Profit sucks, or does it?
Have you seen Larry Fink’s letter to the CEOs of companies that Blackrock invests in? According to Bloomberg it has ‘upended half a century of business thought’.
The upending is caused by these sentences: “society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”
Short-term gains for shareholders at any cost are being questioned with a preference for ‘long-term value creation’. Not just for shareholders, but for all in society. This being championed by Blackrock – the world’s largest institutional investor – is a massive shake-up for business that we’ve been campaigning for in the third sector for many years.
Yet to our surprise, few of our third sector colleagues greet this change with anything less than suspicion and cynicism. We’ve become so used to condemning business for its hand in creating grotesque inequality, that our auto response is to condemn profit-makers and denounce neoliberalism as a diseased from of capitalism.
Grotesque and diseased it may be. As one politician said at a recent discussion about inequality and high pay, “we live in a capitalist system but the majority have no capital in that system”.
But that is why – and we may be naïve – Larry’s comments are welcome.
Profit generated ethically and distributed wisely is much needed.
We need new ways to understand and eradicate the shocking inequality that has been generated over the past three decades. We need new business models that generate profit for everyone. And we need new champions in the business world to help make it happen.
Profit is not the problem. The problem is how profit is generated and how it is distributed.
We all know about the business models that generate profit at the expense of most people and distribute profits to the few. What we need is better and more innovative businesses that generate profit ethically and distribute it to the many!
It’s one of the reasons The Dragonfly Collective has been busy developing a social innovation and enterprise strategy with Caritas over the last two years. The business model is based on profit generation – but the profit will enable people locked out of the labour market for many years to get a decent and dignified job.
It’s a social purpose business, and we’re making sure that social purpose is built into all elements of the business model. While also making profit.
And we’re questioning some of the business models available to achieve this as we go. The well-established social enterprise model continues to need a shake up. Too many are built on business models that are for ‘social good’ but pay their workers poorly. Too many have illogically adopted business practices, offering products that don’t necessarily have a net social benefit (a social enterprise brewery for example – we love our beer, but really, for a social good?).
It’s these models that are behind the growth of social impact investing – investment funds that are indistinguishable to any other investment vehicle offering debt finance to the social sector.
That’s why it’s time for an upending!
That’s why we are working to develop businesses that are profitable for everyone.
That’s why we welcome Larry Fink’s letter.
There’s no better example of what’s possible than the Catalan Integral Cooperative in Catalonia Spain. It’s a project to “build an alternative economy in Catalonia capable of satisfying the needs of the local community more effectively than the existing system, thereby creating the conditions for the transition to a post-capitalist mode of organisation of social and economic life”.
Let’s see as it emerges and grows what lessons it might have for all sectors of society – even more so what disruption it might be capable of. It just might show that it’s possible to generate profit and distribute it to the many, not just the few, creating a better community and dignified life for all.
Watch this space!