By Genevieve Smith, Master of Development Practice, Class 2016
As a development practitioner and masters student, I’m surrounded with news and images around how companies have done wrong to people or the environment. My peers and I see development issues as oftentimes being perpetuated or even caused by companies. Take the Rana Plaza factory in Bangladesh for example, that had blatant safety issues and collapsed due to structural failure in 2013 to kill over one thousand workers and injuring hundreds of others. In our discussions inside and outside of class, it becomes far too easy to paint these negative pictures and mentalities of large companies.
Over these past two years in the Master of Development Practice program at UC Berkeley, however, I’ve been intrigued in the potential of business, recognizing the immense power that business holds and the crucial roles that business can play in reaching ambitious development goals. Thus, I first stepped into the Haas courtyard last spring feeling (1) excited about the free food, and (2) like a conflicted, but eager imposter. Over the past year, however (and particularly in my most recent course, Strategic and Sustainable Business Solutions), three key learnings have impacted everything I thought I knew about business and its relationship to development:
- A company is just comprised of individuals making choices and inspired by purpose. People, for the most part, want to do good and live a life of purpose. That sense of purpose can come from something as simple as selling feminine hygiene products in the US market, or as pronounced as reducing the number of school days missed by girls in India through designing and distributing low-cost pads. By passing companies off as intractable, heartless entities there is a huge amount of wasted opportunity. Rather, companies are comprised of people who are potential partners for development outcomes that I can relate to.
- Social impact and business impact are increasingly, inextricably linked. Climate change, for example, affects 93% of the US equity market, representing $33.8 trillion market capitalization according to the Sustainability Accounting Standards Board (SASB). Reducing impacts on climate change is thus imperative for businesses to be competitive. Returning to the Rana Plaza example, companies who sourced from this factory faced large, negative reputational shocks and boycotting campaigns. Companies cannot afford to take the risk of sourcing from factories that abuse human rights.
- Women’s empowerment has wide implications in for-profit sectors and vice versa. My arts and sciences background in gender and women’s empowerment (a.k.a. the “light side”) has focused largely on building capabilities of women in developing countries. This in turn can have impact on development outcomes, as women reinvest 90% of what they make back into families and communities whereas men reinvest 30 to 40%. Companies have invested over $300 million in the name of women’s empowerment and launched dozens of initiatives. Levi’s, one such company, goes above and beyond to work with factory vendors to provide living wages, fair hours, as well as access to training and life improving goods such as cookstoves and solar lanterns. They are interested in improving workers’ lives inside and outside of factory walls. Suppliers have seen a significant return – up to $3 for every $1 invested in the program. The “right” thing to do is increasingly the right way to do business and vice versa.
Ultimately, finding shared value, where both companies can benefit as well as communities, simply takes a shift in how we mentally construct the purpose of business. This is a shift away from Milton Friedman’s outdated belief that the purpose of business is to increase profits for itself and its shareholders. This belief perpetuates a narrow view of business that legitimizes supply chain activities peppered with human rights abuses. Our world today requires the view that Scandinavia has been pushing for decades, in which the purpose of a company is to create value for stakeholders, not just shareholders.
This article originally appeared on LinkedIn as part of series of posts for Professor Robert Strand’s MBA class on Strategic and Sustainable Business Solutions.