Columnist: David Willson David's Beyonder Story
As Taiwan effectively shut down over the Chinese New Year, I spent more time working with overseas clients, who were not affected by the holiday period. That focused period working again in a more international environment got me reflecting on what true best-practice looks like in strategic corporate social responsibility.
I hope to find examples of good CSR here in Taiwan over time, but as everyone local was away over this period, I decided instead this month to talk about one of the best examples of strategic CSR I have seen to date. A company that should be a role-model in this space.
Mars is one of the world’s largest privately owned companies, with sales in excess of USD$33 billion and owns numerous famous brands such as Mars, Snickers, M&Ms, Uncle Ben’s and Extra. What makes Mars of special interest is that the owning family has a deep interest in ensuring that Mars is a sustainable business and accordingly it operates according to five principles that they set out well over half a century ago: Quality, Responsibility, Mutuality, Efficiency and Freedom.
At the Strategic CSR Conference we held towards the end of last year I invited Clara Shen, Catalyst Director – Emerging Markets, from Mars Catalyst to be a lead speaker. Clara is an expert in her field, but even more, she is quietly but passionately dedicated to making the world a better place, not just by hoping it will happen, but by taking well-researched, planned and concrete action. In a space that attracts a lot of dedicated and passionate people trying to change the world for the better, Clara is one of the most impressive people I have met.
Catalyst @ Mars was established in the mid 1950’s by Mars as a think tank to further the company’s objective of creating ‘a mutuality of service and benefits’ amongst a wide array of groups including consumers, distributors, government, suppliers, employees, competitors and shareholders that had been set out by the Mars family in 1947 as the key directive to drive all business decision making. This is quite different to the normal mantra of “maximise profits” espoused by most businesses and has motivated Mars to launch many initiatives over the years to make society better.
For the last sixty years Mars has been working on building, defining and incorporating the concept of ‘mutuality’ into all of its thinking and actions. In recent years they have been making a concerted effort to present the Economics of Mutuality as an alternative to the idea that businesses exist only to maximise returns to shareholders, as advocated by Milton Friedman in 1970 when he said that “The sole Social Responsibility of business is to increase its profits for distribution to shareholders”. Catalyst has been working with Oxford University and leading academic institutions to create the persuasive academic framework required to realistically present their ideas for sustainable business as a valid one for all businesses to align around and to counteract the idea that businesses should exist only to maximize profits.
What truly impresses me about Mars and the Catalyst people is the depth of their conviction that business should exist to benefit the people around it, not just the shareholders.
In Taiwan roughly 65.6% of public companies are family controlled. This is often presented to me as the reason why so many companies in Taiwan do nothing beyond meeting the minimum legal requirements to benefit society and the people that interact with and work at them. The argument I am presented with is that family companies are by their nature purely greedy and only care about profit and not only do they not try to create mutual benefit, but they often don’t care if they cause active harm. You do not have to look too far to see everyday examples of this approach to business in food and building safety together with many other examples of callous disregard for anything except profits. In stark contrast to this argument, Mars is one of the largest family owned companies in the world and yet it believes that most of its success is attributable to being a responsible entity that actively promotes mutual benefit, not profit maximization.
The arguments for the Economics of Mutuality are compelling ones. As Catalyst explains:
“Over the last thousand years economic history has shown that sustainable prosperity is always based on three factors: The plant provides, the people transform and capital ensures liquidity in the system.”
In the 1970’s, when the drive for profit maximization rose to prominence, capital was scarce, while the workforce was abundant and it was believed that resources were also abundant.
“Things are different today. There is now an overabundance of capital, while there is a shortage of resources and a shortage of workers able to meet the demands of the new types of work being created. But, business thinking has largely not yet adapted to this new reality.”
In order to be sustainable into the future business must shift its thinking from chasing profits only, to ensuring that it delivers holistic benefits to society. Of course this does not mean that shareholders should not get a return on their capital, it does however mean that chasing that return should not be the only driver for a business.
So far I have been discussing a fair amount of theory, so let’s instead turn to a small look at what this kind of approach looks like in practice, by looking closely at one of the pilot programs run by Catalyst entirely based on the Economics of Mutuality principles that it is advocating.
Catalyst has been piloting a program based around a new business model, harnessing both human and social capital in the slums of Nairobi and Manila to unlock shared financial capital.
The approach that they have taken is one that presents a huge opportunity for Mars itself, in that it provides a path to market for Mars into the enormous base of the economic pyramid (essentially the billions of people living on a few dollars a day – well over half the world). The benefits to be gained however are not one-sided, they are designed to be mutual. By providing entrepreneurship training and support to potential ‘micro-entrepreneurs’ in these incredibly poor communities they are helping to raise overall income levels and to build a robust layer of self-sufficiency into the community.
For the past few years Mars has been working in the slums of Nairobi, a place of profound poverty where average unemployment is above 40% and youth unemployment is over 75%. Electricity is scarce and infrastructure like roads and sewerage are severely lacking. Over this time they have created almost 500 new micro-entrepreneurs, most of them women, who have dramatically improved their financial and social situations. Over the course of doing this the program has worked with a variety of partners to create entirely new ways of doing business, providing access to banking services, creating methods of data collection and providing extensive training in entrepreneurship.
Essentially this program has created an entirely new market by making a bundle of desirable products available to people in these areas and providing them with the training in how to sell these products and earn a good living doing so – essentially helping them to set up their own small shops. This is not as simple as it may sound. There was no logistics infrastructure here for example to keep these micro-businesses supplied, so other micro-entrepreneurs needed to be trained in how to do this and added to the chain. There were no banking facilities, so they needed to partner with NGO’s to provide micro-finance to budding entrepreneurs. They also partnered with a local telecom and university to enable the collection of data on the success of the project.
And it is very successful. So successful in fact that it is generating higher average profits than the other segments of the Mars business currently operating in Kenya and is now a major contributor to in-country revenues.
This approach has been a breakthrough one and has proven so successful both for Mars and for the communities that they have worked with, that it is now in the process of being scaled up throughout Africa, South East Asia and even in segments of otherwise developed markets.
They are alleviating poverty and building prosperity in these communities by providing meaningful opportunity to people, using existing social bonds to facilitate business, as many of the traditional institutions expected in developed markets are missing or underdeveloped. The benefits are then shared right across the chain, including within Mars itself, which is what makes this strategic and sustainable CSR.
If you are still with me and reading this, you may be thinking that this sounds like either charity or yet another big company taking advantage of people and claiming to do good so that they can use their activities in public relations materials. Whilst I understand these thoughts and see plenty of examples of cynical exercises by companies that appear to be helping society when they truly do not care, this program is quite simply not one of them. At all levels of the business and the people involved in this program the motive is exactly what they say it is, to prove that businesses can do well themselves whilst also benefiting society and the people they interact with. It is a new economic model and it works.
These programs have been built around a very strong desire to create and measure the success of the benefit sharing between all parties. As profits are not the prime driver, this has required the development of other measures, in addition to traditional income ones. Measures such as increased entrepreneurship, greater social cohesion, trust within the communities and access to services that enable business, have all been created over the last few years and are actively measured and managed.
This may seem like a dry subject and maybe a small shift in thinking, however the reality is that Catalyst is pioneering and proving an entirely new definition for the purpose of companies – a shift in thinking that if they are successful in persuading other companies of the benefits, truly has the potential to make our world a better place.
My conversations with Clara around her work on this change always leave me filled with hope for the future. She and the people she works with at Catalyst are not just dreamers. Every day they move further towards proving the approach they espouse as a logical one for other businesses to adopt and it is this type of strategic approach to corporate social responsibility that leads me to hold them up as a fantastic example of best practice.
Space here has been limited and the depth of thinking behind the Catalyst programs is so comprehensive that if you are interested in this work I suggest you have a look at their blog at CatalystCuratedContent.com, where they have excellent resources, including several videos that explain their approach and the Economics of Mutuality very clearly.