Companies & Industries

Authentic Engagement, Truly


A consulting firm's formula for taking on social problems in a competitive—and ultimately profitable—business context would merit Peter Drucker's blessing

Whenever something is labeled "authentic," it's a good bet that it's anything but. Nevertheless, every manager would be wise to consider what FSG Social Impact Advisors, a Boston organization co-founded by Harvard Business School's Michael Porter, is calling "Authentic Engagement." The idea is for companies to take on social problems but in a competitive context—to look for ways to contribute to the larger community while tackling key business objectives. "Many progressive companies…are seeing social issues through this new lens," FSG reported in its latest newsletter, citing a number of examples, including Toyota's (TM) targeting "zero emissions mobility," Unilever's (UN) promoting good health practices through its Lifebuoy soap, and the fragrance and flavor giant Firmenich's working with poor vanilla farmers on sustainable growing techniques. One can easily imagine what Peter Drucker's response to this flash would have been: It's about time. In his 1973 book Management: Tasks, Responsibilities, Practices, Drucker urged companies to see social ills "as major sources of opportunity." What's more, he counseled them to make sure these opportunities were "built into the strategy" of the enterprise, not viewed as some philanthropic afterthought. The Ultimate Responsibility

Yet it was even earlier, in 1954's The Practice of Management, when Drucker began to argue that meeting a corporation's mission and helping to transform society positively are not only compatible but also mutually reinforcing. "It is management's…responsibility to make whatever is genuinely in the public good become the enterprise's own self-interest," he wrote. Drucker didn't view this as some quixotic exercise. Indeed, he believed it essential that a seamless blending of public and private gain become a common feature of corporate life. "In this lies the real meaning of the "American Revolution" of the 20th century," Drucker declared. "That more and more of our managements claim it to be their responsibility to realize this new principle in their daily actions is our best hope for the future of our country and society, and perhaps for the future of Western society altogether. "To make certain that this assertion does not remain lip service but becomes hard fact," he continued, "is the most important, the ultimate responsibility of management: to itself, to the enterprise, to our heritage, to our society, and to our way of life." Ersatz Engagement

A half-century later, we can only shake our heads and wonder what went wrong. That we now feel compelled to use a term such as "Authentic Engagement" is a measure of just how far from Drucker's original vision we have strayed. To start with, there is an awful lot of ersatz engagement out there. For many companies, invoking "corporate social responsibility" has become a halfhearted statement of noble intentions or, worse, a PR stunt. Tellingly, the marketing firm TerraChoice announced last April that companies were guilty of some form of "greenwashing," or misleading the public about their environmental qualities, in 98% of the 2,219 products it had examined. In addition, too many executives have become focused on doing well, with little regard for doing good—a mindset that helped trigger the global financial crisis that continues to hurt so many people. Some theoreticians and practitioners contend that the persistent pursuit of maximum profit will, in the end, accrue to everyone's advantage. But Drucker held this Gordon Gekko-like logic to be nonsense, dangerous even. "A society based on the assertion that private vices become public benefits cannot endure," he warned. "For in a good, a moral, a lasting society, the public good must always rest on private virtue." Customer Creation

Still, discovering ways to satisfy corporate goals and society's needs simultaneously—what FSG describes as "shared values"—isn't necessarily easy. A survey released last summer by IBM (IBM) found that only 30% of executives receive adequate data on carbon emissions, labor standards, product composition, and the like to figure out how to make a societal contribution in these areas, even if they want to. Companies, meanwhile, must also guard against being pushed or pulled into projects that don't make sound financial sense. "Whenever a business has…assumed social responsibilities that it could not support economically, it has soon gotten into trouble," Drucker wrote. Yet Drucker, as well as others who share his philosophy, would also encourage companies to recognize that, as globalization accelerates and technology spreads, there is an ever-increasing chance—if not an obligation—to both further economic performance and make the world a better place. "Business, as the most powerful institution in society, must be the instrument of social justice," management scholar C.K. Prahalad, author of The Fortune at the Bottom of the Pyramid, proclaimed a couple of weeks ago in Vienna, at a forum marking what would have been Drucker's 100th birthday. At the same time, he stressed "the practical value" of this approach—namely, how 5 billion underserved and unserved people across the globe present an extraordinary opening to carry out what Peter Drucker said was the primary purpose of any business: creating a customer. Opportunities Everywhere

For many, looking at things this way requires an adjustment in thinking—a lesson David Cooperrider, a professor at Case Western Reserve University, learned when he visited Drucker in 2003, two years before Drucker died at age 95. "Can social responsibility also be profitable?" Cooperrider asked. Drucker smiled and told his guest that he had it backward: The question is not whether social responsibility can be profitable to a company, but how profitable a company can make social responsibility. "Every single social and global issue of our day is a business opportunity in disguise," Drucker told Cooperrider, echoing comments he had first made decades earlier. The insight helped spur Cooperrider to launch the Center for Business as an Agent of World Benefit, which is advancing the concept through research and action. Let's just hope he resists the temptation to rename his venture the Center for Business as an Agent of Authentic World Benefit.


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