Can business discover its heart again and do good?

Tuesday October 22 2019

Sophi Tranchell

Commentary Sophi Tranchell. PHOTO | SEARCH 

By SOPHI TRANCHELL

My experience of giving talks to eager, ambitious young business students and explaining the concept of social enterprise has often elicited bemused and frankly sceptical questions. “What do you mean you give the biggest share of the profit to the farmers?” they often ask, when I tell them about my chocolate business, Divine.

But, as I explain, the idea of companies set up to do good is not a new one. In the early 19th century, one particular sector saw business and social improvement go hand in hand – the production of chocolate. Cadbury’s, Fry’s and Rowntree’s in Briain, and Hershey’s in the United States, were all established in the first half of the 1800s, with the overt objective to help alleviate poverty.

These British companies were all started by Quakers who, prohibited at the time from academia and politics, went into trade with their Quaker principles regarding social justice at the heart of their companies.

Identifying alcoholism as one of the toxic causes of poverty, the Cadbury family, for example, was on a mission to wean drinkers away from alcohol by producing hot chocolate.

For decades these companies, and the idea of chocolate itself, were synonymous with doing good. So what happened? Why did all these chocolate companies lose their original raison d’être?

They, along with all the successful companies that flourished over the 19th century, expanded, merged, acquired and ultimately floated their companies on the stock exchange, where many of the shares are bought by institutional investors whose main aim is to make as much money as possible.

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They expect bigger and bigger returns on their investment, so ultimately, whatever the mission was when they first started up, in effect becomes overtaken by the overriding drive to make more profit for shareholders.

These so-called “activist investors” appear to have no long-term commitment and seem only interested in growth as an end in itself, till companies become worth more than the gross domestic products of whole countries, and wield more power than governments.

Still, there have been encouraging signs business is starting to change and rediscover its responsible role in society.

This has been largely consumer-driven and has made several step-changes as the internet and digital communication increase transparency and provide more opportunities to call companies to account.

Consumer movements like Fairtrade have grown over the past 30 years, and the consumer appetite for the now rapidly growing social enterprises — businesses that aim to do good — is increasing too.

Companies that sell the sorts of products and services, you or I, or indeed governments or other companies, want to buy, are being set up with the main aim of benefiting disadvantaged communities, either by employing them, or delivering profits or other shared benefits to them, while also reducing their impact on the environment.

Despite facing many challenges, some social enterprises are achieving scale, and reaching international audiences.

There are once again social mission-driven chocolate companies, focused on addressing the much more extreme poverty among the farmers that supply them.

Their shareholders are “patient investors” sharing the enterprise’s values, and placing an equal weight on social or environmental impact and financial return.

Big business now cannot hide from their obvious responsibility to play a leading part in addressing very serious global problems.

Responsibility – because they are playing a major part in causing them, and they have the power, skills and resources to address them.

It is time for companies to return to their radical roots and recognise that if they are going to be delivering shareholder value in 20 to 50 years’ time, they need to address the urgent issues of the day or they will not be here to deliver shareholder value tomorrow.

However, without equally radical changes to our market-driven economy this is not easy.

Paul Polman, former chief executive of Unilever, worked very hard to show that a huge global enterprise like Unilever could change, but the resulting drop in profits made the company vulnerable to a potential hostile takeover.

Once again chocolate companies have been at the forefront of taking on social and environmental responsibility, addressing major issues such as deforestation and child labour.

Despite this, cocoa farmers remain poor, and global corporations do not pay enough corporate tax in their countries.

It’s change – but not yet radical change, right at the heart of the way business is done. As Paul Polman says, “We are now at a point in society where the cost of not acting in these areas is higher than acting. It is becoming mainstream.”

Sophi Tranchell is the chief executive of Divine Chocolate. First published byThomson Reuters Foundation

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