Profit isn't evil - get over it

Sunday, 16 May 2010

The interesting thing about social enterprise is that everyone asumes that we are talking about the same thing until a question arises that sharply divides them into various camps. There was such a question at the Shine unconference this morning and that question was "Is profit evil"?

Because within the social enterprise community are charities, voluntary groups and social businesses; some totally dependent on grants, some that genuinely trade and some that make considerable profits. For my money grants are simply donations from rich people or rich organisations and whilst they sometimes generate social good they are not sustainable. Grant income is simply a 21st-century version of medieval patronage and is entirely dependent on the whims of the rich. Whilst free money is always nice, it clearly isn't sustainable; which brings us to the idea of profit.

At a purist level, profit is simply the surplus of income over expenditure but for some charitable organisations, the word and the idea carry connotations of the most evil blood-drenched capitalist machines. For those of us at the social business end of the spectrum, profit gives you sustainability, independence and the potential to grow (and therefore massively increase your social and environmental impact). Whilst there may be an emotional (and arguably irrational) reaction to the word "profit", it is really just surplus and if you aren't making a surplus then you are just going out of business slowly.

A much more interesting debate is whether the MAXIMISATION of profit is inherently evil. There is a world-wide track record of organisations who maximise profit by laying off vast quantities of workers, reducing pay and benefits, sourcing from lowest-cost providers, dumping industrial by-products and taking resources from countries that can ill-afford to lose them. If the overriding factor in a company's decision-making is the maximising of profit, it is almost certainly reducing its social and environment impact, if not actively causing social and environmental harm. Corporate Social Responsibility initiatives may be a public-facing sticking plaster over this activity but the scale of it is dwarfed by whatever the core business processes are.

So the really interesting ethical division for businesses is not between those that break-even and those that make profit; but between those that make profit AND social and environmental benefits and those that maximise profit (at the expense of any social and environmental considerations). Depending on which side of that divide you are is a better indicator of whether you are really a social enterprise or a profit-maxising private sector business.


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