Business as a solution to Social Problems

Contemporary world has been confronting with many social problems that people, government and business societies are concerned about. Many serious problems are arising that have come down heavily on the people. Problems like: climate change, deforestation, poor nutrition, access to water, pollution etc. have created major threat to livelihood of people. The problems are supposed to increase even more when endeavor of governments to address these problems have been making only an incremental improvement and primarily the reason for this being scarcity of resources.  In this connection when government (which has been referred to as the solver of societal problems) has been facing with resource crunch, the onus lies on the business which is the real creator of resources in the form of profit. 

Business can create resources when they meet the need, at a profit.  Business at the present time possess humongous power availed to them via resources possession. The accumulation of vast resources generated from profit enables them to mobilize energy and resources to solve the societal problems.

Societal problems and Business:

When we generally talk about business in relation to the societal problems, two differing views appear. The traditional thought identifies business as a creator of societal problems. Meaning that business creates profit at the expense of the society. Profit is excessive when: pollution is massive, labor exploitation is prevailing etc. This is the view that is commonly prevalent which partly is also because of the fact that companies have been neglecting the society in which they operate.

However the modern thought opines exactly the opposite and finds a cordial linkage between business and societal problems. For example a business causing less pollution means that the system is efficient, resources wastages is minimum etc. which automatically leads to more profit and vice-versa. As companies focus on long run of business, the notion of business as solver of societal problems is getting more practiced. This philosophy has been more popularized by socially responsible investors.

Role of CSR in addressing Social problems:

CSR in not a new buzz world in business world. The term originated in a club Rome in 1970s among a group of scholars, thinkers, executives that took talk of laying the future of sustainable development.  Though there isn’t any widely accepted definition of CSR, it can be defined as a self-regulatory mechanism, voluntary rather than mandatory, whereby business ensures compliance with the law of land, ethical standards, and international values. As such, besides embracing the responsibilities for the business actions, CSR attempt to address social issues by going beyond the interest of the firm and the law of the land. Though CSR has often been referred to as a voluntary initiative, recent change has been in the direction to make it mandatory also. For e.g.: Company Act  2013 of India makes CSR a mandatory obligation on the part of the company with  at least INC 5 crore net profit or INC 1,000 crore turnover or INC 500 crore net worth, to pay 2 % of their average net profit of three year on CSR activities on each financial year. The importance of CSR reporting is increasing which are driven by regulatory bodies and stock exchanges around the world.

In case of Nepal, there is absence of dedicated policy that guides CSR activities. Proper enforcement of existing laws will promotes basis for voluntary CSR activities. For instance Environment Protection Act 1997 forbids individuals and enterprises from polluting the environment that might have an adverse effect on the environment or public life. Similarly other acts like, Consumer Protection Act 1998, Black Marketing and Punishment Act, Drugs Act, Corruption Prevention Act, etc. promotes fair practices in business and society.

For companies wanting to be socially responsible, CSR standardization measure like ISO 26000 can give a good reference. ISO 26000 though is a voluntary measure, specifies key principles as roots of socially responsible behavior which are: accountability, transparency, ethical behavior, respect for rule of law etc. Similarly another accepted framework is Triple bottom line which identifies three Ps: people, planet and profit as three pillars of sustainability. As such concern of society, economy and environment must be addressed. Also OECD guideline to multinational companies, UN Global compact etc. are also very popular.

Futuristic Approach to CSR

Though CSR initiatives have been effective in addressing social problems (at least in incremental way) the more sustainable approach to CSR approach would be “Creation of Shared Value” which means addressing of a social issue with a business model. The notion of creating social value is to create product offerings that meet social needs. Harvard Professor and strategist Michael Porter in one of the Ted talks, identifies this model as “high form of capitalism that aims on addressing social problems in effective way”. For e.g.: Invention of drip irrigation technology saves water and fertilizer by allowing water to go drip slowly to the roots of plants, Nestle initiative to become a nutrient company rather than being a food company (that may make people victim of obesity), etc. marks the movement of a company towards this approach of creation of share value.

In another way, this approach enables companies to change the conventional approach of the society of business as creator of social problems. The advantages of this would flow in manifold volume which might be, reduces business risk, greater acceptability of brand, garner customer appreciation, brand enforcement, reduce conflicts etc. which in totality helps it to be a leader in the industry.

As such business resources when deployed effectively can play an instrumental role in solving social problems that are too large for government and I/NGOs.