security and enterprise were all interconnected, Slovenia sought to put morality at its core with an alternative economic model. This holistic approach has seen the government steer away from the recent austerity measures favoured by neighbouring countries and, instead, engage with companies, support social enterprises and revive the cooperatives that thrived before World War II.
Across the world, consumers have become more ethically motivated and conscientious in their shopping choices. Research from the 2015 Cone Communications / Ebiquity Global CSR Study shows that 91 per cent of us expect companies to operate responsibly and tackle social as well as environmental issues rather than simply making a profit. It’s perhaps not surprising to learn that a quarter of all start-ups across Europe are social enterprises, according to the European Commission.
What’s more, there are commercial as well as ethical benefits to be had from this type of model. The last State of Social Enterprise Report 2015 revealed that not only do these enterprises successfully tackle social as well as environmental problems before reinvesting profits back into the business or improving local communities but – critically – they regularly outperform their SME counterparts on a business level.
It seems 41 per cent of social enterprises in the UK created jobs over the last year – nearly twice as many as those from mainstream SMEs (22 per cent) – while half of social enterprises in the UK are profitable and 26 per cent break even, indicating that making a profit and making a difference needn’t be mutually exclusive. And, with 85 per cent of Generation Y saying they are more likely to join a social enterprise than their parents, this belief that purpose and profit go hand-in-hand is only set to increase.
Another key finding is that social enterprises are often the innovation pioneers who capitalise on new technologies. 59 per cent of social enterprises have introduced a new product or service in the last year compared to SMEs, where the figure has fallen to 38 per cent.
Merel Rumping, a Dutch social entrepreneur and a regular at our annual Trust and Integrity in the Global Economy (TIGE) conference in Caux, Switzerland, is a case in point. Inspired by the conferences, she founded LegBank in May 2014 with a mission to increase access to affordable and easy-to-fit prosthetic limbs for low-income amputees in upcoming economies. She has worked with a team at Strathclyde University to create the first prototype. Now – thanks to a $1 million investment from Google – the operation is opening an orthopaedic centre in a landmine-affected rural area of Colombia, where there are 300 amputees, next May.
As people start to demand increased transparency to replenish dwindling trust in big business, encouraging greater ethical commitment and putting people before profit can only inspire positive change across society.
No economic system is perfect. But, if we have any hope of creating a more equitable world, there’s much to be gained from seeking out alternatives that encourage us to change the way we behave when it comes to business.
Michael Smith is Head of Business Programmes at Initiatives of Change (www.uk.iofc.org) and author of the book “Great Company: Trust, integrity and leadership in the Global Economy”. Initiatives of Change advocates conscience-based decision-making, ‘intuitive intelligence’ and a leadership culture based on moral and ethical values.
