Not just for profit

Not Just For Profit (NJFP) is a concept that captures an expanded set of values for defining and evaluating for-profit private sector organizations, not only by their ability to generate profit as is done traditionally, but also by their determination and success in driving a benefit for people and/or the planet and operating sustainably. The concept is applicable to companies of all sizes and all levels of maturity, from a startup company to global enterprise. The NJFP concept builds on the triple bottom line (TBL) reporting used in large corporation corporate social responsibility (CSR) strategies.

History of the term

The term ‘not just for profit’ has been used in this context for many years. An example of this is Harriet Ridolfo and Christine Shiel (Bournemouth University Business School) in its then-regular Business Simulation Week engagements with Barclays Bank since 2002, recognising their “positive perspectives based on reciprocity”, “embracing ‘not just for profit’ issues” and “engagement with the wider social context”. (ref Business Simulation Week).

Later, the term was most used in the context of global health issues and the pharmaceutical industry. In November 2005, Salil Tripathi, formerly an economics correspondent for the Far Eastern Economic Review in Singapore and more recently a writer based in London, wrote the comment article 'Not just for profit, or not just?' for The Guardian, debating the benefits of leveraging clone drugs in the third world.

In May 2007, the UK Government (eg the East Midlands Development Agency) started to use the term in its wider context of people and planet, with events such as Not Just For Profit - Business Solutions to Reap Social Reward where business leaders and Social Enterprise organisations from across the East Midlands come together to help stimulate a greater understanding of social enterprise.

Definition

In practical terms, Not Just For Profit (NJFP) means expanding the traditional business, investor and analyst focus on financial performance to take into account environmental and social performance. The concept of NJFP draws heavily on the outcomes defined and measured through triple bottom line reporting - demanding that a company's responsibility be to stakeholders rather than shareholders. In this case, 'stakeholders' refers to anyone who is influenced, either directly or indirectly, by the actions of the company. According to the stakeholder theory, the business entity should be used as a vehicle for coordinating stakeholder interests in a sustainable manner, instead of maximising shareholder(owner) profit. "People, Planet and Profit" are used to succinctly describe the triple bottom lines and the goal of sustainability. The phrase was coined by John Elkington, co-founder of the business consultancy SustainAbility in 1994. It was later expanded and articulated in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. (ref Business and Sustainable Development: A Global Guide). Sustainability, itself, was first defined by the Brundtland Commission of the United Nations in 1987.

People

"People" (human capital) pertains to fair and beneficial business practices toward labor and the community and region in which a corporation conducts its business. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations and NGO's alike to comparably report on the social impact of a business.

Planet

"Planet" (Natural capital) refers to sustainable environmental practices. Generally, sustainability reporting metrics are better quantified and standardized for environmental issues than for social ones. A number of respected reporting institutes and registries exist including the Global Reporting Initiative, CERES Community Environment Park, Institute 4 Sustainability and others.

Profit

Profit is an aspect shared by all commerce, conscientious or not. Arguably, from the perspective of sustainability, profit is the most critical part of the triple bottom line. If a strong focus is not maintained on the value proposition for the product or service for sale, profits will be affected and consequently a business’s ability to have any impact through its purpose (people and planet) will be eroded.

Socially responsible investment

Socially responsible investing (SRI) is a concept aimed at addressing sustainability through financial markets; it combines investors' financial objectives with their concerns about social, environmental, ethical (SEE) and corporate governance issues. SRI is an evolving movement and even the terminology is still very much in the evolving phase. Some SRI investors refer only to the SEE risks while others refer to ESG issues (environmental, social, governance). (ref Eurosif: Socially Responsible Investment). Also see article: "What is SRI?"

While there is a growing view among investment professionals that environmental, social and corporate governance (ESG) issues can affect the performance of investment portfolios, investors fulfilling their fiduciary (or equivalent) duty have lacked a framework for doing so. The UN's Principles for Responsible Investment (PRI), launched by Kofi Annan at the New York Stock Exchange in Apr 2006, provides a potential framework for these investors. The Principles are voluntary and aspirational and not prescriptive. Instead, they provide a menu of possible actions for incorporating ESG issues into mainstream investment decision-making and ownership practices.

The Principles are designed to be compatible with the investment styles of large, diversified institutional investors that operate within a traditional fiduciary framework. The Principles apply across the whole investment business and are not designed to be relevant only to SRI products. However, the Principles do point to a number of approaches – such as active ownership and the integration of ESG issues into investment analysis – that SRI and many corporate governance fund managers also practise.

In terms of a long-term investment proposition, socially responsible investment (SRI) funds are one of the fastest growing prospects in the City of London. This is important not only because blue chip stock valuation is biased two-thirds towards long-term prospect, but also because the City of London is home to many of the world’s largest institutional funds. The City is now managing institutional SRI assets, for the UK market alone, of around $1trillion and it continues to grow fast.

When Friends Provident launched the first UK ethical unit trust 'Stewardship Fund' in 1984, city analysts predicted that consumer SRI funds in the UK would eventually (within 20 years) reach a maximum size of £2 million. By 2001, consumer SRI funds had reached to over £4 billion and over £6 billion in 2005 – 3,000 times the original estimate.

The principle of SRI tends to focus on the public financial markets. However, over the past five years, there has been a significant growth curve of Private Equity/Venture Capital, which in 2006 hit record levels of financing in both Europe and the US. (ref Eurosif). In 2006, one third of the value of all acquisitions in the U.S. involved private equity firms, up from 5% just five years ago. (ref Knowledge@Wharton, January 10, 2007).

Because private equity is increasingly playing a role in the development and practices of companies, there is a growing role for sustainability factors to play an important part in the criteria of these investors. Until several years ago, few venture capital funds in Europe and the US were linked to sustainability issues. But today there is a burgeoning sector encompassing funds specialised in renewable energy but also includes funds that are focused on the bridging of economic divides. Eurosif calls this emerging space Venture Capital for Sustainability (VC4S).

Changes in society’s values & major economic trends

The rise of consumer SRI is closely linked with the growth of key social and environmental movements over recent decades, which have shaped changes in society’s values and concerns. For example, both the Vietnam War and apartheid in South Africa fuelled the consumer SRI market in the UK and in the US. Partly as a result of globalisation, major economic trends have also driven consumer SRI in the UK. These include the increasing financial independence of women and young people, the growth of employment in the voluntary sector, the emerging power of multinationals, and the reducing power of democratic governments.

Increased awareness of SRI & the success of ethical consumerism

Over the last decade, there has been an increased awareness of SRI by companies, government, NGOs, the public and the press. This is partly due to increased communication flows, extensive media coverage and high-profile campaigns, such as Shell in Nigeria. There are also organisations, such as the Personal Finance Education Group (Pfeg), which are working to educate the younger generations about SRI, integrating SRI issues into the compulsory citizenship module in the UK school curriculum. This increased awareness has promoted SRI and ethical activity amongst consumers, spurring the success of ethical corporations, such as the Co-operative Bank and the popularity of fair trade and organic products.

Increased disclosure & recognition of the business case for CSR

With an increasing number of companies recognising the business case for CSR and disclosing information on the social, environmental and ethical (SEE) risks relevant to their business activities, more and more companies are fulfilling the SEE criteria of consumer SRI funds. In turn this is helping to drive the number and type of consumer SRI funds on the market, giving SRI investors more choice.

See also

Sustainable development portal

References

External links

• NotJustForProfit.org website
• Business Simulation Week
• Not Just For Profit, or Not Just?
• Venture Capital for Sustainability (VC4S).
• United Nations Principles for Responsible Investment
• www.SevaInfo.org Helping those who help others, a platform for non-profit information and needs.
• Conscious Manager - Balance in business and life