On September 24, AmCham Shanghai invited members to hear Professor Phil Cochran, executive associate dean of the Kelley School of Business Indianapolis, speak on “Corporate Strategic Philanthropy”. Invited by the US Consulate General, Cochran predominantly discussed how companies can adopt the practice of measurement with social responsibility and shared examples of ‘disruptive’ for-profit companies and non-profit organizations that ameliorate society through innovation.
Cochran’s presentation centered around four key takeaways.
Firstly, companies that disrupt the traditional business model are more successful. Professor Cochran gave two examples. Amazon revolutionized the retail industry by taking advantage of the internet, resulting in traditional retail companies like RadioShack going bankrupt. Alibaba, as part of the second wave of disruptive ecommerce platforms, is now direct competition to Amazon.
Secondly, for-profit companies that value social responsibility are usually more profitable. For example, Tesla’s vision is to reduce fossil fuels and reduce pollution through the profit-making avenue of electric cars powered by solar power. Volvo aims to produce cars by the year 2020 that would result in no injuries when in car accidents. Professor Cochran also referred to how Uber’s market share in China rose from 1% to 35%, largely contributed by “People’s Uber”, its not for profit car pooling option, and Duolingo’s free language learning program has made learning a second language cheaper and more convenient, benefitting people in remote and poor areas. They continue to make profits by providing a cheaper alternative to TOEFL testing, as well as selling translations (set as homework for more advanced language students) to online companies.
Thirdly, customer loyalty is the key reason for companies doing social good as well as making profits. Microinsure is a company that sells insurance to poor people in places like Zambia. Through working with telecommunications companies, they gave people who bought cell phones free insurance for six months and charged them a low price in the following months. Soon, local people grew loyal to the participating telecommunications companies. The popularity of cell phones in that area grew increasingly and thus so did the coverage of Microinsure.
D.light is a global social enterprise delivering affordable solar-powered lanterns designed for people in the developing world without access to reliable energy. Users can pay one dollar a week, the same cost as using a kerosene burner, and would be able to own the lamp after one year. Using this lantern reduced their chances of developing lung cancer.
Lastly, it is important to measure the outcomes of CSR for NGOs and other non-profit organizations. People’s assumptions are usually wrong and that can often lead to waste. Therefore, adopting the practice of measurement when implementing social responsibility is important.
Cochran gave two examples where assumptions were proven to be incorrect:
The Scared Straight Program took teenagers to jails to ‘shock’ them with the horrible life there and therefore choose not to commit crimes when they grew up. However, according to later statistics, the crime rate of teenagers who attended that program was 13% higher than teenagers who did not, which increased the burden on public resources.
In 1990 multiple rich donors and companies donated books to students in Kenya to encourage them to finish school. This brought no change to the low graduation rate 4 years later. Researchers at MIT found that the true reason for the low graduation rate was the shortage of nutrition for those students.