CSR Entrepreneurs Involved in Solving Social Problems Can't Maximize Profits Simultaneously

At least that's the latest word to CSR social entrepreneurs from Nobel Prize winning Muhammad Yunus, founder of microlender Grameen Bank and recipient of the 2009 Presidential Medal of Freedom. In his new book Building Social Business: The New Kind of Capitalism that Serves Humanity's Most Pressing Needs (Public Affairs, May 2010), Yunus has unconventional advice for the CSR community. If your organization is a social, for-profit enterprise that is attached to blending profits with public benefits in pursuit of building value for shareholders, the environment, local communities or other company stakeholders, it's time for a splash of cold water. Yunus contends that enterprises should be "strictly dedicated to social causes such as helping the poor--without owners or investors taking a profit." So what's the difference between a charity and a social business company in this context? It's not an unreasonable question of any CSR warrior who has been fighting for the balance of a Triple Bottom Line (TBL) strategy in the company cubicle. Yunus' answer is that a social business sustains itself with earned income that continues to advance the mission of that company.

"When you mix profit and social benefit and say that your company will pursue both goals, you are making life complicated for the chief executive officer," writes Yunus. "His thinking process gets clouded. He does not see clearly. In a particular situation where profit and social benefit need to be balanced, which way should the scales be tipped? What if it is possible to increase profit greatly by cutting social benefits just a little--is that all right? How should one judge? What about in times of economic stress, such as a recession--is it alright to eliminate social benefits altogether in hopes of helping the company survive? Why or why not? The idea of a 'mixed' company offers no clear guidance on questions like these."

Holy sustainable enterprise mind-bend, Batman! Look how long it's taking our corporations to embrace the CSR peanut gallery mantra of balance amongst people, planet and profits! What about the sage advice from all al those TBL gurus to have written scores of books to help the newbie and experienced CSR alike? How does this tipsy-turvey lens fit the eye sockets of the mothers and fathers who carefully and methodically developed the Global Reporting Initiative (GRI)'s sustainability reporting framework?

Truth of the matter is, the papi of micro-lending has a point. One worth ruminating over the water cooler with other dazed colleagues. "In practice, profit tends to win out in struggles of this kind," says Yunus. "Most often the CEO will lean--perhaps unconsciously--in favor of profit and exaggerate the social benefits being created. And if the CEO is a little unclear about the real priority, we can imagine that the middle managers and line employees will be even more uncertain. Over time, the social goals will gradually fade in importance while the need to make money becomes more and more deeply ingrained in the company's culture." Let's hope that's not always the case for companies-formerly-known-as-TBL-organizations. But I suspect they too fall pray to the same temptations of their strictly profit-seeking cousins. Yunus provides a "small" but convincing example of how the emergence of a "middleman" in the "unsellable" outdated, dented or mislabeled grocery store merchandise impacted food bank donations.

"Social business gives a clear, unambiguous mandate to management," writes Yunus. "There is no balancing act involved. Every decision the company makes can be measured against a single yardstick: What will enable us to provide the greatest possible benefit to society? This doesn't mean that the decisions are always easy--creative problem solving is just as difficult in social business as in profit-maximizing business. But at least the manager isn't forced to juggle two sets of mutually contradictory objectives." I think it's time to add this book to the CSR library.