It's been fifty years since Milton Friedman’s essay called The Social Responsibility of Business Is To Increase Its Profits came out. Friedman stated that corporate executives should stop worrying about social responsibility and focus on maximising their profits. Fifty years on, how does Friedman's essay hold up? Listen to the newest episode of Any.Talk where Anywise Managing Director Adam Evans and General Manager Steven Kouloumendas discuss Anywise's commitment to balancing profit with giving back to the community.
What is social responsibility?
In a nutshell, social responsibility means individuals and companies have a responsibility to the environment around them and society as a whole.
What can corporations do to be socially responsible?
There are many ways that companies can be socially responsible. For example, Anywise does several things to give back to the community such as:
Donating money for causes that are important to our staff, clients and suppliers
Participating in events to raise money for causes that are important to us (eg. sporting events for war veterans)
What's a B-Corporation?
A B-Corp is an organisation that verifies companies are socially responsible based on their policies, past performance and history that demonstrates that companies are demonstrating their core values. This can be everything from how a company chooses their suppliers to ways a company acts in an ethical fashion. Certified B-Corps are trying to redefine the way businesses define success.
Anywise became a Certified B-Corporation in 2018. We balance profit with purpose.
Listen to the full episode below or stream it on Spotify, Apple Podcasts or anywhere else you listen to podcasts.
Any.Talk Episode #8: Social Responsibility
Annie-Mei: Hello, and welcome back to Any.Talk. I’m Annie-Mei Forster and today I’m once again joined by Managing Director Adam Evans and General Manager Steven Kouloumendas from Anywise. Hello Steve and Adam.
Adam: G’day, Annie-Mei
Steve: Good morning, Annie-Mei
Annie-Mei: So today we’re discussing social responsibility. I wanted to start off by mentioning Milton Friedman’s essay that came out 50 years ago called The Social Responsibility of Business Is To Increase Its Profits, which basically stated that corporate executives should stop worrying about social responsibility and [rather] maximising their profits.
So Anywise places a big emphasis on putting money aside to help people in the community and to help the planet, as well as volunteering their time. So Adam, what do you think is wrong about Friedman’s argument and why should businesses incorporate social responsibility into their company’s values?
Adam: Thanks for the question, Annie-Mei.
When it was written, it was relevant and timely and certainly it shaped the global economy. Certainly in the western world, the shareholder primacy that we see is still resident today. There is something to that, in that a company can have greatest impact in fact if it has generated sufficient profits that it can spend it wisely.
I think the problem though is having a KPI that is entirely dependent on maximising profit shapes internal behaviours and can lead to perverse outcomes. An example of that, is if there is a decision to be made between equitable application of risk between company and suppliers or between the impact and the environment and returning profit to shareholders, The KPI, the one thing that is being incentivised and measured is return of profit, then any other stakeholder inputs are somewhat died down and may not see the light in the decision making process.
Particularly true for very large organisations, which have a mass of profit, cash moving around the globe, driven by institutional investors. It can be very challenging to change the layers of bureaucracy that’s been built up over the last 50 years to be considerate of indigenous cultures. For example, in north Western Australia where we’ve seen for a whole pile of reasons, very large companies potentially brought to their knees. Certainly the executives of those companies brought to their knees because of decisions that on the face of it been good for shareholders.
Now I think we’ve evolved somewhat or at least the world appears to be moving. Where they’re starting to balance profit and purpose or profit and impact. Certainly for Anywise it has always been the case that we have endeavoured to consider as broad a range of stakeholders as we can when making decisions.
It’s a topic I’m pretty passionate about, you might have picked up.
Annie-Mei: Yeah, when you said that, for companies that it’s kind of ingrained that they do focus on making profit and not focusing on any other factors. You did say it was difficult for them to change that when it’s not part of, I guess the business’ DNA. Do you think it’s possible for them to overcome this over time?
Adam: Yeah look, we’ve seen – particularly in the last decade – incredible shifts in momentum. In some ways I think that is driven by an awakening of shareholders. Shareholders are realising that, for example coal industries, that has a shelf life. So we’re seeing very large corporations that have been built on the back of coal as a commodity, start to adjust and adopt alternate and most sustainable energy sources.
So I think it’s possible, whether it’s through an ethical awakening such as what happened during the early 2000s with US contractors on operations in war zones where heads rolled because of bad, unethical behaviour. Or whether it’s driven by shareholders who are realising that there are greater responsibilities on the company as a whole than returning shareholder profit.
I think at the other end of the extreme, companies can’t expect to necessarily be all not-for-profit either because one of the things that comes with additional profit is that momentum and ability to professionalise the entire organisation and to take risks, develop personnel, technology and systems to continue to grow and evolve.
Not-for-profits on the other end of the spectrum potentially don’t have that capacity or capacity building sufficient to do that, so I think somewhere in the middle is that balance. I think, my experience at least for the last six years with Anywise is that we are seeing convergence. Companies that are on the far extremities of either not-for-profit running on the smell of an oily rag, or very large multinationals. We’re seeing them converge to a more sensible middle ground.
Annie-Mei: Ok, thanks Adam. So Steve, coming back to Anywise. There’s a lot of charities and I guess, social causes that people can either donate money or give their time to. So how does Anywise decide which ones they’re going to give money to or give their time to volunteer for?
Steve: Thank you, Annie-Mei.
It’s a really good point. When we talk about wanting to give back to the communities, it is actually about the people. So it’s about our employees and our wider community. So what may be important to me, might not be important to the next person. So part of the way we decide which organisations and how we give back is actually allowing all of our staff, contractors and clients even to say – what are the organisations that are important to you?
As a person, as a family. Some may have a very personal connection to a charity or a cause because they may have been touched by it. Thinking of the many organisations and research organisations that are targeted towards medical issues all the way through to other entities. Sporting organisations, from cycling to community sports that help engage people.
We actually have a quite broad range of organisations that we either donate to in monetary donations all the way to volunteering our time and effort to organisations that are important to our staff, subcontractors, our suppliers and our clients alike.
Annie-Mei: Ok, thanks Steve.
So Adam, Anywise became a B-Corp in 2018, which I wanna discuss a bit further. But first, up to that point, I guess how did this journey begin with Anywise giving back to the community and how did it start?
Adam: Yeah thanks, Annie-Mei.
I think from the very beginning of the company we’ve had this belief that we can make money and also be not just corporate but community citizens. We can be good neighbours. I come from a family that’s fairly philanthropic anyway. Not that we had a lot of money, but we were always considerate of the community. So I think that’s part of the company from its early beginnings.
I also come from a service background having served in the Australian military forces. I took a lot of that service ethos into the corporate world when I started the company. So in the early days I was volunteering my time for a high profile ex-serving organisation in Canberra where I established a national cycling program and a golf program. Through that I really saw the value of cycling activities as a means of providing really positive mental and physical health outcomes for veterans, particularly those that have been impacted by their service.
So in the early stages of Anywise, once we started to generate some profit, we were able to reinvest both project management expertise and skilled volunteering, but also real money, tangible sponsorship for veterans to participate in some competitive cycling events, which was really rewarding. The whole company went on that journey. Some iconic early social media of the company included a picture of really inspiring views of our cycling team standing in front of Cradle Mountain. Even now a lot of the company members genuinely feel excitement and part of that journey.
So it was always part of what we were doing. It wasn’t until probably maybe 2015 or 2016 when we did some more cycling events that we realised up until that point, most of it had been captain’s calls by me. We’re going to go and do this because it’s going to be a good thing to do! Naively I had missed all of the other good that the company was doing. So we kicked off a gift or donation-matching program, and just started asking people in the company including our suppliers what they were doing in their community.
We realised that there is a tremendous volume of community volunteerism. A lot of formal and informal mentoring occurring across the company and tens of thousands of dollars of donations being made out of people’s salaries towards causes that were important to them. So took the opportunity to sit back and look at the impact that the individuals were having. It was a fairly obvious thing for us to do to start recording and promoting that volunteerism and matching donations.
So we very efficiently realised that we were having an impact on the local community that we were living in, the professional bodies we were associated with and also the community in the market that we’re operating in as a company. So in 2018, after a period of reflection on that, we started exploring ways we can qualify that as an independent body. Every company has a corporate social responsibility and every company is a shining light of what should be done. At least that’s what their website says.
We were a bit shy about promoting what we were doing until we actually had an independent view of that we wanted to benchmark our performance in impact against a number of different measures. We ended up applying for and successfully being certified as a B-Corporation in 2018.
Annie-Mei: Ok great, thanks Adam.
So Steve, for anyone who might not know what a B-Corp is, can you briefly explain what a B-Corp is and what the process is to become one?
Steve: Thanks, Annie-Mei.
So a B-Corp is fundamentally an independent certification. This is an organisation that is all about trying to formalise organisations and companies’ social responsibility and find a way to do, just as Adam mentioned. Benchmark and not allowing charlatans if you will, just talk about social responsibility without actually doing anything. It’s a way of independently certifying an organisation to say - Yes, you’re saying that you’re doing good and you’re actually delivering. You have all the policies and we can see based on your past performance and history that you’re actually demonstrating these values, you’re not just talking about these values.
The organisation has gone through a process. B-Corp has a series of questions I’d liken it to a quality audit. Most entities would be familiar with the process of going through an ISO9001 quality audit where you’re asking yourself certain questions about your policy, what you actually do and how you perform in accordance with your policies and plans.
This is a very similar process, so asking ourselves questions about the way we conduct ourselves and the way we make decisions. All the way down to things like our suppliers. How do we choose our suppliers? Are we making sure that our suppliers aren’t necessarily doing something that is the opposite of what we are trying to achieve or are they disrespecting or marginalising certain communities? Making sure that we take that into account in the way that we make decisions both for our suppliers all the way to the clients that we choose. The process is very much making sure our values and our ethics are true to us and reflected in everything we do and everything we say we’re going to do. It’s a way to formalise all of that.
Annie-Mei: Ok thanks Steve.
And finally, what’s your advice to a small business owner or a large business owner who might be thinking of incorporating social responsibility into their company but might not know where to start. What would your advice to them be?
Adam: I’d say don’t wait. I’d recommend doing two things earlier than what we did. The first is to talk to the staff, suppliers and clients, and work out what’s important to them. As I said in 2016-2017 we realised that there was already all this good that was already happening and we just hadn’t been telling that story internally. So absolutely talk to the staff and find out what’s going on.
And the second is, not wait to consider how difficult or the return on the investment. Don’t overcomplicate it. If the company is making good values-based decisions, then that will be good for business. So as early as possible, stitching additional stakeholders into the consideration of these decisions can only be good for business.
That may mean a reduction initially in return on investment for the shareholders, but it’s certainly been our experience that everybody in the company will be more fulfilled at work. They will be able to draw a clear line to the impact that they’re having in their local community and the community in which they operate. Fundamentally everybody sleeps better knowing that every part of the company is conducting itself in an ethical manner and is returning a positive impact.
Annie-Mei: Great, did you have anything to add to that Steve?
Steve: Yeah, all I say is this is everybody’s responsibility. The time is now to act. I think everybody listening to this, as a business we have done this. If you’re listening, this is your responsibility as well. So take the reins. It doesn’t have to be as formal as B-Corp, just act right now.
I think we’ve proved to ourselves that back to Milton Friedman’s article, 50 years ago to the day. He may have been talking about it was government’s responsibility to provide these types of things to help the community. I think 50 years old we can see that government fails time and time again to do that, which means it’s our responsibility as business leaders to take the reins. And the time now is to act.
Adam: I think it would also there would be nobody in the company that wouldn’t be willing to share their story and our collective journey. So if anybody that is listening wants to get in touch, please do so. We can describe our journey but we can also put you in touch with a range of other companies that have successfully done it or are taking the journey themselves.
Annie-Mei: Ok great, thanks Adam. So if anyone does want to get in touch, you can always drop us a line on our contact form on the Anywise website: anywise.com.au.
And that’s the end of the show today. So thank you Adam and Steve for talking about Anywise’s social responsibility.
Steve: Thank you.
Adam: Thank you very much Annie-Mei.