There is increasing attention to businesses delivering value to all stakeholders, and the benefits of sustainability and equity in the workplace. However, it is not clear the extent to which such pronouncements are authentic, or at least authentically implemented.
I recently learned of a new book that tackles this issue head on. Paul Klein’s Change for Good: An Action-Oriented Approach for Businesses to Benefit from Solving the World’s Most Urgent Social Problems, describes his 35 years of experience in the corporate social impact world. Klein is the founder of impakt, a Toronto-based B Corp that helps corporations improve their social impact on the world, and the Impakt Foundation for Social Change, an organization that creates pathways to employment for vulnerable people.
What sets “change for good” apart from other corporate social responsibility strategies? As part of my research into businesses focused on social impact, I reached out to Paul via email to learn more.Christopher Marquis: In your book, you differentiate between CSR Lite and “change for good.” Can you define both and tell us why you call out certain companies for insufficient CSR programs?
Paul Klein: CSR Lite happens when businesses do the minimum amount required to be seen as responsible rather than making a meaningful commitment to helping to solve social problems and taking action to make this happen. Some corporations practice CSR Lite because they aren’t able, or aren’t willing, to compromise their profitability by spending money or committing resources. Other businesses operate in the CSR Lite space because they recognize that it’s too risky not to be socially responsible (because increasingly shareholders, employees, and customers expect businesses to be “responsible” for doing more than exclusively making a profit) and also too risky to make a bolder commitment to social change. Either way, these are signs of businesses that are acting primarily in the interests of their shareholders and not considering the broader priorities of stakeholders. Ironically, the context for business and social change has shifted considerably. Increasingly, the decisions of stakeholders, including investors, are being made with any eye to the degree to which corporations are helping to solve social problems. This shift began prior to COVID-19 and, like many other issues, accelerated during the pandemic.
“Change for good” happens when businesses decide that practicing CSR Lite isn’t good enough anymore. This means shifting from inadequate, ineffective tactical initiatives that are primarily rooted in communications to a strategic, programmatic approach to helping solve social problems that is informed by people with lived experience, resourced adequately, and measurable. Corporations that commit to “change for good” can benefit considerably while those that maintain a CSR Lite approach are creating more risk and missing out on many opportunities to improve their performance.
Marquis: There is an acknowledgment that most companies teeter the scale between good and bad practices. You have been criticized for working with oil and gas companies, for example. How do you justify working with these companies, and is it possible for their financial incentives to align with their social purpose?
Klein: I think there are relatively few businesses that operate unethically and irresponsibly. That being said, in today’s increasingly polarized social and political context, the ways in which stakeholders view the same company can be equally polarized. For me, manufacturers of handguns are in a business category that is unethical and irresponsible. I also recognize that many people would have a very different view.
I’ve chosen to help companies in the resource extraction sector because I believe that getting to net zero emission depends on massive change by these companies. I’ve also seen first-hand remarkable environmental innovation and progressive work with Indigenous communities from corporations in this space.
“Change for good” is happening in this sector to a degree that is faster, and I think is more material, than what is taking place in other sectors. For instance, many companies that are in the consumer packaged goods sector can maintain a CSR Lite approach because they are effective at communicating actions that sound responsible but may not be making much of a difference. Today, oil and gas companies understand that they need to transform to renewable energy and are moving surprisingly quickly. Companies that make junk food don’t seem to be as motivated to stop making food that’s unhealthy and is making many people sick.
Marquis: Why is it important for companies to work with people who have lived experience of the social problems being addressed, and why do so few companies do so?
Klein: One of the reasons corporate social change programs don’t work very well is that they’ve been developed by people who have never experienced hunger, homelessness, or food insecurity, never been in the criminal justice system, and never have been the victims of domestic violence or systemic racism. That’s a very good thing for them but it also means they’re not in a position to decide how to best help people who have had these experiences.
In my book, I use an analogy of a company that has a serious IT problem and their executives hire someone who knows nothing about IT to fix the problem. Obviously, this would never happen. Too often, however, the same executives would consider it perfectly acceptable to hire someone who has not experienced homelessness to decide what they should to do help end homelessness in the communities where they operate. People of relative privilege are making important decisions on issues they know nothing about, so it’s not surprising most of these corporate social investments don’t make much of a difference. As business value is increasingly tied to corporations helping to solve social problems, the way this gets done needs to change. As the saying goes “nothing about us without us.”
Marquis: Why are there so few large corporations taking up the B Corp mantle, and what would it take for them to do so?
Klein: It’s very true that the vast majority of B Corps are small businesses. There are a few prominent exceptions including Danone Yogurt, Comfort Zone (a global cosmetics and skin care company that’s located in Parma, Italy), and the Business Development Bank (BDC), which operates here in Canada. To be designated a B Corp, companies need to complete a rigorous evaluation process that includes an assessment of specific social and environmental actions. Quite simply, most large corporation aren’t doing enough to quality as B Corps. Operational change in any large organization is difficult, but it starts with a belief at a governance and executive level that change is needed. It also means understanding that the current approach — usually CSR Light — is no longer adequate and that a “change for good” is required.
Marquis: Can you describe the difference between philanthropy and impact investing, and, building on that, describe how investing in social change can be good for a company’s bottom line?
Klein: Helping to solve social problems means going beyond the current approach to using capital that most corporations have. Despite the rhetoric in this space — shared value, partnership, sustainability, collaboration — most companies are still practicing what I’d call advanced philanthropy. Making donations to effective charitable organizations is a good thing, but it’s not enough. If it was, we’d be much closer to solving social problems that we are now. I think we need to anchor the conversation on the word “investing.” For me this includes new approaches to social change such as social impact bonds and other forms of social finance. It also connotes that a corporation is “invested” in making a difference in world. This means being committed to solving social and environmental problems, understanding that doing this will require allocation of capital and human resources, acknowledging that (like any investment) there will be losses, relying on experts to inform investment decisions (in this case, people with lived experience), and ensuring that social change results are measurable. Done in this way, investing in social change will help companies benefit from solving social problems.