I have heard Michael Porter's name being mentioned several times this term. In my Marketing Management class, we used Porter's five forces analysis in analyzing the external environment of our chosen firm. In my CSR class, we have some readings co-authored by Porter. Because of these mentions, I was looking forward to watching Porter's TED talk video since I was curious about him.
In his TED talk entitled "Why business can be good at solving social problems," Porter mentions the many problems facing the world such as lack of access to water, poor nutrition and obesity, and lack of skills. Usually, one would think that the solution to these social problems is the responsibility of NGOs and the government. Unfortunately, both these organizations cannot have a significant impact on these problems. Their lack of resources hinders them.
Only businesses can create resources. They generate resources by meeting a need. However, this single-minded pursuit of profit causes social problems. The new way of thinking proposes that businesses should help to solve social problems by creating shared value. Shared value is defined as policies and practices that enhance the competitiveness of companies while improving social and environmental conditions in the regions where they operate. Shared value can be addressed at multiple levels, such as (1) meeting society's needs through products; (2) utilizing resources, suppliers, logistics, and employees more productively; and (3) improving the local business environment. To solve social problems, businesses must change how it sees itself and also change how others see business.
After watching the video, I would like to say that I agree with what Porter is saying. Companies can profit by solving social problems. Workplace safety may seem like an added cost in the short term. However, in the long run, it saves the company cost of dealing with the accidents that occurred in the workplace. Addressing employee health may be an added cost to the company, but in the long term, healthy employees would increase productivity and reduce employee absenteeism and turnover rate. Reducing pollution might seem like an added effort and cost to the company, but companies can benefit from it.
I used to work in a manufacturing company that produces snack food. Part of the manufacturing culture there is to reduce waste. For example, the company reuses Kraft paper sacks. The sacks are used for storing or transferring intermediate but not yet processed products. Also, when the final product has quality defects, one of the things the company does is to grind the rejected product and sell it as material for fish food. Just like in the company I used to work for, a strategy that some corporations can adopt is to make waste reduction activities as income-generating activities or cost reduction activities.
Porter's talk reminds me of social enterprises. Social enterprises are businesses that address social issues while at the same time earning a financial return for its owners.
An example of a social enterprise in the Philippines is Rags2Riches. One of the co-founders of Rags2Riches is Reese Fernandez. The company started by addressing the problems of poor mothers in Payatas, one of the most impoverished communities in Metro Manila. Payatas is known as a former dumpsite of garbage. To earn income, the mothers, while looking after their children, weave rags and clothing out of scraps of cloth. The mothers did not make much money because they relied on intermediaries to sell their products. However, these middlemen took a large cut of the sold products.
Rags2Riches partnered with the women and designed a business model to improve the quality and style of their products, increasing its value and providing them with sustainable market access. As a result, women's income levels increased tremendously. The company eventually expanded its partnership to many communities in Metro Manila. The products of these artisans are sold in the Philippines and abroad.
As a result of the COVID pandemic, the women started to produce upcycled face masks in their homes, providing them and their families much needed income during the enhanced community quarantine months. To order, visit their website, https://thingsthatmatter.ph/collections/face-mask.
Kevin Arthur Chan is an MBA student at the Ramon V. del Rosario College of Business, De La Salle University. This article is part of his blog, a requirement for the course, Lasallian Business Leadership with Ethics and CSR. Visit his blog at https://dextrorotatory.wordpress.com/.
