Article

Force for Good: Market-Based Social Activism for Sustainability

Posted April 26, 2022 | Sustainability | Leadership | Amplify
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AMPLIFY  VOL. 1, NO. 4
  
ABSTRACT

Helen Chen brings our focus on process and mechanisms to the domain of market-based social activism (MbSA), in which a business seeks to align its activities with moral principles to drive positive change at the society scale. Chen presents the Pyramid of Forces for Good framework that can be used to better organize MbSA to develop a “market for virtue” in which morally sound business activities outcompete those that are morally questionable. A market for virtue applied to green performance is based on three building blocks: (1) valid and reliable green-performance measurement, (2) fair and equitable green-performance valuation, and (3) efficient and scalable green-value apportionment. Establishing a market for virtue would make green practices economically profitable, fundamentally changing the economic system that currently makes unsustainable practices more economically profitable than green practices.

 

Civilization is fragile, as seen in our current multitude of crises: a prolonged pandemic, increasing social injustices, and unchecked climate change. Shaken awake by these threats to humanity, civil society’s drive for systems change toward a better world has never been stronger. That world would be safe and prosperous for all, as envisioned by the United Nations (UN) Sustainable Development Goals.

Market-based social activism (MbSA) seeks to align business activities with moral principles to drive positive societal changes. Its roots trace back to the 1960s.1 Paul Polman, former CEO of Unilever, is one example of such advocacy, and there are many others.2 Business has significant impact on society, for better or worse, given that it is the most influential global institution in terms of employment size and technol­ogical capabilities.3

This article focuses on how MbSA can be better orga­nized to drive positive impacts more effectively. It uses a mini case study to highlight the conflicts between MbSA and the traditional business model, discusses the building blocks of a “market for virtue,” proposes a conceptual framework to structure forces in the field that can help build a market for virtue, and reports lessons learned from current affairs and the implica­tions for a change in basic assumptions in the commun­ity’s collective mental model. The article aims to clarify MbSA’s position and priorities against the broader backdrop of systems change — conceptualized as an all-for-one, one-for-all approach aligning forces for sustainability toward building a better world.

In the context of this article, the term MbSA is used interchangeably with social investing and stakeholder capitalism, since they differ in scale and scope but not in nature. MbSA is “a force for good,” a phrase borrowed from INSEAD, a pioneering business school in the movement.4 We refer to the force for positive change toward sustainability as “good/virtue” and the resistance to change as “evil/vice,” noting that these are not a dichotomy but two extremes on the spectrum of human conditions.

Danone’s Opposing Business Models

In 2020, Danone, a global food and drink company headquartered in Paris, became France’s first public Entreprise à Mission, a company with social and environmental objectives set in its by-laws.5 Emmanuel Faber, the company’s then chair and CEO and a representative of stakeholder capitalism, thanked the 99% of shareholders who voted favorably for this new legal status for having “toppled the statue of Milton Friedman.” (Friedman famously professed that “the business of business is business.”6)

However, Faber left Danone in March 2021 after seven years at the helm and 24 years with the company, defeated by activist investor-initiated attacks based on the company’s financial underperformance.7

Does doing good come with a cost? Could it be that Faber’s triple-bottom-line approach distracted Danone from focusing on financial performance, making it vulnerable to attacks from profit-driven shareholders? Plausible, but hard to prove. If this is the case, Faber’s departure from Danone could have been a do-gooder’s sacrifice. As Polman pointed out, the incident “crystallized a fraught conflict within … two opposing economic models. One focused on a few billionaires; the other focused on serving billions of people.”8 The Green-Grey Matrix in Figure 1 illustrates such conflicts.

Figure 1. The Green-Grey Matrix
Figure 1. The Green-Grey Matrix
 

For simplicity, Figure 1 sets MbSA in the context of impact investing for environmental sustainability (green versus grey), but the same applies to conflicts between shareholder-centric and stakeholder-oriented business models. We can view the conflicts as occurring between two opposing camps: social investors with different priorities (profit versus impact) and time frames (short term versus long term).

All is well when their objectives align (Quadrant I, Green Reward), but conflicts occur when green leads to net costs (IV, Green Liability) or profit comes from exploitation (II, Grey Exploitation). Faber’s departure from Danone might have been a case of the former, and Amazon workers’ protests against unsafe working conditions could be a case of the latter.

As the planet continues to heat, so will such conflicts. And if the market does not value the externalities of business activities, do-gooders will continue to be punished for good-doing while exploiters are rewarded for exploitation. For business to scale as a force for good, such market failures must be corrected through a market for virtue, as discussed below.9

The matrix also suggests that it “takes a village” beyond the private sector to achieve systems change. Regulations and legislation are needed to hold accountable companies that profit from exploit­ing nature — pushing them to move from Grey Exploitation (Quadrant II) to Grey Penalty (Quadrant III).

Norms and values are also necessary to generate the initial impetus for change and function as a mechanism of social control. Together, they may shift the market landscape from traditional shareholder-centric to revisional stakeholder-oriented, like a seesaw game between two opposing camps.

Market for Virtue

A market for virtue needs three building blocks that must be developed in this order:

  1. Green performance measurement (GPM) that is valid and reliable

  2. Green performance valuation (GPV) that is fair and equitable

  3. Green value apportionment (GPA) that is efficient and scalable

Green performance measurement is funda­mental to building a market for virtue as GPM enables transparency in corporate sustainability performance. Transparency can increase efficiency in the market for virtue by reducing information asymmetry and opportunistic behaviors like greenwashing. In November 2021, the International Financial Reporting Standards (IFRS) Foundation Trustees announced the creation of the International Sustainability Standards Board (ISSB).10 Market-based social activists are hopeful this will lead to improved transparency in corporate sustainability, which can help to build a solid foundation for the market for virtue.

A comprehensive scheme of green performance valuation must be based on valid GPM. GPV converts externalities from business activities into equivalent economic values in monetary terms for transactions to take place in the market for virtue. The development of GPV may be controversial, involving ethical and philosophical debates (e.g., monetizing the health impacts of air pollu­tion differently in developed and developing nations). Hence, fairness and equity principles must be upheld alongside the technical aspects of GPV, taking into account relevant contextual factors.

Green value apportionment, the exchange mechanism of the market for virtue, can be developed according to the GPV scheme. GVA enables economic values of external impacts to be apportioned and allocated to responsible parties. The Pyramid of Forces for Good (PFG) — discussed more fully in the next section — can be applied to identify apportionment channels such as regulations (carbon taxes), market-based mechanisms (the price premium of electric vehicles), and intangible social capital (generated through normative and moral forces).

There are two critical success factors for a market for virtue. First, there must be a sufficiently sizable buyer-supplier pool to ensure transaction costs are affordable and exchanges are scalable. Second, there must be a social governance system that safeguards the interests of both parties, with perhaps a new social contract based on transparency, trust, and goodwill.

Pyramid of Forces for Good

As Figure 2 illustrates, the Pyramid of Forces for Good organizes various forces for change into a coherent conceptual model. PFG is built on Maslow’s hierarchy of needs11 and the corporate social performance model.12  It organizes four forces for change into a structured framework for systems change: (1) the normative force that integrates, (2) the regulatory force that alleviates, (3) the rational force that motivates, and (4) the moral force that elevates.

Figure 2. Pyramid of Forces for Good (PFG)
Figure 2. Pyramid of Forces for Good (PFG)
 

The normative force institutionalizes sustainability values, attitudes, and behaviors. It functions as a form of informal regulation that makes people, of their own will, want to do what they perceive society expects them to do to be rewarded with legitimacy.13 The normative force gradually assimilates into the citizenry’s collective mentality and may be institution­alized as part of the culture, exerting long-lasting influences by driving environmental-regulation enactment, impact investing, or NGOs’ activities. Fostering and institution­alizing the normative force is fundamental to systems change for sustainability.

The regulatory force threatens disciplinary actions when it sees environmental regulations violations. It has the power to alleviate unsustainability through penalizing mechanisms (e.g., fines, penalties, and lawsuits). There are also market- and nonmarket-based mech­anisms (e.g., the carbon market and mandatory reporting and disclosure). Like the physiological needs in Maslow’s hierarchy, the regulatory force takes precedence over higher-level needs.

The rational force incentivizes companies to adopt mutually beneficial green practices. It elevates sustainability by rewarding green practices and is a motivational factor for “growth needs” — meeting such needs increases motivation and leads to a self-reinforcing virtuous cycle. It is the key driving force in the market for virtue.

The moral force is the intrinsic motivation to do good that comes from within. It is embedded in individuals and exerts its influence through an organization’s key stakeholders, including managers or investors. The moral force drives organizations to engage in actions like forgoing profitable but environmentally damaging business opportunities or sharing experiences with rivals. Although it may not be intended, economic benefits may accrue to the company through its green reputation and stakeholder goodwill. The moral force is less tangible and less common, similar to self-actualization in Maslow’s needs hierarchy.

PFG illustrates the multidimensionality and intercon­nectedness of various drivers of systems change for sustainability. It shows that none of these forces is sufficient on its own; all are necessary for systems change toward sustainability:

  • The regulatory force can be a powerful impetus to generate a level of traction that exceeds resistance to change.

  • The normative and moral forces must be fostered for self-sustaining motivations toward sustainability.

  • The rational force can be harnessed to build a market for virtue.

Lessons for the Way Forward

This section suggests four lessons that can be learned by reflecting on current affairs. Incremental change (make do with what we have) can be achieved through a market for virtue, but fundamental change demands a paradigm shift in our mental model.

Lesson 1: Social Entropy

As in physics, social systems and institutions deteriorate over time and may break down if left untended. For example, the global security system was disintegrating for decades without us noticing until the war broke out in Ukraine. The climate crisis is of the same nature, with more dire effects over a longer timeframe.

However, to quote António Guterres, the UN Secretary-General: “We always have a choice.… To choose … courage over complacency.”14 The force for good should always be present and strong enough as anti-entropy against social issues and other threats to humanity.

Lesson 2: Self-Projection Bias

We are predisposed to see the world as what we are, not as what it is. The virtuous see innocence in vice, the vice-prone see weakness in virtue. This cognitive bias is self-sabotaging for good and self-reinforcing for evil, as virtuous forces are weakened by their virtues, and vicious forces are strengthened by their vices (it is not uncommon to see corruption exploiting philanthropy in real life). This is a more elaborate version of “the malice of the wicked was reinforced by the weakness of the virtuous” noted by Winston Churchill.15

Do-gooders must step out of their rose-colored mental frame to become detached observers of the world, trusting but verifying rather than keeping good faith indiscriminately, lest good-doing empowers vice.

Lesson 3: Love and Power

Love is the answer, but power is the solution. Together with the self-projection bias, this may explain why social activism has not been effective in changing the status quo. The virtuous preach/practice love while the vicious grab/grow power. Over time, this results in a stark imbalance — the stones of the former against the cannons of the latter, as seen in the futile protests of environmental NGOs against oil and gas oligarchs.

Although light can drive out darkness, this step only opens our eyes to what was hidden in the dark; it does not change what is in front of us. Love may not be able to drive out hate, as they are not necessarily mutually exclusive, and it is not clear which one is more power­ful. Therefore, although social activism may be driven by love, to be effective it needs power. Just being a force for good is not enough, it must become a force for good through a “missionary-military” approach that appeals to love but first tames the darkness.

Lesson 4: Substance & Style

Humans tend to value style over substance, both in business and with people. We glorify surface glamour while ignoring what’s at the core. Left unchecked, such blind spots in our mental model create loopholes in social systems, letting greenwashers get away without walking the talk. If we truly want change, we must go back to the basics by valuing character over competence. This may include rethinking the logic of capitalism.

Conclusion

MbSA can be better organized to drive positive societal changes. To that end, in this article, we have examined the building blocks of a market for virtue (for incre­mental change in the private sector), proposed a conceptual framework to structure various forces (for incremental change in civil society), and examined lessons learned from current affairs (for transforma­tional change in the MbSA community).

This will be a long and difficult battle, and we are all enlisted by default. So let us join forces to forge a better world. The times they are a-changin’, and nothing that we do is done in vain.

Acknowledgment

This article is partly based on the author’s PhD thesis, “On Sustainability,” the Hong Kong Polytechnic University, revised October 2021.

References

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2Polman, Paul, and Andrew Winston. Net Positive: How Courageous Companies Thrive by Giving More Than They Take. Harvard Business Review Press, 2021.

3Hoffman, Andrew J. “The Next Phase of Business Sustainability.” Stanford Social Innovation Review, Vol. 16, No. 2, Spring 2018.

4INSEAD website, 2022.

5Raison D’Etre.” Danone, accessed April 2022.

6Friedman, Milton. “A Friedman Doctrine —The Social Responsibility of Business Is to Increase Its Profits.” The New York Times, 13 September 1970.

7van Gansbeke, Frank. “Sustainability and the Downfall of Danone CEO Faber.” Forbes, 20 March 2021.

8Walt, Vivienne. “With the State of the World in the Hands of Big Business, Some Executives Think It Can Pay to Do Good.” Time, 18 January 2022.

9Vogel, David. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Brookings Institution Press, 2006.

10International Sustainability Standards Board.” International Financial Reporting Standards (IFRS) Foundation, 2021.

11Maslow, A.H. “A Theory of Human Motivation.” Psychological Review, Vol. 50, 1943.

12Carroll, Archie B. “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders.” Business Horizons, Vol. 34, No. 4, July-August 1991.

13DiMaggio, Paul J., and Walter W. Powell. “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields.” American Sociological Review, Vol. 48, No. 2, April 1983.

14We Always Have a Choice Between Humanity over Hatred, Secretary-General Stresses in Message for International Day of Reflection on 1994 Rwanda Genocide.” United Nations (UN), 1 April 2022.

15QuoteFancy, accessed April 2022.

About The Author
Helen Chen
Helen Chen is a researcher and consultant in corporate sustainability. Prior to joining academia, she worked in global supply chain management in different countries and regions. Dr. Chen’s research and consulting interests include standardization of sustainability performance measurement, humanitarian logistics, and sustainable supply chains. She earned a master of science degree in supply chain and logistics management (with distinction) from… Read More