ENTREPRENEURS AS AGENTS OF CHANGE

IS IT THE ENTREPRENEURS RESPONSIBILITY TO MAKE A DIFFERENCE IN SOCIETY?

Renee Horne-London                                3 August 2011

So you, as an entrepreneur, took those risks and worked hard to develop a product that has ultimately made a profit. But is your profit beholden to societal approval?  Pundits argue that making a profit is, by and large, providing goods and services that customers want and prefer, with the agreement of society. Indeed some describe the best entrepreneurs as tasked with finding the best products that meet customer needs in new ways and, in doing so, governments, employees and customers feel good about them in terms of the impact on society. Ultimately does your success need to be shared with the broader society?  Over the last few weeks, the World Entrepreneur Society (WES) conveyed stories of social enterprise and corporate social responsibility from Asia to Africa to that of Europe. So the crucial question to ask is can a business succeed in a society that fails?  The flip side of the coin is that if a society succeeds and your business fails, who can you turn to in troubled times?  What is the entrepreneurs’ responsibility; to society, to profit or to both?

FORTUNE AT THE BOTTOM OF THE PYRAMID

Economic jargon states that the bottom of the pyramid consists of four billion people making up 65% of the world’s population.  They constitute the largest socio-economic group in the world.  Hence the term 'bottom of the pyramid' is an entrepreneur targeting that socio-economic demographic by using innovative ways. The “Fortune at the Bottom of the Pyramid” dubbed by C.K. Prahalad, suggests that companies can not only make money selling to the world's poorest, but also by undertaking such efforts as a necessary way to close the growing gap between rich and poor countries.  The argument here is that the world’s poorest is a huge market to tap into and this is contrary to conventional methods of doing business where the rich and the middle class are an attractive market. A case in point is an entrepreneur may be inclined to design a product for the poor. For example, the Hindustan Unilever product which is a shampoo that works best in cold water, targeting the poor who do not have electricity.  According to the Economist, another example of the bottom of the pyramid approach is micro-credit, by making small amounts available to the poor which allows banks to increase their business.  Micro-credit is a growing market in South East Asia. However, would banks not be at risk as many of the poor may not be able to meet the payments every month?  One could also take the route of venture capitalists that of investing in Small Medium Enterprises (SMEs) in a particular society.  SMEs have been dubbed as the backbone of many economies, aiding in terms of increasing employment. However, it should be noted that many SMEs fail within two years of opening their doors.  Another option is the business community partnership such as that of the SC Johnson Company who partnered various youth groups in the Kibera Slum of Nairobi, Kenya.  This was a community based waste management and cleaning company which not only provided a profit for the company but assisted in youth development, employment and cleaning up of the slums. While this may appear to be a win-win situation, as the company has returns, employment and development for an individual and community enhancement, are such projects viable? Who benefits the most?

   
THE HARD CHOICE

While more and more social enterprises in developing countries use the ‘Bottom of the Pyramid’ model as a potentially large market for their products and services, is it not the entrepreneur’s job to make a profit or ultimately maximise returns for shareholders?  Does the entrepreneur have the business of improving society when his business is to make a profit?  There are times where the interests between a society and business collide, what happens then?  Citizens pay taxes, so is it not the government’s job to worry about societal woes?  Is it also government’s job to ensure that entrepreneurs operate in a society where their businesses can flourish?  It is the entrepreneurs’ duty to question and then make a value judgment.  There is a choice.  The harsh reality is some companies are successful but are committed to social responsibility; equally there are successful companies who couldn’t care less, focusing solely on profit.  The downside is that you may give more to a society that does not guarantee any returns.  However, entrepreneurs that thrive are in the business of knowing what people want, hence seizing the opportunity to make their products serve their customers.  So ultimately a business cannot live in a vacuum. In order for a business to operate and do well it needs a healthy society, with a thriving economy. Businesses will rarely succeed in an environment where there is war, strife and lawlessness. But then again there is a lot to be said about those who make money from war and strife!  Ultimately, is it the primary role of a business to alleviate poverty with the goal of making a profit while seeing real progress?  Have your say…..