Wealth creation before wealth distribution

Cliff Venzon, reporter for Manila-based newspaper Business World, came up to me for a short interview after my SCOPE presentation at the Asian Forum on Corporate Social Responsibility (AFCSR) in Manila, October 18 to 19. The next day I found myself gaining some media mileage in the local newspaper.

The three underlying "SCOPE" principles I stated--first, harness companies' expertise in wealth creation; second, work in the interest of the company; and third, create mutually beneficial partnerships--to Cliff and his readers, needed additional explanation.

Cliff is not the only one who raises an eyebrow, especially in times of outspoken public unrest towards the corporate world, when I speak of serving company's self-interest and increasing corporate wealth.

Occupying Wall Street was a topic often raised during the two-day conference. Cliff anchored his article on this undefined and random gathering of a handfull of people in various locations around the world. I personally think it's like comparing apples and oranges. Company's engagement in alleviating poverty in developing countries by furthering economic growth and bursting stock market bubbles can't be discussed in one breath.

This is where I draw the line between "creating" and "non-creating" industries. A company producing a product is engaged value creation. The finance sector and stock market, juggling numbers based on perceived values and people's emotions, creates nothing but bubbles (which sooner or later burst).

In the context of poverty alleviation, companies are asked to give a share of their created value to people who, for one reason or the other, are not participating in value creation (for example the farmer who lacks proper knowledge, technology, or market access). But how long can a company invest its profits into causes which are not contributing to value creation? Not long. This is the typical unsustained one shot dole out concept inherent in charity, which I call the Robin Hood principle (taking from the ones who have and giving it to the ones who don't have).

Before wealth can be distributed, it has to be created. Therfore, my job is to enable the farmer or small scale producer to become an economically active member of society. So he can earn from what he creates and sustain himself eventually.

My experience implementing the SCOPE program for the past five years throughout the Philippines have taught me the following:

The people who are experts in wealth creation are business men. Therefore, I tap their expertise to help me identify a sustainable business model for my communities.

For the bussines man to share his expertise, time, and resources with me and my small scale producer groups, there has to be something in it for him. I work in his self-interest by solving a supply problem along his value chain - my foot in his door.

For the trade-link to be sustainable it has to be economically viable and at the same time socially empowering. That's what I call a mutually beneficial partnership.

These three truths turned into the three underlying SCOPE principles. And guess what?! They work!

SCOPE on Stage

The scope of SCOPE is expanding. Not just throughout the Philippines. During the Asian Forum on Corporate Social Responsibility (AFCSR) my SCOPE program faced and convinced an international audience. SCOPE is an approach to embed producer groups into the value chain of Philippine-based companies, thus creating jobs and income opportunities. With more than 35 implemented projects since 2004, SCOPE has become a brand name, and a source of insight.

I felt both, proud and honored, when the Asian Institute of Management (AIM) invited me as a speaker for this year’s AFCSR to share my experiences in a session titled 'Identifying Opportunities to Create Shared Value'.

Already, the discourse about the concept of Creating Shared Value is distorted. Too much emphasis is put on the word “Shared”, instead of the important word “Value”. I therefore opened my presentation with a quote from Michael Porter, a renowned Harvard professor and expert on “Strategic CSR” and now, the concept of “Creating Shared Value”.

He said: “The real opportunity is to figure out how we can create more value and therefore the farmer will actually be rewarded for the reality of participating in creating more value. But not through charity, but by actually expanding the pie. By creating economic value but also creating social value at the same time."

I like that quote because he pinpoints the essence of economic and social development: the need to enable people to become productive members of society. For one reason or the other—lack of market information, lack of access to technology, lack of skills—some people are left out of the loop. Integrating those people into the local economy is what helps them improve their skills and income situation, while at the same time improving the business environment for local companies who are in dire need of raw materials, and skilled labor.

More than 80 people listened to me explaining the heart of SCOPE: the Value Chain. How can we talk about wealth distribution without talking about wealth creation? Nodding heads and approving facial expressions during my presentation proved the SCOPE approach right.

It seems the days of philanthropy and charity often dubbed as 'Corporate Social Responsibility' (CSR) are finally over. People realized that taking from the rich and giving to the poor--which I call the Robin Hood principle—is not a solution to fight poverty or advance a developing country. It creates dependencies among the recipients and an unnatural strain on companies’ competitiveness.

Unfortunately, that is what various groups—NGOs, civil society groups, foreign aid agencies—used to promote. Under the cover of CSR, companies all over the world were 'asked' to invest parts of their profits into social programs, detached from their core-business, and without any bearing to their bottom lines.

Today, the corporate sector is acknowledged for its expertise and competence to expand the pie. At least in Mr. Porter’s and my world. The rest of the world will hopefully soon follow.