As media outlets in the United States and Europe celebrate the move of Bill Gates from his full-time role at Microsoft to a new, one-day-a-week schedule to pursue his philanthropic dreams, there is a growing interest in the patterns of philanthropy developing among China’s super-wealthy. “Chinese companies are calling for a new charities law in the wake of the devastating earthquake in Sichuan,” the Financial Times reported in July, “to allow them to set up private foundations, a move that could open up space for civil society in China.” Welcome news indeed.
A little earlier, a different part of the same newspaper — FTWealth — had underscored the extraordinary recent growth in the number of multi-millionaires and billionaires in China. Estimates vary, but magazines like Forbes and the Hurun Report calculate that there are between 66 and 106 dollar billionaires in the country. “Many of China’s new rich are embracing charity because they genuinely want to make a contribution to society,” FTWealth concluded. “But they also do not really have a choice.” Wealthy people who would have been broadcasting their riches only a few years back are increasingly cautious about stirring social unrest — and some analysts see the new interest in charity as simply one more symptom of that trend.
Whatever the motivation, the growth in philanthropy must be welcome, but perhaps we should take a closer look at the potential strengths and weaknesses of philanthropy as a driver of social change. What has caught the attention of the outside world has been the way in which a number of Chinese business leaders responded to the deadly earthquake of May 12, among them Zhang Xin from property developers Soho China, which jumped its contribution from 2 million yuan (around US$292,000) initially to 20 million yuan (almost $3 million), and Wang Shi of Vanke – also property developers – who increased his contribution from 2 million yuan to 100 million yuan (almost $15 million), but only after an online campaign accused him of being ungenerous.
While philanthropy is an important element of wider societal health, and the accelerating trend for voluntary wealth transfers should be welcomed, there seem to be at least three key issues here. First, there are some challenges which only governments can manage, which suggests that we should be very careful about encouraging a trend whereby governments sub-contract major areas of responsibility to business people who are not politically accountable. Second, there is a real risk of bribery and corruption with such massive flows of privately-directed money, especially where the transfers are not a matter of clear public record. And, third, we should be aware of encouraging “corporate schizophrenia”: where companies give back a small fraction of profits they have extracted in other areas, sometimes in profoundly unethical ways.
Take Bill Gates and Microsoft as a case in point — and here we should declare an interest, as Microsoft have been a client of ours at SustainAbility in the past. Gates and his business partner Paul Allen built enormous fortunes as Microsoft became the dominant global force in software. The way in which the Microsoft team built that dominant position, however, has caused a constant stream of protests and counter-measures from competitors and governments alike. No-one who has seen Microsoft CEO Steve Ballmer in action can have any doubt that this is a hard-charging, hard-hitting company where building and protecting market share are concerned. Indeed it sometimes seems that the Microsoft strategy has been to grind competitors into the pavement, whatever the reputational cost, and then to “buy back” some of that lost reputation through the efforts of philanthropic ventures like the Bill & Melinda Gates Foundation.
Whatever the truth of the matter, there is a growing sense in some parts of the world that this apparently schizophrenic approach adopted by wealthy people from John D Rockefeller to his modern-day counterparts, is not the only possible answer to the question of how capitalism and wealth creation can be made compatible with social justice and environmental sustainability. Increasingly, business leaders are beginning to acknowledge that rather than externalising their conscience and values to corporate foundations, there is a better way — which involves integrating twenty-first century values into the business model and strategy of their core business.
We explored how this decidedly twenty-first century approach is being applied in emerging market businesses in our recent report Market Movers: Lessons from a Frontier of Innovation. Produced collaboratively with the International Finance Corporation, Market Movers profiles four companies that have pioneered new sustainable business strategies. These include: Sri Lanka’s MAS Holdings, a supplier in the price-sensitive textile industry, who work with leading international retailers while offering high standards and benefits to its female workforce; Chinese egg producer Deqingyuan, which has built a brand around providing healthy and high-quality eggs in Beijing; India’s Jubilant Organosys, a chemical producer that has attracted investors with its high environmental, health and safety standards; and Amanco, a Brazilian water pipe manufacturer that has developed a profitable business line catering to low-income farmers. These businesses are responding to societal needs by building profitable and successful businesses, rather than "giving something back" once the damage has been done.
John Elkington is founder and non-executive director at SustainAbility (www.sustainability.com) and founding partner at Volans Ventures (www.volans.com). Jodie Thorpe is manager of SustainAbility’s Emerging Economies Program (www.sustainability.com/emerging-economies).
Homepage photo by Matthew J. Stinson