Financial and Monetary Systems

How do you balance business and philanthropy?

Michael Green
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As the UN works on a post-2015 development framework – the Sustainable Development Goals – there is a growing realization that governments cannot identify and address the world’s most pressing development issues alone. A big question persists: how can governments best involve businesses and philanthropists in the fight against poverty?

Ban Ki-moon recently said that “international public finance will not be sufficient to build a more sustainable and prosperous world” and added that “financing and investment from the private sector will play an increasingly vital role.” I wholeheartedly agree, but it’s easy to forget what a massive shift this is in thinking about financing development.

Less than a decade ago, philanthropy was viewed as something of a sideshow in global development. When I left the Department for International Development six years ago to write Philanthrocapitalism, many colleagues wondered why I was interested in what was a marginal issue at the time. The Paris Declaration on Aid Effectiveness of 2005, for example, did not mention philanthropy, as the pledges of aid money made at the G8 summit that year meant signatories had little need to partner with private donors.

However, the financial crisis of 2008 stalled the flow of government aid and prompted a search for new ways to complement official development assistance. When the Organisation for Economic Co-operation and Development Assistance Committee met in 2011, philanthropy had finally made its way on to its agenda. The G20 went a step further that year by asking philanthropist Bill Gates to write a report on how to finance the Millennium Development Goals. This was recognition at the highest level that governmental aid is not the only tool at our disposal.

Business plays a crucial role in tackling development challenges. Harvard Business School Professor Michael E. Porter calls this revolution in business thinking “shared value”. One of his case studies is the food giant Nestlé, which has worked hard to bring social and economic benefits to small farmers in its supply chain and is now shaping its future as a “nutrition” business. Obesity, for example, is a strategic risk to the food industry and one that businesses like Nestlé have the tools to tackle, not through philanthropy, but by changing what they sell and how they sell it.

Yet the question remains of how an alliance of governments, business and philanthropy could work together. Many aid organizations are sceptical of the motives of business and suspicious of philanthropy because, well, private actors just don’t play by the same rules as multilateral organizations like the UN.

But the world needs that scepticism to change. William Eggers and Paul Macmillan call it “the Solution Revolution” and it has radical implications for global governance. The Global Fund to Fight Aids, Tuberculosis and Malaria, for example, has given private donors and businesses seats on the board alongside governments. It’s exactly this kind of “grand alliance” that we need to see more often.

It’s self-fulfilling to an extent: if philanthropic organizations and businesses can see that their money has a tangible impact, further support and engagement are more likely. And it can be expected that they will be more likely to pursue single-issue campaigns that create solutions to specific problems – regardless of whether these campaigns fall within the UN’s Sustainable Development Goals or not.

This is where a new global measure of national performance – the Social Progress Index – is trying to make a difference in this changing environment. It attempts to measure the host of dimensions that make a good society and highlight issues that, although urgent, are not on the agenda for the Sustainable Development Goals. These include obesity, gender equity and minority rights: the kind of issues that philanthropic involvement and businesses can help to address.

The world is changing. The development sector has to realize that the way it is funded will have to change too and that, while traditional top-down government-led solutions will form part of the “input mix”, the private sector has an increasingly important role to play.

Author: Michael Green is the Executive Director of the Social Progress Imperative, a Washington DC-based non-profit that produces the Social Progress Index.

Image: Pedestrian cross the diagonal crossing at Oxford Circus in London REUTERS/Stefan Wermuth.
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