Why Philanthropic Businesses Should Focus on Social Purpose

Originally published on VictorJung.org

For decades, many corporations have had just one singular focus – increasing value for the shareholders.

Early education has taught us the value of philanthropy, but it has also been enshrined into several laws that permit shareholders to hold executives responsible for attempting to increase profits at any cost. Such a policy has led to some great innovations in technology, making the supply chains faster and more efficient than previous years. It has, unfortunately, also led to some of the most damaging exploitation, abuse, and neglect of the workers, communities, and environment that support these corporate giants.

The larger, social issues that they are primed to address or possibly prevent have disappeared from the list of priorities for corporate executives in pursuit of this singular goal. The belief was that, in time, the “market” would fix most of the bugs in the system. Businesses would be forced to improve working conditions, create safer products, and preserve the environment, because failing to do so would affect the bottom line. After nearly five decades of such a policy, people and (most importantly) corporations are waking up to the fallacy of that world view.

Vast income inequality, social upheaval, and environmental disasters have forced businesses to rethink the idea of shareholder primacy. Calls for a shift away from a purely profit-driven corporate culture to one that takes the business’s responsibility to the communities they serve and the planet are growing. Even investors are shifting their focus, with more and more investors putting money into sustainable, responsible, impact-driven investments.

Curiously, it is the handful of brave companies that have bucked that convention that has reported greater growth and stability. By creating a corporate culture that aims to promote an economy that serves everybody instead of just the shareholders, companies have outperformed the market by 5-7% annually. They are proof that being a genuinely philanthropic entity is profitable and sustainable.

When corporations shift focus and begin to examine the impact they can have on the larger community they are primed to come alongside government and NGOs to address serious issues. They can become change agents that not only enrich their shareholders but the communities in which they exist and serve. Not only are the communities happier and healthier, but the employees are also more engaged in their work and find greater meaning.

Leave a Reply