Can for-profit businesses promote social good?

Our generation’s tremendous enthusiasm for merging enterprise and social impact suggests that the answer is a resounding “yes.” The success stories are many, from the archetypal microfinance programs offering small loans to poor populations to businesses like HelloRewind, which gives former sex trafficking survivors employment in making recycled laptop sleeves.

Despite these successes, some people argue that doing business is fundamentally incompatible with doing good. In a 2005 article in the Stanford Social Innovation Review, Deborah Doane claimed just that, asserting that business objectives and social outcomes simply cannot align. In the long term, she argues, the ultimate need to bring in profits will always trump social objectives. While Doane’s view is extreme, the widespread criticism of corporate social responsibility--companies’ efforts to do social good--suggests it can be tough for existing for-profit businesses to make a real social impact.

CSR is often “largely nonsense,” according to a quote from consultant Gaurav Gupta in the New York Times. Gupta’s opinion is a fairly common one. While CSR has become increasingly popular among corporations in the past decade, it is widely criticized for placing an emphasis on improving a company’s public image and for the routine failure of CSR initiatives to make a real difference. In fact, The Economist has argued that CSR “can be positively harmful.” Even when it is not, CSR is often nebulously defined and sometimes consists of little more than philanthropic donations and companies’ efforts to protect their reputations. In a 2006 article in the Harvard Business Review, Michael Porter and Mark Kramer pointed out that many companies’ CSR programs are “uncoordinated initiatives to demonstrate a company’s social sensitivity.” Problematically, these initiatives are not always aligned with overall corporate strategy. For instance, the same article in The Economist pointed out that Toyota promoted environmental sustainability with its launch of the Prius but lobbied against the creation of tougher fuel-economy standards in the United States.

All of this underscores the difficulties of aligning business objectives with social outcomes. But doing so is not impossible. Indeed, when done well, using business for social good can not only help communities but also bolster companies’ competitive advantage, as Porter and Kramer have noted. In their Jan. 2011 article in the Harvard Business Review, they asserted that “[b]usinesses acting as businesses, not as charitable donors, are the most powerful force for addressing the pressing issues we face.”

A recent initiative being pioneered by PepsiCo, Inc. supports this view. In the past three years, Pepsi has begun buying corn directly from small farmers in Mexico, providing much-needed employment in poor communities in the developing world. Indeed, Mexican corn farmers have faced economic troubles since the adoption of NAFTA, when the Mexican government stopped subsidizing corn production and Mexican markets were flooded with corn from the United States. This depressed the price of corn, hurting Mexican farmers’ ability to subsist off corn sales and exacerbating issues like poverty and immigration to the United States. Pepsi’s new partnership with these small farmers, which has resulted in substantial increases in the farmers’ incomes, is contributing to alleviating poverty, decreasing immigration, and perhaps reducing marijuana production.

Moreover, the deal is highly advantageous for Pepsi’s business strategy. Pepsi no longer has to pay transportation costs to ship corn from the United States to their local factories, which are located near the Mexican farms Pepsi is now buying from. The company has also gained access to corn better suited to their products. Through this project, the corporation is improving its business and simultaneously promoting social good in a way that is distinct from the oft-criticized work of typical CSR initiatives.

Other businesses have also found unique ways to align social impact and profit-making. Philips Electronics has created cheap solar-powered lighting products being sold in Africa to people otherwise lacking access to electricity. Through its “Hairdressers Against AIDS” initiative, L’Oréal is leveraging its networks with hair salons in 24 countries to help hairdressers raise awareness and educate customers about how to prevent the spread of AIDS. These types of initiatives, in which businesses tackle social issues related to their corporate interests, reaffirm the potential for corporations to help build a better society. Perhaps, then, businesses really can do good.

Niharika S. Jain ’12 is a social studies concentaror in Dunster House. Her column appears on alternate Wednesdays.