By Alice Korngold, author, A Better World, Inc.: How Companies Profit by Solving Global Problems…Where Governments Cannot
Social, economic, and environmental challenges threatening our world are likely to increase exponentially in the coming decades. In my latest book, A Better World, Inc.: How Companies Profit by Solving Global Problems…Where Governments Cannot, I contend that only multinational corporations have the vast resources, global footprint, and incentives of the marketplace to build a better world.
Nonprofits have many good solutions, but lack the resources to scale. Governments have not achieved binding and actionable agreements. Some multinational corporations, however, are already leading the way by finding solutions to reduce and mitigate the damage of climate change and ecosystems loss, alleviate poverty and wealth inequality, and provide access to education and healthcare.
Challenges facing the world
Although steady progress has been made in reducing poverty over the past three decades, poverty continues to plague over 1 billion people. The growing disparity between rich and poor is a top concern of global leaders, as it threatens peace and prosperity. Climate change is causing extreme weather events that trigger human dislocation and geopolitical destabilization. The degradation of water, forests, and arable land threatens human existence.
The failure to adequately educate the world’s children, particularly in STEM (science, technology, engineering, and math) creates a disconnect between jobs and job-seekers, leaving too many people unemployed and a workforce without the skills to tackle global concerns. Millions of children and adults continue to die from preventable diseases and illnesses due to the lack of access to healthcare, medicines, and vaccines. People suffer the loss of human rights across the globe as victims of human trafficking, labor abuses, violence over conflict minerals, and limits to free expression. All of these world problems bring suffering to people and their families. Companies have begun to realize that these global struggles also undermine economic progress and their businesses.
Opportunities for businesses
Companies that discover solutions to global threats have much to gain. Improving energy efficiency, recycling materials, and ensuring that families gain access to healthcare services help companies mitigate risks, reduce costs, increase profits, and build long-term value and sustainability.
The greatest opportunities for businesses to profit are in emerging markets, where 3 billion people will enter the middle class in the next two decades. In Africa alone, consumer-facing industries will grow by $400 billion. This underscores the value of a well-educated, trained workforce with healthy families.
A number of leading companies are becoming global problem-solvers
There are many examples of companies that are solving global problems, including Ecolab, Hewlett-Packard, Kimberly-Clark, Microsoft, Nike, and Unilever. Here are a few other examples:
- Johnson Controls is retrofitting buildings for energy efficiency, focusing on large-scale projects like the Empire State Building in New York City and the Inorbit Mall in Mumbai. Retrofits generate profits for the company, benefit the commercial real estate companies that partner with Johnson Controls, and provide cost savings for building tenants. Additionally, building retrofits will have a high impact in reducing the world’s greenhouse gas emissions, since 70% of the world’s population will live in cities by 2050, and the building sector consumes up to 40% of the world’s energy.
- GlaxoSmithKline (GSK) is partnering with Vodafone to increase the uptake of DPT vaccines in Mozambique. If successful, the pilot will be taken to scale in many African countries, where it has the potential to save the lives of hundreds of thousands of babies. If the pilot is expanded, GSK could sell millions of vaccines and Vodafone could increase its sales as well.
- Dow Chemical’s pro bono work in East and West Africa informs the company’s decisions about investing billions of dollars in new manufacturing plants that will last between 50 and 100 years. The company is working in the region to help expand and scale million-dollar social enterprises that provide low-income people with water, sanitation, agriculture, and energy services. This experience helps the company avoid making bad decisions and missing opportunities to maximize profits. Small investment, big return. Benefits include leadership development, capacity building in an important region, market research, and stakeholder engagement.
Global problem-solvers do three things well
Companies that profit by finding solutions to global problems do three things well:
- Include sustainability on the governance agenda: The board of directors has the legal and fiduciary responsibility to ensure the company’s prosperity. The risks and opportunities described here are boardroom issues. Sustainability is a governance matter.
- Partner with NGOs and sometimes other companies: Thoughtfully and purposefully identify and collaborate with NGO/nonprofit partners who bring expertise as well as credibility, relationships, and access to communities where the company seeks to engage.
- Engage with stakeholders: Build trust with consumers, employees, investors, and communities where the company has a presence.
Three groups drive global problem-solving
Three groups in particular are driving companies to find solutions to global problems:
- Consumers: Through social media, consumers are quickly aware of how companies treat their workers and the environment even in the most remote regions of the world. Consumers don’t like wearing clothes and using devices that are tainted by cruel labor practices, and they want companies to find solutions. Consumers feel good about companies that help us to reduce our carbon footprint and improve our world.
- Employees: People want their work to be meaningful… and serve a larger purpose. When companies consider how to use their resources to solve global problems, employees are motivated and more productive.
- Investors: Socially responsible investors already account for $30 trillion, approximately 20% of the estimated value of global capital markets. Additionally, Ceres reports that a number of mutual funds—including Goldman Sachs Asset Management and JP Morgan Asset Management—are now directing their proxies to support sustainability guidelines. And Ernst & Young’s proxy preview for 2014 shows that investors will focus on board effectiveness (including board composition) and sustainability.
A number of leading companies are beginning to learn—and exemplify—how to build profitable brands and businesses by engaging stakeholders, including women and girls who have been disenfranchised; young employees who are adept with technology, social media, and innovative solutions; consumers on the Internet worldwide; grassroots NGOs in the communities where there are opportunities to expand businesses; and investors who understand that companies are more valuable when they incorporate sustainability into planning. Furthermore, multinational corporations have the vast financial, human, and technology resources, as well as the global footprint, and market forces to drive transformational change in addressing issues from poverty to climate change. A Better World, Inc. shows that companies are the most likely institutions to solve the world’s most daunting problems, and that they are beginning to show promise in doing so.
Alice Korngold, President & CEO, Korngold Consulting, is the author of A Better World, Inc.: How Companies Profit by Solving Global Problems…Where Governments Cannot (Palgrave Macmillan, 2014) and Leveraging Good Will: Engaging Businesses in Strengthening Nonprofits (Jossey Bass, A Wiley Imprint, 2005). Korngold has been consulting to businesses and NGOs/nonprofits on board governance and sustainability/CSR for over twenty years.