Ranjit Voola has a message for big business. The future belongs to the companies that rethink their single-minded drive for profit, and instead look to developing countries for opportunities to make money, while improving peoples’ lives.
One of my most significant childhood memories is seeing my parents, who were Christian missionary doctors in India, providing medical care to the poor. This had a profound impact on me, shaping my world view and my career goals.
In 2014, I developed a new unit of study for the University of Sydney Business School curriculum titled ‘Poverty Alleviation and Profitability’, arguing that there is both a moral and an economic imperative for businesses to engage with social issues such as poverty alleviation – and they can do this while making profits.
The idea for this unit emerged from my engagement with the global conversation relating to reimagining the purpose of business. Since Milton Friedman’s quote in 1970 that the “corporate social responsibility of business is to make profits”, there has been a transformation in thought regarding the role of business in addressing global challenges. Specifically, there has been a critical examining of the notion that profits can be a means to a greater end – societal wellbeing.
I believe companies that demonstrate ambidextrous strategic thinking by reconciling seemingly contradictory outcomes, such as poverty alleviation and profits, will be the leaders of the future.
There is an obvious economic imperative – there are 4 billion people who live on less than $5 a day. As developed countries become saturated markets, companies are looking towards these other markets. However, only companies that rethink their business models from the traditional ‘low volume and high margins’ to ‘low margins and high volume’, will be able to address social issues ethically, as well as make profits. In other words, the idea is to build your profits on a little money from many people rather than more money from fewer ‘rich’ people.
There are 4 billion people who live on less than $5 a day.
For example, there are 2.5 billion people in the world who do not have a bank account, which exacerbates poverty because they have no way of participating in the financial world.
Seeing an opportunity, communications giant Vodafone worked through a Kenyan network operator, Safaricom, to develop a financial product called M-Pesa. This allows their Kenyan consumers (often the poor) with no bank accounts, to transfer money through their mobile phones. When the consumers subscribe they can deposit money with their Safaricom agents, often in easily accessible corner shops. The money is then in the consumer’s account and can be withdrawn from another agent. As a result, M-Pesa has enhanced financial literacy and security, and allowed easier access to funds, while simultaneously achieving profits.
Seventeen million Kenyans are now using this product and it has been introduced in Afghanistan, Mozambique, South Africa, Tanzania and India.
In another example, Lifebuoy soap, owned by multinational company Unilever, has run a massive campaign in India to promote regular handwashing. This simple piece of sanitation knowledge could save the lives of thousands of children who die from diarrhoea every year. At the same time, of course, Lifebuoy is accessing a vast new market.
An important global narrative that provided impetus for this counterintuitive business thinking was created in 2015, when the United Nations ratified 17 sustainable- development goals. These goals include ending poverty, increasing gender equality and addressing hunger. The 17 goals have 169 targets that provide a roadmap to a better world by 2030.
The United Nations argues that these goals cannot be implemented without the private sector, which is an important departure from the previous reliance on non-government organisations (NGOs) and governments themselves. This change of focus is already having an effect locally. In 2016, 33 Australian chief executives signed up to the CEO Statement of Support for the sustainable development goals. This push for businesses to reimagine its purpose and engage in ambidextrous strategic thinking is also visible in the Australian Government’s current aid policy, ‘trade for aid’, which revolves around the private sector.
Interestingly, individual consumers also expect businesses not just to do no harm, but proactively to do good for society. In my teaching I see a clear desire in students to learn about how they can change the world for the better, through business. When looking for employment, they are also seeking out companies that are making a difference. Most importantly, some CEOs are passionately calling for businesses to engage with social issues. The key question for companies, then, is how can they best embrace this new paradigm that challenges the traditional assumptions of business?
I believe such a transformation is possible. Specifically, companies need to unlearn the entrenched notion of the purpose of business (singular focus on profits), before learning about implementing the sustainable development goals. An introspective internal dialogue about their purpose is needed. Complex problems require complex partnerships. Businesses must go beyond their comfort zones to develop partnerships with NGOs, governments and civil society, as well as with the very people affected by these issues. If a company is trying to alleviate poverty, developing genuine relationships with the poor is critical, because they are the experts on poverty!
At their core, sustainable development goals such as ending poverty and hunger require the heart as much as the mind. Business leaders need to reflect on the emotional connection they personally have with the goals. Apart from work, they – and all of us – should ask, what am I passionate about? Climate change? Ending poverty? Supporting a charity? How can we use that self knowledge to motivate engagement with the goals while making a profit at the same time?
For myself, I have two daughters, Charvi, 8, and Leela, who is one year old. My emotional connection to the sustainable development goals is to shape the world by 2030 so that gender inequality will not be a problem anymore.
I believe that businesses that can reflect on the following question will be able to combine profit with purpose, a characteristic that will define the leaders of the future: Where does my passion meet the world’s greatest need, at a profit?
Written by Associate Professor Ranjit Voola (CertEdStud ’08)