Give a Man the Means to Fish

From Paternalistic Charity to Venture Philanthropy

Part 3 of 13 in Wayne Visser's Age of Responsibility Blog Series for 3BL Media.

By Dr Wayne Visser

Give a man a fish and he will eat today. Teach a man to fish and he will eat tomorrow – or until his nets break. Invest in a man’s fishing business and he will feed himself and others for a long time to come. This is what it means to shift from paternalistic charity to venture philanthropy. It is an evolution that is important to root in a long and varied cultural tradition of philanthropy.

Confucius (551-479 BC) said: ‘When wealth is centralized, the people are dispersed. When wealth is distributed, the people are brought together.’ Hence, ‘a man of humanity is one who, in seeking to establish himself, finds a foothold for others and who, desiring attainment for himself, helps others to attain.’ When asked, ‘Is there one word which may serve as a rule of practice for all one's life?’ he replied, ‘Is not reciprocity such a word? What you do not want done to yourself, do not do to others’.

This so-called Golden Rule, which we find in all the world’s major religions, has come to represent the very essence of charity. In fact, the word charity derives from Latin caritas, which meant preciousness, dearness, or high price. However, in Christian theology, caritas became the standard Latin translation for the Greek word agapē, meaning an unlimited loving-kindness to all others. Hence, in St Paul’s Letter to the Corinthians, we read, in the King James Version of the Bible, of ‘faith, hope and charity’. Of course, it is not only giving that is important, but also the nature of giving. There is a Jewish proverb that says: What you give for the cause of charity in health is gold; what you give in sickness is silver; what you give after death is lead.

Islam also has a strong tradition of charity. Zakāt, or alms-giving for the purposes of alleviating poverty and helping those less fortunate, is one of the Five Pillars of Islam. The practice is generally in the form of an annual tithe or tax of 2.5% of an individual’s wealth, including money made through business, savings and income. The zakāt must also be above an agreed minimum (called nisab), which is said to be around $2,640 or the equivalent in any other currency. As important as the collection of zakāt in a community is its fair distribution among the needy. Another form of charitable action is sadaqah, which literally means ‘righteousness’ and refers to the voluntary giving of alms or charity. These ancient traditions are considered to be a personal responsibility for all Muslims, practiced out of love for humanity, to ease economic hardship for others and eliminate inequality.

There are numerous other religious and cultural variations on the theme. Philanthropy in Latin America typically revolves around asistencialismo, which is charitable giving for poverty alleviation. Out of dedication to their religion, education and culture, Bulgarian communities raised donations to build churches, schools and cultural centres called chitalishta. In India, Gandhi’s trusteeship concept was adapted and applied to welfare acts. In Mexico, the Raramori, who still live in the mountains of the state of Chihuahua, use the expression korima, which means ‘to share’ resources in times of stress. In Southern Africa, ubuntu is the practice of humanism based on the collectivist notion that ‘I am a person through other people’.

So much for the roots and cultural traditions of philanthropy. Upon these foundations, the great philanthropists, ancient and modern, built their charities – from Rockefeller and Carnegie to Gates and Turner. The more interesting question, I think, is whether there is anything new and transformative about charitable giving?

One concept that has generated a lot of excitement is ‘venture philanthropy’. Seemingly, it has origins in another HBR article, ‘Virtuous Capital: What Foundations Can Learn from Venture Capitalists’, by Christine W. Letts, William Ryan and Allen Grossman in 1997. Their basic message was that corporate foundations can be more effective if they ‘develop hands-on partnering skills’, for which venture capital firms offer a helpful benchmark: ‘In addition to putting up capital, they closely monitor the companies in which they have invested, provide management support, and stay involved long enough to see the company become strong.’

Since then, the debate has raged about what venture philanthropy is and whether it is plausible, ethical and desirable. After all, if the venture capitalists are treating their donations as an investment with expectations of a financial return, then is it philanthropy, or just business? And is it feasible to expect charities like community development organisations to generate a financial return in the first place? And what about the distinction between venture philanthropy and social enterprise, or social business?

So what do we know? There are basically three models of venture philanthropy. The first is traditional foundations practicing high-engagement grantmaking. The second is organisations which are funded by individuals, but all engagement is done by professional staff. Examples cited include the Robin Hood Foundation in New York City and Tipping Point Community in the San Francisco Bay Area. The third is the partnership model, in which partner investors both donate the financial capital and engage with the grantees. An example is the Silicon Valley Social Venture Fund in San Jose, California.

Without getting heavily into the venture philanthropy debate, I do believe that – as with strategic philanthropy – it is symptomatic of the shift in our approach to tackling society’s most intractable problems. What we have seen is that traditional charity has been, for the most part, invaluable in bringing about alleviation of social and environmental distress, but rather ineffective in achieving resolution of the problems themselves. The need for pure philanthropy, irrespective of its strategic alignment to donors, will always be there. There will always be emergencies, crises and urgent problems that don’t link conveniently to business interests.

Venture philanthropy, on the other hand, recognises that we need ways to scale up solutions, and one way is to link business with a social cause, and provide the capital it needs to be effective. Hence, I regard venture philanthropy as one of the transition tools that we need as we move to the Age of Responsibility, not least because it brings creativity and scalability to the table. It is one of the critical enablers that is facilitating the social enterprise revolution, which is discussed in more detail in later chapters.

About the author

Dr Wayne Visser is Founder and Director of the think-tank CSR International and consultancy Kaleidoscope Futures Ltd. He is the author of thirteen books, including The Age of Responsibility: CSR 2.0 and the New DNA of Business (2011), The World Guide to CSR (2010) and The A to Z of Corporate Social Responsibility (2010). He is the author of over 180 publications (chapters, articles, etc.) and has delivered more than 170 professional speeches on in over 50 countries in the last 20 years. In addition, Wayne is Senior Associate at the University of Cambridge Programme for Sustainability Leadership, Visiting Professor of Sustainability at Magna Carta College, Oxford, and Adjunct Professor of CSR at Warwick Business School, UK.

Is Philanthropy a Smokescreen?

By Dr. Wayne Visser

Quest for CSR 2.0 Series No.3

“I believe it is my duty to make money and still more money and to use the money I make for the good of my fellow man, according to the dictates of my conscience.” —John D. Rockefeller Sr.

The Rockefeller story is a good one to introduce the Age of Philanthropy, not only because of John D.’s iconic status as a tycoon and philanthropist, but also because his life and views on charity embody much of the philanthropic attitudes that still prevail today in business. At the heart of the Age – and its chief agent, Charitable CSR – is the notion of giving back to society. Rather interestingly, this presupposes that you have taken something away in the first place. Charitable CSR embodies the principle of sharing the fruits of success, irrespective of the path taken to achieve that success. It is the idea of post-wealth generosity, of making lots of money first and then dedicating oneself to the task of how best to distribute those riches, by way of leaving a legacy.

In 1970, the respected US economist Milton Friedman published an article in the New York Times Magazine (13 September) entitled ‘The Social Responsibility of Business is to Increase Profits’. In it, he called the ‘doctrine of social responsibility’ a ‘fundamentally subversive doctrine in a free society’ and argued that ‘there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits, so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud’. As such, he came to define one end of the spectrum of opinion on CSR: the purist, stockholder (or shareholder) view, a view which was once again given an airing in the Wall Street Journals’ ‘The Case Against Corporate Social Responsibility’ article on 23 August 2010. Despite his hard-line view, Friedman does allow some concessions, saying:

“It may well be in the long run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects. Or it may be that, given the laws about the deductibility of corporate charitable contributions, the stockholders can contribute more to charities they favour by having the corporation make the gift than by doing it themselves, since they can in that way contribute an amount that would otherwise have been paid as corporate taxes.”

Although Friedman calls this ‘hypocritical window-dressing’ when done under ‘the cloak of social responsibility’, he concedes that these practices may be justified if they contribute to shareholders’ interests. Hence, he is setting out an early version of what today is more popularly called ‘strategic philanthropy’ – the practice of social responsibility only when it is aligned with corporate profitability. Three decades later, academics Michael Porter and Michael Kramer have given this concept more structure and credibility – and with considerably less malice directed towards CSR. In their 2002 Harvard Business Review article, ‘The Competitive Advantage of Corporate Philanthropy’, Porter and Kramer argue that:

“Increasingly, philanthropy is used as a form of public relations or advertising, promoting a company’s image through high-profile sponsorships. But there is a more truly strategic way to think about philanthropy. Corporations can use their charitable efforts to improve their competitive context – the quality of the business environment in the locations where they operate. Using philanthropy to enhance competitive context aligns social and economic goals and improves a company’s long-term business prospects. Addressing context enables a company not only to give money but also leverage its capabilities and relationships in support of charitable causes.”

Without a doubt, strategic philanthropy represents an evolution of more ad-hoc approaches to charity, and there will always be a place for philanthropy in responding to the most urgent and desperate unmet needs of society. Even so, we have to question the appropriateness and effectiveness of philanthropy in addressing the root causes of our biggest global challenges, which have more to do with the Achilles heel of Western capitalism itself, namely the environmentally unsustainable and socially inequitable growth and lifestyles that it spawns. How, for example, does so-called ‘philanthrocapitalism’ address the Western consumption, production and trade practices that are wreaking havoc with the world’s ecosystems and many of the world’s poorest communities? By and large, it doesn’t.

I believe ‘giving back’ after the fact is just a smokescreen, notwithstanding the generosity that it shows and the benefits that result. Would you agree?

Welcome to this international dialogue, Quest for CSR 2.0, with Dr Wayne Visser, pioneering author, academic and social entrepreneur. The dialogue, hosted by CSRwire Talkback, is based on his groundbreaking book, The Age of Responsibility: CSR 2.0 and the New DNA of Business. For the next several weeks, Dr Visser will summarize the main points and key lessons of each chapter of his book, exploring why CSR 1.0 has failed, the 5 Ages and Stages of CSR, the 5 Principles of CSR 2.0 and how to make change happen. Readers will be invited to share their views on each posting. This exciting new series is co-published by CSRwire and CSR International.

Original link on CSRwire

The Age of Philanthropy: The Wheels of Wealth

By Wayne Visser

The Rockefeller story is a

good one to introduce the Age of Philanthropy, not only because of John D. Rockefeller’s iconic status as a tycoon and philanthropist, but also because his life and views on charity embody much of the philanthropic attitudes that still prevail today in business. At the heart

of the Age – and its chief agent, Charitable CSR – is the notion of giving back to society. Rather interestingly, this presupposes that you have taken something away in the first place. Charitable CSR embodies the principle of sharing the fruits of success, irrespective of the path taken to achieve that success. It is the idea of post-wealth generosity, of making lots of money first and then dedicating oneself to the task of how best to distribute those riches, by way of leaving a legacy.

Of course, the ideals of charity and philanthropy pre-date Rockefeller. Like greed, charity is probably as old as humanity itself. And right from the beginning, there is an element of enlightened self-interest. For example, in the Hindu religious text, the Rig Veda (1,500–900 BC), we are told: ‘If it is expected of every rich man to satisfy the poor implorer, let the rich person have a distant vision (for a rich man of today may not remain rich tomorrow). Remember that riches revolve from one man to another, as revolve the wheels of a chariot.’ Similarly, in the Upanishads, another of the Hindu scriptures, it states: ‘Like in a well, the more you fetch, the more water oozes. The more you give the more you get. This generosity is mandatory to every individual. Hurry to promise or pledge to help.’

Turning to the Far East, Confucius (551–479 BC) said: ‘When wealth is centralized, the people are dispersed. When wealth is distributed, the people are brought together.’ Hence, ‘a man of humanity is one who, in seeking to establish himself, finds a foothold for others and who, desiring attainment for himself, helps others to attain’. When asked, ‘Is there one word which may serve as a rule of practice for all one’s life?’ he replied, ‘Is not reciprocity such a word? What you do not want done to yourself, do not do to others.’

This so-called Golden Rule, which we find in all the world’s major religions, has come to represent the very essence of charity. In fact, the word charity derives from the Latin caritas, which means preciousness, dearness, or high price. In Christian theology, caritas became the standard Latin translation for the Greek word agape, meaning an unlimited loving kindness to all others. Hence, in St Paul’s Letter to the Corinthians, we read, in the King James Version of the Bible, of ‘faith, hope and charity’. Of course, it is not only giving that is important, but also the nature of giving. There is a Jewish proverb that says: ‘What you give for the cause of charity in health is gold; what you give in sickness is silver; what you give after death is lead.’

Islam also has a strong tradition of charity. Zakat, or alms-giving for the purposes of alleviating poverty and helping those less fortunate, is one of the Five Pillars of Islam. The practice is generally in the form of an annual tithe or tax of 2.5% of an individual’s wealth (although the percentage can vary by country and tradition), including money made through business, savings and income. The zak_at must also be above an agreed minimum (called nisab), which is said to be around $2,640 or the equivalent in any other currency. As important as the collection of zakat is in a community, its fair distribution among the needy is even more important. Another form of charitable action by Muslims is sadaqah, which literally means ‘righteousness’ and refers to the voluntary giving of alms or charity. These ancient traditions are considered to be a personal responsibility for all Muslims, practised out of love for humanity, to ease the economic hardship of others and eliminate inequality.

There are numerous other religious and cultural variations on the theme. Philanthropy in Latin America typically revolves around asistencialismo, which is charitable giving for poverty alleviation. In Eastern Europe, Bulgarian communities have, over the years, raised donations to build churches, schools and cultural centres called chitalishta. In India, Gandhi’s trusteeship concept has been adapted and applied to welfare acts. In Mexico, the Raramori, who still live in the mountains of the state of Chihuahua, use the expression korima, which means ‘to share’ resources in times of stress. In Southern Africa, ubuntu is the practice of humanism based on the collectivist notion that ‘I am a person through other people’. And so on, all around the world.

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This is an extract from Chapter 3 of The Age of Responsibility: CSR 2.0 and the New DNA of Business. For more information and ongoing updates, follow the The Age of Responsibility Blog

Copyright 2010 Wayne Visser

Video: Peter Michel Heilmann on CSR & Philanthropy in Europe

Peter Michel Heilmann is President of Eurocharity. In this interview with Dr Wayne Visser, Director of CSR International, he talks about his experiences working in the charity sector in Europe. The interview took place in Athens on 11 June 2010.

CSR Gives Companies a Competitive Edge

This is a translation of an interview for Capital newspaper in Armenia, conducted when I was recently there delivering training (hosted by the UNDP/Global Compact, British Council and Eurasia Partnership Foundation) on CSR and Marketing. The interviewer was Habeth Madoyan.

Question: Mr. Visser, it is no secret that labour is cheaper in developing countries than in the developed world. Developing countries have weaker legislation on environmental issues, which gives them a kind of competitive edge in attracting foreign investment. Wouldn’t the promotion of CSR in a developing country deprive it of this edge?

Developing countries do have advantages as far as labour is concerned. To some extent, business and capital will go to those places where costs are less or standards are lower. That is why we need a system of CSR standards.

An interesting piece of research on Responsible Competitiveness, which covers 108 countries, has been published. This research shows that those countries where CSR is embedded in business and the government, and is also reflected in civil society, have a greater competitive advantage. In these cases, the link between responsibility and competitive advantages is always obvious.

So if developing countries have advantages based on lower costs, but do not have responsibility, then over time they will inevitably lose their competitiveness.

I think that, over the short term, it is possible to have economic growth without taking standards into consideration. But today, the CSR sector is seeing the integration into business of standards on quality, environmental issues and work conditions. So it is possible to sell a bad quality product at a cheap price and get to economic growth that way. But that is not a long term solution, because it leads to only short term economic growth.

After all, developed countries need more products of good quality. Their demand for responsible and ethical goods is constantly increasing.

Question: How should CSR standards and principles be introduced to developing countries?

The first path is through multi-national companies. In developing countries, they often use the same CSR principles and standards which are part of their operations at headquarters. This leads to the introduction of responsibility from developed countries to the developing world.

I think there is some pressure from the governments of developing countries too. China, for example, is saying that if the world wants it to become more responsible, then the world has to transfer the knowledge and technology necessary for this, preferably for free.

Today there is an interesting tension between the developed and developing world especially around the issue of climate change. The West has no moral right to tell developing countries that they cannot develop and grow or produce more and copy that which they have done. The West has no moral right to do this because it has already been on that path.

If the West is asking developing countries to adopt a new model of development and to produce cleaner, socially responsible and ethical products, then it should be ready to help them financially, through training and providing technology. Only through this kind of support does the West gain the right to demand a new model of development.

Question: How can one find the middle path between CSR and profit maximisation?

It is quite difficult to find the point of perfect balance between these two. Developing countries often find themselves faced with this problem. But it is necessary to seek and find the opportunities which allow cost reduction through steps aiming at environmental management. These are new business solutions that everyone is looking for today.

But in order to find these business solutions, it is important to have a strong system of governance, a well established civil society as well as pressure from the international community. In these cases, avoiding environmental issues could end up being more costly for companies.

One has to ask a simple question – what costs will I be facing ten years from now, if I avoid solving environmental issues today?

Economists have calculated that the money spent on climate change issues today could account for only about 1% of the world’s GDP. But if we leave avoid those issues now, then the costs could come to 20% of global GDP. This is the logic that we need to explain to our business community – by avoiding these expenses now you face much larger costs over a long term.

A few developing countries are bringing forward the concept of “environmental justice”, i.e. they are linking social issues to those of the environment. Their governments are coming up with legislation which encourages companies not only to spend on social issues. They demand that companies implement environmental programmes as well.

After all, it is the poorest layers of society that bear most of the ill effects of a polluted environment and it would be only fair for companies to deal with environmental issues as well.

Question: In our country, there are cases when companies are very active in philanthropy. Many people think that this is a “cheap” marketing ploy. How can one differentiate between them and draw the line between Marketing/PR and charity?

One first needs to understand the concept of strategic philanthropy. This is the theory of American academic Michael Porter. He says that companies should be involved with the philanthropy that deals with their area of business directly.

When a company works in agriculture, its philanthropy could be linked to food security issues. When that company is Coca-Cola, then its philanthropic work should involve water issues. In those cases, it is less likely that philanthropy will be used as a PR or marketing tool, because in reality it helps the business itself.

Corporate Social Responsibility is a much broader concept.

CSR is not about how a company spends the money it makes, but rather about how it makes that money. The weaker the link between CSR and the company’s main business, the higher the probability that it is being used for PR or marketing purposes.

There are a number of initiatives in the CSR industry that help us avoid these issues. One of these is the Global Reporting Initiative and its Sustainability Reporting Guidelines. These are very similar in nature to accounting standards. Accounting methods and standards are similar for all companies.

Through these, companies present their social activities, such that society also gets a chance to see and evaluate them. This would make it difficult for companies to use CSR as a PR or marketing tool.

Question: In your opinion, how will the global economic crisis affect CSR? Should we expect companies to lower their standards?

I think this question is linked to the last one. Those companies which are dealing only in philanthropy will suffer during the economic crisis. In these cases, philanthropic activity will lessen. Those companies which have strategic CSR will be less likely to reduce costs.

Coca-Cola will not be inclined to reduce its expenditure on water issues. They know that if the water situation worsens, the company would have serious problems.

Some time ago, that company had faced a conflict situation in India. They were accused of wasting water reserves there. It was not true, but that was the impression that people had there.

Coca-Cola is a huge consumer of water and, according to the people, they were responsible for water issues. That led to the problems for their brand reputation. But I don’t think that the crisis will affect the standards of those companies which have strategic CSR and ethical operations in any way; that is their way of working.

On the other hand, I think that a lot depends on the stage at which CSR is in a specific company. We may begin to see a tendency where companies that have well developed CSR gain additional competitive advantages in times of crisis.

That is natural – they have implemented a number of social programmes and so have a greater share of the public’s trust, which means better conditions of business for them.

The role of charity in CSR

Following my last post on philanthrocapitalism, you may think that I am somehow anti-charity. Nothing can be further from the truth. Charity has an important role to play in society. There will always be those who are vulnerable or who are victims of injustice, who need and deserve the help of those of us who have been more fortunate.

I found out the other day (reading the Oxford  Book of 20th Century Words) that "Barnado" entered the English language as an adjective in 1904 (thanks to Rudyard Kipling - "all the time the beggar was a balmy Barnardo Orphan!"). What an amazing legacy of Dr Thomas John Barnado, who first founded Barnado homes in 1867.

In fact, supporting an orphanage was one of the first recorded instances of CSR-related charity, by Macy's in 1875 (as Archie Carroll tells in his excellent chapter on "A History of CSR" in The Oxford Handbook of CSR). I share Carroll's perspective on philanthropy, namely that it is just one part of CSR (along with economic, legal and ethical responsibilities in Carroll's CSR pyramid).

As I also show, however, philanthropy plays a different role in different countries and regions. In many developing countries (as I argue in a chaper in the same book), philanthropy tends to be the second-most important aspect of CSR (after economic contribution). But this is not ideal - it brings serious dilemmas and dangers.

One dilemma is that it casts companies in the role of governments - providing public services like education, healthcare and infrastructure. The problem is that business acts more like a monarchy than a democracy. Nobody voted them in and there are serious conflicts of interest when the beneficiaries are often dependent on the company for jobs.

Which is really the second major dilemma and danger - dependency. I saw this especially in Mozambique when I did some CSR work there a few years ago. The entire economy is geared towards foreign aid and donations. This leads to perverse policies (and sometimes questionable behaviours from charities themselves) that do not encourage independence or innovation.

Since charity will always be an important part of CSR, the real challenge is how to make sure that it "does what it says on the tin". Can we trust the organisations that act on our behalf? Today, I dropped off some spare clothes and books with Oxfam, which I think does a great job. But the issue of charity governance and accountability will certainly not go away.

The final point I would make is that charity is as much about the giver as the receiver. Giving makes us feel good. My research on what provides CSR managers with meaning in their work and life suggests that "making a difference" (which is the title of my CSR book on the subject) represents a deep pyschological motivation in humans that companies be aware of and tap into.

CSR Reflections on Davos (Day 2)

A year after Bill Gates famously called for a new model of "creative capitalism" at Davos, it seems that business (especially the banks) took him a bit too literally. Of course, Gates didn't mean creative loans and hedge fund activities, but his speech stands in stark contrast to this year's "crisis capitalism" mood.

Despite Tony Blair's reassurances that "the free enterprise system has not failed, the financial system has failed", the most consistent refrain echoing through the chilly corridors of the World Economic Forum on Day 2 was that capitalism needs bringing back into line. The adolescent years of free market rebels without a cause are over. (I wish I believed them!)

On Day 1, all eyes seemed to be on the bankers. On Day 2, the stakes were raised and the US was in the spotlight. A number of delegates were talking about the failure of US-led capitalism and even Bill Clinton was nodding. When asked about Wen Jiabao's thinly veiled criticism of America over the crisis, he said: "The Chinese premier was right: It all started in the United States."

Somewhat incongruously, Valerie Jarrett, speaking as President Obama's representative in Davos, told delegates that his message can be conveyed in one word: "responsibility". That's encouraging but not terribly helpful. What does it mean? Maybe the test will literally be "the ability to repond" by policians and CEOs. Too little too late some say, but watch this space.

One place to start, according a WEF report released is clean energy investment, which they claim needs to more than triple to $515bn (£360bn) a year to stop greenhouse gas emissions reaching levels deemed unsustainable by scientists. At least that's a message Obama seems to be taking on board.

At a corporate level, at least one good news story of response-ability emerged. US firm Tupperware Brands Corp said it is unlikely to lay off staff or cut costs. Chief executive Rick Goings admonished that "the last thing to cut is your talent." Let's hope other CEOs are listening, although I seriously doubt it.

The annual Philanthropic Lunch, with its predictable crowd of Bill-spotters (including the Gates and Clinton varieties), seems to me a bit like a doing a band-aid dance at a chainsaw massacre party. At least it produced a pearl from Gates - philanthropy is fun and fulfilling! Well, if anyone would know, its the world's biggest philanthropist ever, right?

Then again, wouldn't it be better to improve capitalism as a system, so that we don't need to rely so much on uber-philanthropists' need for a warm-fuzzy endorphine fix? Why don't we give responsible capitalism a try first, and then we can talk about something a bit more creative after that? How about it - do we have a deal, Bill?