Through my work, working with firms looking to develop “CSR” programs in China, more often than not the conversations I have revolved around donating money. For many firms, even those experienced in philanthropy, China can be a difficult place. The groups who are able to accept 50,000+ USD are more likely to be GONGOs (Government Organized Non-Government Organization), which have a shaky reputation, and the issue driven grassroots organizations are often either too small, unlicensed, or cannot “prove” their value.

So, as part of my China Philanthropy 101 introduction, I will include the following 5 steps for developing a more a corporate philanthropy program with the deepest impact.. a program that starts with knowledge, involves a long term strategy and partnership, and leads to the deepest impact.

1. Move past awareness to knowledge
Having more than just the basic understanding of an issue is critical to the process of developing a successful program.  At the very minimum, donors need to understand the history of the problem, the players, existing programs, and what are considered the most successful models.  The idea is to have the greatest understanding of the problem, and where help is needed most, BEFORE engaging potential partners or deciding on the level of engagement.

2. Develop a clear strategy
For many firms who are looking for a program to participate in, the strategy can have roots in several places, the C suite, the PR Department, or the HR department, with each having different reasons/ angles for wanting the program.  Often developed with the firm in mind first, and how to either engage internally or externally, the strategy for developing a program can often leave the impact of the program diluted.

Thus to ensure that the program itself is given the best opportunity for the long term, and the impact to the partner is greatest, it is important to develop a strategy that balances the equation between the needs of the community (as identified through the knowledge building process) and of the firm (which should be focused on fomenting engagement and leveraging the capacity of the organization).

Once this is complete, then the firm can begin understanding how best insert itself, and through which partners

3. Identify and work with partners who are naturally aligned with the strategy
Finding the right partner is perhaps the most critical step, and will only work if one’s understanding of the issue and one’s strategy are clear.  In China, there are a large number of good organizations.  Organizations that have the capacity to do anything, given the right budget

As such, it is critical donors spend the time to not just research their potential partners, but to have a framework by which to judge the organization, and to support this framework with a process that ensures engagement between the partner and the donor.

4. Look beyond donations.  Create Deeper Engagements
For most organizations in China, regardless of what may be said, money is not the only issue they face.  For many, it is actually the least of their concerns, as issues of scale, human resource management, and program development are impede the growth of the organization.

For donors, this is one of the greatest opportunities to create a lasting, and successful engagement, but it is often one of the least developed opportunities.  Servicing on the board, mentoring leaders, offering administrative support, and supporting other capacity developing activities can (and will) magnify the long term impact of the funds.

5. Stop trying to compete.  Engage.
Corporate philanthropy is not a game to be won, and the best measure of success is not the number of trophies a firm has in its trophy case. All too often, firms get wrapped up in the process of applying for awards (internally and externally) or looking for the sound bit that will round out their CSR report without realizing that the negative impacts to the program.  That, in being focused by an external stimulus, firms are virtually guaranteeing that their commitment will be short lived and unlikely to be re-upped (even if successful).  Programs will always need to be bigger and better, and therefore program stability cannot be maintained.

What firms should be doing is building engagements that have true alignment to the issues, interests, and capabilities of the firm (and its employees), and in a way that can build depth over time. Ultimately, it is through this process, and being apart of a program (or organization) that grows that will provide the best measure of success.

Following last week’s piece on moving from band-aids to solutions, I thought I would share the above as another example of where I see flawed thinking on sustainability.

Great package.  Statistics that back up his points.  Key messages hit.

But for anyone who has been involved in sustainability, this message is lacking depth.  Particularly as his statistics and key messages are only meant to potential of China versus the reality.

In truth, China is making big moves.  And it is spending big money.  But the problems are still very grave, are growing in number, and regardless of how much has been invested in “clean energy” in the last 2-3 years in China, the fact remains that much of it is still not connected to the grid.

Last year, Jack Ma said in an interview with Charlie Rose that the biggest business opportunities (in China) would be those that fix China’s problems, and if you have been following IBM in china they are clearly showing an interest.

going back 3 years ago, IBM began working with the city of Shenyang to monitor the city water supply, with the expectation that following the one year monitoring process, IBM would assist in developing solutions to improve the city’s water distribution system.  A big project, and one with solutions that could be rolled out to a large area of China.  Including the capital city itself.

More recently though, IBM has been working on food safety, and recently launched a program with Shandong province to try out a new pork traceability program.  Again, a program whose applications could be used by many in China. Particularity in Sichuan province, China’s largest producer and consumer of pork.

Where both of these projects are interesting to me, and should be to others, is that these are projects where a firm (IBM) has seen a business model in fixing the problems the world faces.  It is not just about appearing to be a “good” company, or a company that cares, but there is an economic model that underlies the efforts and a business is built around the product.

Much like GE’s Ecomagination portfolio, but in many ways, the Smarter Planet portfolio looks to be one that has far wider application, scalability, and ultimately… impact.

Business leaders have today warned financial short-termism is continuing to prevent companies from becoming more sustainable.

A global survey of 642 senior executives, campaigners and academics conducted by consultancies GlobeScan and SustainAbility found 88 per cent of respondents regard pressure to deliver immediate financial results remains a significant barrier to firms’ sustainability efforts.

This is the lead in from Business is Green’s article Profit incentive derailing sustainability, and I wanted to take a moment as I feel there is a fundamental flaw in the way this story (and the conclusions of the survey) are being spun.

That, it is in fact not profits getting in the way of sustainability, it is greed.  And this to me is important because on a regular basis I hear, and read, about how so many firms (and their executives) want to “do the right thing”.  They see the problem, they know they have a place to inject themselves, but they don’t.

Apple is a great example of this.  A firm that made a billion USD a week in profits last quarter, and yet claims that not only is the US to expensive to manufacture in (i.e. Apple could not be AS profitable), but it is also a firm that is unwilling to invest in a supplier network that abides by even China’s labor or environmental laws… or holds their key suppliers accountable.  Could Apple sacrifice 300 million USD to ensure that all their supplier’s plant met environmental code and that their compliance team was the biggest and baddest in the industry?  sure.. why won’t they?  simple, it would reduce profits.

Not eliminate profits.. reduce.   Which is a greedy act.

In Business is Green’s article, they make mention of the fact that tied to this is also the consumer end:

Meanwhile, low consumer demand for green products and services was identified as a problem by 57 per cent.

Which for me is completely beside the point. Yes, consumers should push back (particularly in cases like Apple), but the vast amount of greed in the system, that maximizes the size and effect of externalities, are outside the reach of the consumer.. and are not about “green”. Best example of that would be the housing crisis of 2008 where the greed of a select few created the conditions for a financial meltdown

For me, what it all comes down to at the end of the day is value, and the value(s) that leaders themselves have.  At this point, the system rewards those who are maximizing profits in the short term, regardless of the environmental, economic, or social costs, and regardless of whether or not consumers show a preference for “Green” products, there needs to be a fundamental value set within leaders where externalities are considered, minimized, and addressed with a balanced view for profits

Update: In reading through the post again, I realized that it would be best if I highlighted some firms who I thought were on the right track.  Those who, even with a planned profit sacrifice, went ahead and begun transforming the way they do business.

1) Interface flooring – this is perhaps the most commonly used example around, and for god reason.  Ray Anderson took a company who profits were reliant upon a business model that sourced worst chemical compounds known to man as raw materials, and then put those materials through an energy/ water intensive process to develop products where there is no “away” and then he turned it around during a time of peak profits.  He forced his company through a process of assessment, action, and innovation that many thought would result in lost profits, only to find out that the firm would be more profitable, be more resilient, have employees who loved working for the company more, and whose customers did not walk away.

2) Timberland – Jeff Schwartz is one of the most vocal CEOs around when it comes to issues of the environment, and like Ray, he began a process whereby timberland shoes and apparel were designed with sustainability in mind.  Material usage, social responsibility, environment, and fair labor all became factors in a firm whose industry is known for anything but.  It was a process that required investment, but that investment was seen as one the business SHOULD make as a member of the community

3) Haworth furniture – A tour of the Shanghai plant, and in speaking with their team, and this is another clear example of a firm who is doing things “differently”.  Their Shanghai facility is a zero waste facility with no materials going to landfill (there is a waste recycling program), but more than that, it is a process that included suppliers (boxes must be reused by suppliers) and customers (the firm is now taking old furniture and refurbishing it – at a profit).  There is still work to be done with materials, but so far the energy savings, material savings, and increased customer/ supplier engagement has only proven the financial side of going “green”

.. and there are many others who deserve mention.  Particularly those who built firms with the balance in mind, versus the need to find it later, but as the above survey was more about the later I pulled out those three examples.  Figured they were more applicable.

It is a discussion that has taken place in many forms, and with many angles, but in rereading the piece I found two paragraphs that were most interesting to me.

Some former Apple executives say there is an unresolved tension within the company: executives want to improve conditions within factories, but that dedication falters when it conflicts with crucial supplier relationships or the fast delivery of new products [...] “We’ve known about labor abuses in some factories for four years, and they’re still going on,” said one former Apple executive who, like others, spoke on the condition of anonymity because of confidentiality agreements. “Why? Because the system works for us

This passage is interesting for three reasons.

1)It shows that there is a debate going on internally about what should be done
2) It shows that Apple actively listening to its consumers for guidance on what to do.
3) It shows that Apple understands that (on some level) their brand image could be tarnished by this issue.

But ultimately, say former Apple executives, there are few real outside pressures for change. Apple is one of the most admired brands. In a national survey conducted by The New York Times in November, 56 percent of respondents said they couldn’t think of anything negative about Apple. Fourteen percent said the worst thing about the company was that its products were too expensive. Just 2 percent mentioned overseas labor practices.

This passage is interesting for one reason.. It shows that the average American is either unaware of or does not care about these issues, and therefore the risk to Apple of brand destruction (from U.S. consumers) is a low risk item.

It seems that Apple’s approach to date has been the right one for Apple and its bottom line.

BUT, is it the American consumer who should be listened to a this point, or is it the Chinese consumer who should be driving Apple’s next move?  After all China is now their #2 market.  A market whose growth potential far outstrips any other.

THIS is the question I believe everyone, including Apple executives, should be asking.  That, while the average American does not seem to identify with, or care about, the issues of a failed supply chain in China, the average Chinese (i.e.  their future) just may.  And that while a poor standard of CSR may fly with the average American, with respect to treatment of Chinese labor and environment, it may not fly with the average Chinese consumer (or government official).

Which is an interesting dynamic that I do not think many firms operating in China have had to work with until only the last few years, and it is a dynamic that has still yet to filter back to HQ.  That, as firms are building the markets in China, their global HQ’s need to begin factoring in the expectations of consumers locally over those of their home territory.  It is not the days of old where a firm, through its export strategy, was able to blackbox its problems without risk to a domestic market.

Where firms manufacture, is where they sell, and as such, it is time to begin addressing the issues differently.

Particularly for those firms who are not using a global standard (like JCI or Intel), but are instead using the local standards as the base.

That is a simple lesson that I teach my students every semester, and one that requires them to go through a series of exercises to identify the root factors causing the problems that emit the byproiducts we are seeing, who the stakeholders are of the key factors, and then how to effectively engage them into a solution that will address ROOT FACTORS.

By doing this, and moving beyond addressing byproducts, the goal is to nip it in the bud so to speak.  To fix the problem BEFORE its byproducts are able to impact the wider systems (directly and indirectly), rather than apply a fix to what is visible.

Unfortunately, the recent post from Greenpeace The Solutions on China’s air pollution issues highlights that those who are in a position of influence are still falling into the trap.  The trap whereby the byproduct itself creates a nice “fix it” story that no one is interested in looking past the byproduct to fix the system

The most basic solution for air pollution is to end its root causes: quit coal and move away from fossil fuels, replacing them with clean, renewable energy.

In the short-term, there are many intermediate solutions for air pollution. However, all of these solutions require governments to recognize the impact of air pollution on public health and the economy, and take action immediately.

• In China, update the Air Quality Index to include PM2.5, the most dangerous form of particulate matter, and make air quality information easily available to the public.
• In Hong Kong, update and amend the Air Quality Objectives to match World Health Organization targets
• Tighten the controls for power plant emissions to reduce emissions
• Introducing cleaner fuel standards and switching to electric vehicle
• Restrict the construction of power plants and other energy-intensive industries near residential areas
• Improve urban planning to increase green spaces
• Take air quality into consideration when conducting environmental assessments for major projects; for example, flyovers and highways should be far away from residential areas.

Looking at the above, what is happening is that Greenpeace’s analyst has labeled air pollution as “the” problem, and then proceeded to identify transparency in reporting, emission controls, fuel standards, lacking green space, and urban planning as the root causes. An approach that I feel is incorrect as it labels the problem incorrectly, the medium (coal) as the sole source of the problem, and the solution set that is presented does not address core issues the CREATE air pollution beyond cars and coal.

The above is simply applying band aids to the byproducts, and in a way that would at best slow down / contain the impacts, but would certainly not result in a systemic change that would eliminate the byproducts.  What the goal really should be.  To accomplish that, and to develop a true solution, the process needs to change.  It must start with taking the physical/ tangible byproduct (air pollution in this case), and the analyzing the systems that are creating the byproduct to understand what solutions can be implemented.

Solutions that would permanently move the levels of emissions downward.

In reviewing the above, what strikes me the most is the lack of systems thinking.

Coal is seen as an evil.

Cars are seen as an evil.

There is no systemic approach to the problem, the real problem, and as such no depth exists as you why each of these evils (anything that results in carbon) exists and the solution set needed.  As is, it is a piece that is focused on building a message to support a supply side solution set, and ultimately that is nothing more than a band-aid to the byproducts of the system.

For social entrepreneurs, or socially minded entrepreneurs, maintaining a focus on excellence and impact should be paramount. At times, maintaining that focus is difficult .. and tiring .. and it’s my hope that this clip helps those of you who are looking for a bit of inspiration (and focus).