By Rhod Ellis-Jones
Money equals opportunity. Whether your aspirations are more time, more power or more lobster, capitalism creates an environment for you to raise and deploy money to achieve your ends.
When Michael Porter and Mark Kramer posed in the Harvard Business Review that we “fix capitalism,” they weren’t suggesting we devise a new form of economic system; they were proposing we find a better use of the capital available and, when we raise new capital, we deploy it for more ambitious outcomes.
The shared value concept acknowledges that capital flows make the economies of the world go round. Capital is the fuel of change, particularly when it is directed at scale – just ask Ben Bernanke. The simple formula could be: capital + focused purpose = change.
The spending on sponsorship globally in 2011 was estimated by the World Bank’s Independent Evaluation Group (IEG) to be USD 46.3 billion. Contrast that with OECD estimates of the value of aid investment in 2013 of USD 100.5 billion being spent trying to solve social and economic problems. The world spends the equivalent of almost half its total aid budget on sponsoring football matches, street festivals and celebrities.
Just imagine what impact we might see if the capital currently being swallowed up by sponsorships for short-term PR and brand awareness was redeployed to solving health and education challenges in Africa. An end to poverty in some of the world’s developing and developed nations? Massive new export markets for products and services formerly out of reach for the world’s poor or underemployed?
That’s not aid, it is smart economics. It leads to measurable and sustainable, long-term growth beyond traditional market cycles. It attracts shareholder investment and government support.
So, a proposition: let’s fix capitalism by fixing capital on economic and social challenges that can deliver returns way beyond the ambitions of most business development managers.
When our agency presents to business, not-for-profit and government audiences about social impact as growth opportunity, we always make sure money is on the table. Not actually (they don’t pay us enough) but in the sense that, if we can’t put capital at the centre of our discussion about social value creation, we won’t get very far. Social purpose is a sustainable path to economic gains but it requires investment of cold, hard cash.
Community organizations are acutely aware of the relationship between financial investment and social returns. That awareness makes shared value, with social returns married to economic returns, a compelling proposition. And not-for-profits are critical to the success of shared value projects. Particularly projects of major scale and, therefore, impact.
Community organizations have the trust of, and access to, consumers. They have distribution networks and data. The government relies on NGOs to do the heavy lifting in health and welfare, so they have the ear (if not always the wallets) of policy makers.
Community organizations can be the lead generators for business investment in social projects.
By identifying opportunities for business investment, not-for-profits can achieve social objectives and organizational purpose while making better use of limited available funds. Shared value is just as relevant to an NGO leader as it is to a company executive. However, it requires the community organization to have an expanded or different view of its role. To think like business does about capital.
Fundamentally, this is why shared value thinking is a powerful force for cross sector partnerships and rebuilding trust between society’s great institutions.
We need to think differently about capital and we need to believe in its potential to deliver better, more sustainable returns.
Rhod Ellis-Jones is principal for Australian social impact, business improvement and communications agency, Ellis Jones, and founder of the Shared Value Project, an influential forum for creating shared value in practice in Australia. Rhod is a member of the Shared Value Initiative’s Affiliated Professional Services Network.