Sustainable enterprise and strategic philanthropy

In this new global context, an enterprise must also become sustainable, both internally and in its relations with the outside world. This does not mean sacrificing, much less relinquishing, the logical need for profit. However, it does mean taking on a new mission and assuming a new responsibility. An analysis by Maurizio Ferrera, full professor of political science at the University of Milan

di Maurizio Ferrera

In a famous article written in 1970, Milton Friedman (winner of the 1976 Nobel Prize for Economics) formulated a thesis considered by many as the foundation of neo-liberal politics: the only contribution that companies are required to make to society is to “do good business“, in other words maximise profit for their shareholders. Friedman was well aware of and accepted the fact that there would inevitably be a few regulatory constraints with a social purpose, but for the Chicago economist, these constraints had to be as limited as possible and, above all, remain external to private enterprise. The constraints marked out the boundaries of a field (the market) where you play and win by taking care of your own profit.
the theory of the “selfish company” was replaced – especially in Europe – by the idea of the “socially responsible company“, which also had to consider the interests of its stakeholders (staff, consumers, suppliers and the communities most directly involved). Robert Shiller (winner of the 2013 Nobel Prize for Economics) went so far as to argue that businesses must operate to serve a “good” society (the Good Society). or at least that they can do well for themselves – that is, make a profit – whilst also doing good in the community (doing well by doing good). In other words, they must respect not only the constraints set from the outside, but also their own initiatives with social purpose. While this may not be immediately profitable for shareholders, it does create value for the wider context, which generates opportunities and fuels the success of the companies themselves over time.
The environmental and climate challenge is now changing our frame of reference. The notion of a responsible company is no longer enough; it is increasingly ill-equipped to address the need for sustainability. It is no longer about respecting social rules, nor about unregulated initiatives with a broadly philanthropic bent. The prospect of a global climate collapse is making us all vulnerable – and we are all stakeholders with a priority goal: to ensure the resilience of the planet’s entire ecosystem. In this new context, a company also has to become sustainable, both internally and in its relations with the outside world. This does not mean sacrificing, much less relinquishing, the logical need for profit, but it does mean taking on a new mission, with a new responsibility: not harming the environment is the very least we can do, but what we actually need is to reclaim and nurture our ecosystem, so that it can reproduce over time. In a sense, doing good (promoting sustainability) becomes a necessary condition for doing well (business performance).
A growing share of businesses (at least in Europe) have now embraced the sustainability agenda: not only the general agenda of the UN’s Sustainable Development Goals (SDGs), but also the more specific ESG indicators, which measure environmental (E), social (S) and governance (G) performance. When it comes to the environment, there is now a consolidated metric, recently formalised by the European Union in the so-called “green taxonomy”. The situation remains more fluid with regard to social aspects, of which the problems are well-known. Looking at Europe alone, we know that in the wake of repeated economic crises (but also in the face of demographic change and more recently the pandemic) the socio-health, housing and educational needs of the population have rapidly grown. On the other hand, the level of investment in these sectors has been sluggish, and funding has even fallen in some countries. The risk of child poverty – in decline for decades – now affects 25% of children. More than 5% of the population currently live in critical housing conditions and the percentage of NEETs (young people not in education, employment or training) has reached 20% in some countries (including Italy). Furthermore, the percentage of elderly in the population will rise from one-fifth to almost one-third by 2060.
Without a drastic reversal, the economic and social sustainability of the European model is in serious danger. The Next Generation Eu program has given a very clear warning. But it might not be enough without a more active involvement (and not just financially) from private actors, including businesses. How do we concretely define our objectives and give them a minimum order of priority, as was the case with the green transition?
The EU is developing a “social taxonomy”, designed to guide companies in their choice of inclusion and cohesion projects. However, there is and will continue to be a need to place the general objectives and criteria in their relevant sectoral and local contexts. Compared to the green transition, responsibility for the social transition will leave companies with more room for choice – but this will also call for new skills in needs analysis, project planning, monitoring and evaluation. Otherwise, the risk is that companies’ efforts will be wasteful and/or ineffective: little good will be done for society, with few returns when it comes to doing well.
In order to develop these new skills and optimise the impact of social schemes, a growing number of businesses have equipped themselves with a dedicated tool: the corporate foundation. In most EU countries, non-profit foundations have become a major player in the social economy. In France, corporate foundations now make up 15% of all foundations; in Spain, 16%. Even in Italy, the phenomenon is growing, but the percentage is still low: around 2% (more than 100 in absolute terms). Recent research by Percorsi di Secondo Welfare confirms that this type of foundation was created to contribute more effectively to the common good (we could say, like Fisher, to the Good Society), but also to reflect corporate culture There has also been great interest in the strategic philanthropy model, which in the current context means aligning with the sustainability agenda in a proactive and collaborative way.
The seventeenth goal of the UN agenda specifically mentions mobilisation and cooperation between sectors and actors as the obligatory response to the need for sustainability. All hands on deck: everyone, including companies, needs to get involved. The call to action is particularly urgent in Italy, which is not only labouring under the usual burden of delays and regional differences, but which has also been hit by a particularly acute economic and social crisis in the last fifteen years. This crisis has especially affected Italian youth, in terms of their prospects for personal and professional autonomy.. This presents great cause for concern, as it is the young people of today who will have to endure and remedy the environmental and social damage caused by the generations that preceded them.