How Businesses Create and Destroy Social and Natural Value

by PROFESSOR SHEILA CANNON, edited by EMMA RATZMAN, produced by CAITLYN LECHENE June 19, 2021

Everyone agrees that education is important. But, perforce, not all education is the same. There are some types of schools that prefer that students have "real world experience" before applying to enter. Business school is one of those institutions; it has to be. The real world is a whole lot messier than the organized way school in which exists and structures our thinking. Having some experience in "the mess" has great value and helps a business school class become more well-rounded by creating a fertile ground for students to learn from the world around them and from one another - as well as for professors to learn from their students. Nonetheless, at the same time, sometimes the distance that academic institutions can have from the messy, action-oriented world is a benefit, too. To be distanced is to be able to take a step back, to analyze micro- and macrocosms with objectivity, constructive criticism, and offer new language and paradigms to explain the actual or potential transformation of the world. Sheila Cannon herself, professor of Social Entrepreneurship at Trinity College Dublin, had a wide range of experiences before she became a professor with a focus on social enterprise. Read on to discover her fascinating background in peacebuilding and to learn more about how we can all do work that transforms us and the world around us...

- Dr Sheila Cannon, Assistant Professor, Trinity Business School, Trinity College Dublin, Ireland. - Director of Engagement, Centre for Social Innovation. - Associate Director of Global Business Programme.

by DR SHEILA CANNON, edited by EMMA RATZMAN

Business is neither a force for good nor a force for evil. But like any tool, it can be used to create or destroy. As more and more people are becoming aware of the damage done to the natural environment and to communities by our current systems, there is a growing drive to use businesses as a force for good. A look at how social enterprises work can provide us insight into how businesses can create social, natural and financial value, which goes far beyond just doing less harm.

HOW DO BUSINESSES CREATE AND DESTROY DIFFERENT KINDS OF VALUE?

Most of the models and frameworks we teach in business courses or accelerator programmes prioritise financial value, and how a business can create it. Everything else is context.

However, business schools and professionals are increasingly taking a more honest view of their impact on people and planet. A barrier they face is how to express that non-monetary value. It is easy to measure money and communicate fiscal results. It is harder to measure social and environmental impact. Descriptions of impact or value tend to be seen and heard either as sales pitches, or vacuous and lacking substance.

SOCIAL ENTERPRISES- organisations that balance both social and commercial goals— have been concerned with measuring their social impact for decades. This is driven partly by funders who want to know the ultimate effect of their donation or investment, and whether it reflected value for money. But it is also driven by the organisations themselves in explaining the positive impact of their work on the world and how they are achieving their mission.

Researchers are starting to look beyond social and environmental impact to see if they can understand the value created and destroyed by organisations more holistically.

VALUE CREATION was popularised by a famous article by Porter and Kramer in 2011 on creating shared value— that is, providing value for shareholders and for a wider set of stakeholders, such as the communities in which the business operates. Shared value is a way of considering societal concerns in the core operations of the company. For example, if a factory is polluting a local river, the staff and wider communities are negatively affected, so ignoring this issue negatively effects the company. Historically, government regulation, a coercive external driver of change, would stop this problem with regulations and fines. Shared value is a different approach— one that is internal and creative— that encourages businesses to shift away from seeing corporate sustainability or responsibility as a necessary expense. By widening the scope of value creation beyond immediate monetary returns, the company factors in the community’s ability to survive and thrive.

ARTICLE22 is an incredibly creative and collaborative example. The company creates value by bringing together harmful metal waste that is a legacy of violent conflict, talented craftspeople and artists, a global market of jewellery consumers, and the intellectual spark to combine these resources. ARTICLE22 captures value that is monetary (income), human (by empowering Lao craftspeople to take part in global industry), and social (by raising awareness of the legacy of war). Value is then shared beyond the organisation through wages paid and investors gaining a return (a financial impact), munitions cleared (an environmental impact), and people empowered (a social impact). The sphere of value creation and sharing is opened wide through creative collaboration, and by using the power of the jewellery market to address the impact of war.

On the other side of the world, in Newfoundland, Canada, Fogo Island Inn has created an Economic Nutrition Certification Mark that shows exactly where the money goes when you purchase their products or use their services. They have taken the concept of nutrition labelling from food products and applied it to everything you can purchase at the Inn. Instead of carbohydrates, fat, and protein, the label shows labour, marketing and operations costs. Their profit margin is transparent and the benefit distribution is clear, demonstrating exactly how much their work actually helps the community.

You might have heard of blockchain. Because it creates an unalterable timeline, blockchain can be used to trace social impact: companies and consumers can see what happens at every step in the supply chain.

For example, when you buy a bag of Moyee Coffee, a QR code shows you who farmed the beans, and how much value they gained from this work.

There is a hunger for this kind of socially conscious, value-driven change. But much of the public discourse is polarised: pro- versus anti-capitalism; pro- versus anti-business; pro- versus anti-Big Pharma. These discussions tend to stagnate in oversimplifications. What we need now are models, templates, frameworks, and case studies of how organisations succeed at creating multiple forms of value, better explanations of different kinds of value, and more accurate accounts of corporate impact on people and planet. At the Centre for Social Innovation in Trinity Business School, we are working with organisations to create such value-based models. With their wealth of experience, social enterprises like ARTICLE22, Fogo Island Inn, and Moyee Coffee can help us learn how to move businesses toward creating value that benefits everyone.

References

Photos from article22.com

Photo from Fogoislandinn.ca Image Gallery

Photos from moyeecoffee.com

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How Businesses Create and Destroy Social and Natural Value

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