A few days ago, I spoke at a conference on impact
investing. I was invited to speak on the topic “Trade-offs between profit and
social impact?” from an ethical perspective. The deeper I got into the
question, the more I discovered how interesting and challenging it was to
provide an adequate answer to. Indeed, there are several answers to it. The
first and simplest one is: “Yes, of course!” If a corporation doesn’t do
anything else but maximizing profits, it doesn’t bother about the social impact
of its activities. The “Invisible hand” of the market will turn private vices
into public goods. Spending money for “corporate social responsibility” is an
undue sacrifice of profits. All followers of the Friedman-tradition will agree
on that answer.
I think, however, that the title of my presentation
was set by those who invited me to challenge this tradition.
I discovered that you can look at the question from a
different perspective and say: “No! There is no trade-off between profit and
social impact.” Profit is the result of a specific impact of money in a
creative and productive socio-economic environment. No profit has ever been made without any
social impact at all. So the question regarding a trade-off is not the right
one. The right question is the one referring to the quality of the social
impact: “Is profit the result of a fair process of value creation, and a fair
process of distribution of benefits?”
The trade-off question leads me to the moral category
of “fairness”. This is not just because I’m an ethicist. It is because there is
no way around the fact that value creation is a process of social interaction.
In a business environment, this process is facilitated by the investment of
specific resources such as financial capital, human capital, natural resources
etc. Different stakeholders represent different resources and potentials.
Thus, coming back to the initial “trade-off-question”
we need to acknowledge that there may be nevertheless be a trade-off between
financial profit and social benefit. But we realize that the meaning of our
question has shifted away from a perspective of narrow financial interest to a
broader perspective of shared value creation.
Financial profit is just one particular form of
benefit that emerges from shared value creation. So: “Yes, there may be trade-offs
between different forms of benefit”. But one thing is clear: financial profit
at the cost of providers of specific and success-critical resources is not the
result of value creation, but of unfair value redistribution. We have seen
enough of that recently.
Financial profit in the context of shared value
creation and a fair distribution of benefits is a fantastic thing. The better
we understand the signs of our time, the better off we will be in the
future.
Christoph Weber-Berg
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