Can business really tackle poverty?
According to Harriet Lamb, CEO of Fair Trade International: “Businesses alone are not enough to tackle poverty; the EU should foster people-centred businesses. Cooperatives and Fair Trade have shown that they put high standards and strict rules on businesses, that they put people first, and still they are successful.”
When people-centred business was introduced to the UK in 2004, the business plan came with a warning about this being both a moral and a strategic imperative.
“While the vast majority of people in poverty suffer quietly and with little protest, it is not safe to assume that everyone will react the same way. When in defence of family and friends, it is completely predictable that it should be only a matter of time until uprisings become sufficient to imperil an entire nation or region of the world. People with nothing have nothing to lose. Poverty was therefore deemed not only a moral catastrophe but also a time bomb waiting to explode.”
The original warning was made in a 1996 position paper, in North Carolina where people-centred business was conceived. Today , Charlotte in North Carolina has been placed in a state of emergency.
How then can business put people first?
A key point from the 1996 paper was the argument against ‘shareholder value’, the belief that business has the sole responsibility of maximising profit for shareholders.
“The P-CED concept is to create new businesses that do things differently from their inception, and perhaps modify existing businesses that want to do it. This business model entails doing exactly the same things by which any business is set up and conducted in the free-market system of economics. The only difference is this: that at least fifty percent of profits go to stimulate a given local economy, instead of going to private hands.”
“If a corporation wants to donate to its local community, it can do so, be it one percent, five percent, fifty or even seventy percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object. But, if an a priori arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no objection can emerge. Indeed, the corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of corporate employees and community leaders. “
People-Centered Economic Development had first been deployed in Russia to source an experimental poverty alleviation program known as the Tomsk Regional Initiative
Interviewed in 2004, about this success and follow on activities in Crimea, founder Terry Hallman described the concept:
“The P-CED model is not a charity sort of operation. It is business. What we choose to do with profits is entirely up to us, and we choose before anything else happens to set most of our profits aside to assist poor people. In fact, our corporate charter requires us by law — UK law, where rule of law is very well established — to use our profits only for social benefit. We cannot do anything else with it.”
At this time P-CED had registered as a guarantee company, advocating the Community Benefit Society model for replication across the UK. The Community Interest Company did not yet exist.
In 2005, People-Centered Economic Development was introduced to Baroness Thornton, then chair of the Social Enterprise Coalition. Her name was suggested by Jerr Boschee, a prominent American social enterprise advocate. We then joined the SEC and introduced it again. “Your work is beyond our focus”, I was told.
Why then is people-centred business now being read back to us, with the benefit of EU funding to promote it?
Perhaps the willingness of Jerr Boschee to engage offers a clue. He and others like Charles (Hipbone) Cameron, Paul Polak and Marc Lane illustrate a culture of open dialogue that does not exist in the UK, where ‘not invented here’ might well be described as the order of the day.
Social enterprise in the UK has been very reluctant to engage in social media. As a software developer, I’d offered to help the SEC create a membership directory. Their preference it seems was to issue selective bulletins of new members. Senscot, the Scottish support organisation delivers a weekly bulletin to this day.
I was reminded of a passage from later work in Ukraine, which advocated the deployment of affordable broadband as one component of a development plan:
“Availability of affordable, modern day Internet access is crucial to any nation’s economic development. This is by now a truism and does not need much elaboration. It is enough to understand that nothing whatsoever can happen in terms of social, economic, civic, and political development without communication. To the extent that communication is limited or completely absent, development is equally limited. If demonstration of this is needed, each reader is invited to do the following. For the next week, do not speak, do not write, do not read, do not listen to or access any form of communication in any way. With those restrictions, it might still be possible to survive for a week. Extend the same restrictions indefinitely, and basic survival will be at risk. It is almost impossible to imagine life without communications of any kind.
In most of Ukraine, citizens have about the same degree of connection to the modern world. Information is usually one-way, receive only, by way of television, radio, and newspapers.”
One of the few to engage online is David Floyd, who blogs today about the state of social investment. An informative interview with the CEO of Big Society Capital is treated with the kind of reverence one might expect from an audience with the Pope.
Oddly enough, it was Pope Benedict who wrote in 2009:
“The economy needs ethics in order to function correctly — not any ethics whatsoever, but an ethics which is people-centred.”
“This is not merely a matter of a “third sector”, but of a broad new composite reality embracing the private and public spheres, one which does not exclude profit, but instead considers it a means for achieving human and social ends. Whether such companies distribute dividends or not, whether their juridical structure corresponds to one or other of the established forms, becomes secondary in relation to their willingness to view profit as a means of achieving the goal of a more humane market and society. “
The re-invention of people-centered business underlines the oxymoron of the term ‘social enterprise’ in the UK. There’s nothing very social about keeping others out of the conversation, to pass of their work as your own.
The future of business lies in people not profit, says the Blueprint for Business. Look at the tweets from The Great Business Debate and you’ll see who that came from. Alternately, you can read it on Mckinsey media.