Business and Society: Bridging the Gap
Reinhard Mohn Prize 2016
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© 2016 Verlag Bertelsmann Stiftung, Gütersloh
Responsible: Birgit Riess, Julia Scheerer
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Most people, if asked how they envision the world of the future, would be likely to respond with profound uncertainty. This is clearly in part due to the crises we face today, but is also a function of the rapid pace and complex nature of the technological, economic and societal changes currently underway, which together are creating a world increasingly marked by transition, flexibility and mobility. This leaves many feeling overwhelmed and unable to keep pace.
Many people respond to these upheavals with a sense of anxiety about the future. However, these emotional responses often cloud both the creativity needed to develop innovative solutions and the clarity of thought required to identify new opportunities. How might we create a future marked by innovation and social inclusion, thereby fostering employment and wellbeing in a globalized world? The belief advanced by my husband, Reinhard Mohn, that “we need to get more people thinking,” holds more true than ever. Getting more people to think requires a culture of responsibility if we are to unleash motivation and creativity. Above all, we need more reasoned, dispassionate dialogue between stakeholders that brings everyone on board to target the same goal.
Facing the challenges ahead will require the combined strength of all sectors of society. Actors in government, the private sector and civil society are called upon to work together in demonstrating their responsibility to society by showing the way forward. Together, we must aim to bring as many people as possible on board by helping them assume greater responsibility for determining the course of their own lives.
Targeting social innovation in this way requires sharing the same ethic, seeking to preserve an open, democratic and fair society underpinned by the values of freedom, solidarity and compassion. Responsible entrepreneurship can and should have a positive impact on fostering advances in society. Aiming to help drive the debate forward, this year’s Reinhard Mohn Prize stands as a reminder of the fact that even in a context of global competition among entrepreneurs and businesses, Reinhard Mohn’s faith in the strength of compassion (“Menschlichkeit gewinnt!”) serves us all as a leitmotif.
Liz Mohn
Vice-Chair of the Executive Board, Bertelsmann Stiftung
Our society finds itself confronted with a broader array of challenges than ever before. Globalization may have brought prosperity, but it has also brought new problems. Digitization already heavily influences the way we make money, consume and our very way of life. However, it is simply too soon to predict the extent to which these changes will have a negative or positive impact on our society. Similarly, it is far from certain how we will deal with the consequences of demographic changes that will pervade every aspect of society. We know that the effects of demographic change will fundamentally alter the labor market, but how we manage migration and integration has cast a spotlight on unresolved problems.
These challenges elude easy solutions. Highly complex by nature, they are interdependent. Appropriate and effective responses to this complexity and efforts to introduce future-oriented change often fail at the national level, finding more success in an international context. Alongside these developments, there is a growing awareness that securing the sustainability of our economic, social and environmental systems will require contributions from all societal actors – in other words, joint efforts from politics, business and civil society. While political action is essential here, there are additional, meaningful ways in which we can support it.
The Reinhard Mohn Prize 2016 takes as its subject the world of private business and explores the question of how companies can make a meaningful contribution to sustainable societal development – by demonstrating responsible management and proactively contributing to their social environment. This year’s Reinhard Mohn Prize draws on its namesake’s conviction that “companies have a contribution to make to society” and that entrepreneurs “do not have the right to stand completely apart from society” (Mohn 2004: 141).
Many companies commit to contributing to the societies in which they operate. The Institute for Economic Research estimates that the volume of domestic entrepreneurial engagement represents a financial equivalent of at least €11 billion a year (Hüther et al. 2012). But this raises two questions: What are the standards of responsible activity for companies under conditions of shifting global megatrends? And how effective is social engagement, anyway, in terms of both scale and reach? Underpinning these considerations is the understanding that responsibility does not equal charity. Companies have a decisive role to play in strengthening social fabrics and innovation in society. Companies influence the lives and environment of people in our society in diverse ways with their products and services, as well as their manufacturing and supply methods. They therefore bear responsibility – not just economically – but also in the social and environmental impact of their activity.
Entrepreneurial engagement also bears an enormous social potential: the ability to solve social problems with entrepreneurial means. This is rooted in the fundamental principles of enterprise: innovation, risk-taking and resource allocation. And these principles can form an effective complement to conventional state or civil society mechanisms targeting solutions – ideally in joint initiatives. Clearly, this kind of activity also lies in the interests of companies themselves. This is because companies and society exist in complex interrelation with each other – and in a state of mutual dependence. This publication therefore examines the role of companies as social innovators in light of the dramatic shift in expectations placed upon them.
In recent decades, the debate around the social responsibility of companies has accelerated at a rate many scarcely thought possible – including those who identified a fundamental paradigm shift underway, going so far as to postulate the “reinvention” of capitalism (Porter and Kramer 2011).
But what has actually changed, and why? A cursory glance at the development of the “corporate responsibility” movement reveals that what we expect in terms of company activity in a globalized world has changed fundamentally, underscoring the need to develop new approaches that make corporate responsibility more effective.
In the 1970s and 1980s, the shareholder value approach dominated management literature and practice. It held that a company’s sole objective was to maximize profits for its shareholders. This perspective failed to acknowledge that companies move within a dynamic network of relationships, and that other stakeholder groups – employees, customers, politicians and the general public – are also important.
The growing influence of multinational corporations and the globalization of value creation chains, in particular, precipitated closer scrutiny of firms’ economic, social and environmental responsibilities. In addition, the breakneck spread of information and communication technologies allowed for greater transparency, meaning that company scandals and misconduct quickly came to the attention of a worldwide public. Meanwhile, an increasingly vigilant civil society developed more effective campaigning skills. The economic crisis that began in 2007 served to further shake remaining confidence in business.
These developments were and are the drivers for companies’ increasing acknowledgment of their social responsibility. Terms such as “corporate social responsibility” (CSR), “corporate responsibility”, “sustainability” and “shared” value are now permanently affixed to corporate agendas. And the quality of the concepts explored under these labels has changed greatly over the course of time. While corporate responsibility previously found expression in charitable and sponsoring activities, today, the prevailing conviction holds that the core business, including the supply chain, must be aligned with economic, social and environmental factors in mind. This minimizes risks and maximizes opportunities for new business models.
Another important driver was the increasing awareness among policymakers that corporate social responsibility had to be both supported and mandated. At the supranational level, too, a generally shared understanding of the foundations of corporate social responsibility emerged through the ILO’s core labor standard, the OECD’s Guidelines for Multinational Enterprises, the UN Guiding Principles on Business and Human Rights as well as the universal principles of the UN Global Compact. These international agreements form the reference framework for a multiplicity of management guidelines as well as rating and reporting systems.
The European Commission also plays an important part here, with its conviction that socially responsible corporate behavior can make a fundamental contribution to sustainable and integrative businesses in Europe. With the 2001 publication of the green paper “European Framework for Corporate Social Responsibility” (European Commission 2001), the Commission defined for the first time what it understood this social responsibility to be – “a concept whereby companies integrate social and environmental concerns in their business operations (...) on a voluntary basis” (ibid.: 8) – and how the necessary framework conditions might be created.
Demonstrably dissatisfied with what had been achieved to date, the Commission shifted its policy strategy from encouragement to obligation. In the new strategy presented in 2011, companies were generally held responsible for their impact – both negative and positive – on society (European Commission 2011). To lend weight to its demand for responsible action, in 2013, the European Commission ordered large companies to provide greater transparency in social and environmental matters. The extent to which a binding reporting requirement, such as the one that will come into effect in Germany in 2017, is able to not just sanction undesirable actions, but also open up potential for CSR remains to be seen.
The urgent need for businesses to actively assist with the major challenges of our time was illustrated by two major events of recent years: the signing of the climate agreement in Paris and the Sustainable Development Goals agreed by the General Assembly of the United Nations in New York. Both agreements foresee an active role for companies and business in the implementation of their respective catalogs of goals. The largest and most important network in the world for responsible management, the UN Global Compact, emphatically calls for companies to mobilize in the effort to reach the 17 sustainability goals. And the final document of the UN Conference on Development Finance in Addis Ababa in 2015 placed a particular emphasis on the creativity and innovation of business in the search for solutions that implement sustainability and development goals.
There is a growing recognition of the significance of companies as actors or even partners in efforts to address the pressing problems of society. And the self-applied definition of companies acting as “corporate citizens,” to the extent of their abilities, ties in with their understanding of themselves as responsible companies that have an obligation to society and are unable to act in isolation from it. The engagement of companies in social issues can also be understood as an investment in the framework conditions for their own entrepreneurial success. With high rates of youth unemployment in Europe and low equality of social opportunity, companies are no longer willing or able to stand aside in passive observation. Many company initiatives can cultivate social innovations and make a lasting contribution to social progress. In its international research, the Reinhard Mohn Prize 2016 searched for proof of this contribution.
This book represents the findings from worldwide research into entrepreneurial solutions for societal problems. The methodology used to categorize the exemplary initiatives identified is outlined by Andreas Heimer, Claudia Münch and Lea Eggers. Embedded in contributions by renowned academics, these examples illustrate a new paradigm for effective corporate engagement: “thinking big” about social impact from the start, including partners to ensure wide circulation and, finally, anchoring this approach in a way that guarantees sustainable success.
The first section of this volume focuses on the role of the company as a sociopolitical actor. Here, Timo Meynhardt highlights the contribution of organizations and companies to public value. Jürgen Howaldt considers the role that companies play in social innovation. Finally, Felix Oldenburg shows how companies and social concerns can grow in concert.
In Section 2, Christiana Weber describes the requirements for scaling entrepreneurial initiatives. Drawing on the initiatives researched, Julia Scheerer and Jakob Kunzlmann subsequently present reference models that might serve as blueprints for effective corporate engagement.
Section 3 examines what form the conditions for corporate engagement might take. In his contribution, Josef Wieland and Isabel Jandeisek address the normative demands made of companies today. And Gregory Jackson investigates which forms of capitalism tend to favor or hinder responsible corporate behavior.
Finally, Birgit Riess, Julia Scheerer and Jakob Kunzlmann extrapolate recommendations for promoting and embodying responsible entrepreneurship in the political and entrepreneurial spheres.
European Commission. Europäische Rahmenbedingungen für die soziale Verantwortung der Unternehmen. Grünbuch. Brussels: European Commission, 2001.
European Commission. Eine neue Strategie für die soziale Verantwortung der Unternehmen (CSR). Brussels: European Commission, 2011.
Grayson, David, and Jane Nelson. Corporate Responsibility Coalitions. Stanford: Greenleaf, 2013.
Hüther, Michael, Sebastian Braun, Dominik Enste, Michael Neumann and Liliane Schwalb. Erster Engagementbericht – Für eine Kultur der Mitverantwortung. Berlin: Federal Ministry of Family Affairs, Senior Citizens, Women and Youth, 2012.
Mohn, Reinhard. An Age of New Possibilities. New York: Crown Publishers, 2004.
Porter, Michael E., and Mark R. Kramer. “Die Neuerfindung des Kapitalismus.” Harvard Business Manager 2: 58–75, 2011.
Riess, Birgit. “Quo Vadis CSR? – Zukünftige Herausforderungen für die Integration von CSR in wirtschaftliches Handeln.” Corporate Social Responsibility, edited by Andreas Schneider and René Schmidpeter. Berlin and Heidelberg: Springer, 2012: 779–787.
“We can best discover innovation, learn and make a difference by looking beyond our own borders.” Following this maxim by its namesake, the Reinhard Mohn Prize 2016 is paired with research into initiatives implementing responsible entrepreneurship in an exemplary manner. This year’s prize focuses in particular on approaches offering solutions to societal challenges such as growing diversity, increasingly complex supply chains and unequal access to educational opportunities – all examples of the structural changes shaping our shared economic, social, political and cultural lives.
The initiatives identified in the context of the research represent practical expressions of the theme of “Responsible Entrepreneurship – Social Innovation through Entrepreneurial Activity.” They address individual societal challenges and offer a variety of answers to the question of how responsible business can tackle societal challenges and promote social innovation.
The initiatives that are the subject of this research are presented at the end of chapters throughout this publication. The following section describes the filtering mechanisms used in the research and the overall methodological approach.
From a content perspective, the research is guided by three megatrends that strongly shape society and social cohesion:
• Smaller, older and more diverse populations – demographic change is transforming social structures, creating challenges and opportunities associated with increasing societal diversity.
• Globalization is leading to increasing political, economic, cultural and social links between people and states. Rising in parallel are demands for an economy that is both forwardlooking and does not endanger social cohesion.
• Social inequality is manifesting itself in increasing societal division. Promoting social participation by all people is becoming an increasingly important task.
The complexity of these societal challenges requires new solutions that are more effective, efficient, sustainable or fair than existing approaches (Phills, Deiglmeier and Miller 2008: 36). In other words, social innovations are needed that may arise in politics, civil society or business. The international research associated with the Reinhard Mohn Prize 2016 focuses on business initiatives. Figure 1 presents a selection of the megatrends’ characteristics as well as the associated areas in which companies are able to take action.
Figure 1: Megatrend characteristics and companies’ areas of activity
Source: Prognos AG
With their innovation capacity, their entrepreneurial know-how and their financial resources, companies have the capacity not only to generate new ideas, but also to implement them successfully and bring them to scale. To be included in the RMP 2016 inquiry, the role of the companies in the innovation process should be clearly definable and describable. The initiatives may also arise in non-profit organizations as long as they are linked to a company.
Business initiatives are sought that offer new solutions to the societal challenges associated with the megatrends of demographic change, globalization and social inequality. Companies have a clearly defined and describable role in the initiatives.
A special feature of social innovations, and thus a requirement for the initiatives researched here, is that they create both social and economic added value (Crets and Celer 2013: 77 f.; Guenther and Guenther 2013: 167 f.; Porter and Kramer 2011). This dual added value arises particularly when companies address business-related issues that are directly related to their business activity and its unintended consequences (Porter and Kramer 2011). Business-related issues can either cut across sectors, thus having relevance in all businesses, or be sector or company specific (Riess 2010: 36).
The initiatives produce added value both for society and companies. They address companies’ business-related issues.
To be classified as particularly exemplary, the initiatives researched should already have demonstrated a certain impact (Kesselring and Leitner 2008; Carnegie et al. 2014). The impact of social innovations is typically assigned to three levels. At the project level, the impact affects only the actors directly participating in the initiative. At the structural level, new institutions or organizations additionally emerge, or the initiative is taken up by other companies. At the system level, by contrast, the focus is on large-scale societal transformations. The initiatives researched here are thus distinguished by having impact that extends beyond the internalcompany project level, and that is felt at a structural or even systemic level with respect to duration, scope or permanence.
The impact of the initiatives is felt at a structural or (potentially) systemic level.
Finally, the research recognizes the fact that not every societal challenge is relevant everywhere. The specific character of responsible entrepreneurship is often dependent on the country-specific context. Factors such as competition and regulation, corruption, the political spectrum, the strength of unions and the availability of skilled labor may influence the degree to which companies practice social responsibility (Ioannou and Serafeim 2010: 23 ff.). In order to do justice to the Reinhard Mohn Prize’s motto of “Learning from the World,” priority was given to researching initiatives that offer possible solutions to social challenges in Germany and, thus, serve as a model for responsible entrepreneurship and social innovation in the German context.
The initiatives can be applied within the German context.
Initiatives were first identified in a process of comparative desk research, as well as through telephone interviews with experts in the areas of responsible business and social innovation. The roughly 250 initiatives thus collected were subjected to the research filters described above, with about 50 moving on to more detailed examination. In this next round, telephone interviews and personal on-site interviews with initiative organizers and actors from academia, politics and civil society enabled comprehensive insight – in the sense of a 360-degree perspective – into the initiatives’ operations.
Overall, more than 120 interviews were conducted with actors from Australia, Austria, Belgium, Brazil, Canada, Denmark, France, Germany, India, Israel, Japan, the Netherlands, Norway, Singapore, South Africa, Switzerland, the United Kingdom and the United States.
An expert panel convened by the Bertelsmann Stiftung supported the research throughout the entire period. Over the course of two all-day meetings, 11 top-level experts from academia, business and civil society worked to sharpen the research approach and discussed results. This helped keep the procedure transparent, prevent the research field from becoming too complex, and ensure the consistency of proposals to structure and evaluate the project. The expert panel also ensured that the presentation of results was complete, and its presence meant that research results were validated and accepted by experts. Figure 2 illustrates the methodology.
Figure 2: Methodology
Source: Prognos AG
As a result of the international research process, 12 initiatives were selected to serve as models for responsible business and corporate social innovation. In accordance with the criteria of transferability to the German context, the initiatives researched originate in European countries and North America, which have a cultural proximity to Germany and face similar societal challenges.
The initiatives illustrate the diversity of opportunities for companies to exercise their social responsibility:
Companies can take on the role of sociopolitical actors. Examples of this include the Intercultural Innovation Award, a joint program offered by the BMW Group and the United Nations Alliance of Civilizations that supports intercultural understanding (Germany/United States); and Social Impact Start, a scholarship program for social startups operated by SAP and Social Impact (Germany). In both examples, companies consciously take on the role of “enabler” of social innovations. Particular importance is attached here to the targeted use of the company’s resources. The IT consulting company Specialisterne, which focuses on the labor-market integration of people on the autism spectrum (Denmark); the Zweite Sparkasse for people without bank accounts (Austria); and HP with its HP LIFE education program for young entrepreneurs (United States) all use their dedicated resources to exercise their social responsibility by concentrating on specific target groups.
Moreover, companies can play a particular role in scaling innovative solutions. The Nestlélaunched Youth Employment Initiative for combating youth unemployment (Switzerland), the company-led Business in the Community responsible-business non-profit organization (United Kingdom), as well as the Together for Sustainability (Germany/Belgium) and Sustainable Apparel Coalition sectoral coalitions represent good examples of collective action. In these instances, companies pool their resources and coordinate their activities in order to achieve even greater impact together.
Finally, companies can influence the political environment as they exercise their social responsibility. The BASF-initiated Zukunft Metropolregion Rhein-Neckar regional development initiative (Germany) and the B Corp movement for responsible business (United States) both help reshape the political environment as they have sought to establish a legal grounding for their ideas. The Charte de la diversité (France), a voluntary commitment to anti-discrimination and diversity within companies, is a successful example of agenda-setting on the European level.
The initiatives are profiled individually at the conclusion of the following chapters, and are assigned to the appropriate stages of development in the presentation of the reference model.
Carnegie, Tania, Tim Draimin, Amy Birchall, John Elkington and Charmian Love. Breaking Through – How Corporate Social Innovation Creates Business Opportunity. Toronto: KPMG, SiG and Volans, 2014.
Crets, Stefan, and James Celer. “The Interdependence of CSR and Social Innovation.” Social Innovation – Solutions for a Sustainable Future, edited by Thomas Osburg and René Schmidpeter. Berlin and Heidelberg: Springer-Verlag, 2013: 77–88.
Guenther, Edeltraud, and Thomas Guenther. “Accounting for Social Innovations: Measuring the Impact of an Emerging Intangible Category.” Social Innovation – Solutions for a Sustainable Future, edited by Thomas Osburg and René Schmidpeter. Berlin and Heidelberg: Springer-Verlag, 2013: 155–170.
Ioannou, Ioannis, and George Serafeim. What Drives Corporate Social Performance? International Evidence from Social, Environmental and Governance Scores. Working Paper. Boston: Harvard Business School, 2010.
Kesselring, Alexander, and Michaela Leitner. Soziale Innovation in Unternehmen. Vienna: Zentrum für Soziale Innovation, 2008.
Phills, James A. Jr., Kriss Deiglmeier and Dale T. Miller. “Rediscovering Social Innovation.” Stanford Social Innovation Review Fall: 34–43, 2008.
Porter, Michael, and Mark Kramer. “Creating Shared Value.” Harvard Business Review 01: 62–77, 2011.
Riess, Birgit (ed.). Verantwortung für die Gesellschaft – verantwortlich für das Geschäft. Ein Management-Handbuch. Gütersloh: Verlag Bertelsmann Stiftung, 2010.
What do Google, Airbnb and WhatsApp have in common? All three companies are striking examples of innovative business models that intervene in the fabric of society in new ways, thus changing living conditions and ultimately affecting social values. Google’s products and services drive our collective approach to the handling of information and data protection; online marketplace Airbnb facilitates overnight stays in private lodgings, thus ushering in a notable shift in the relationship between privacy and commerce; and, finally, the WhatsApp messaging service enables hitherto unknown possibilities for exchange within social groups. At first glance, all three companies can be said to provide services that promise benefits in our everyday lives; however, upon closer inspection, their influence on the social fabric is not directly evident.
The social dimension of these and other innovations also involves questions relating to their contribution to the common good – their so-called public value. For example, Google promises to make information accessible to everyone across the globe; Airbnb advertises that it can find us a place to stay anywhere in the world; and WhatsApp is more than just a cool and affordable messaging service.
And yet, although a company can set out to provide a value contribution and benefit to society, the only entity that can actually create such value is society itself. In fact, whenever and wherever the common good is affected, any responses to such developments are generated within society itself. This means that responses cannot be unilaterally determined by a company in advance. Indeed, leaders active in the fields of business, politics and civil society are often faced with the old and painful truth that the recipients of a message are the ones who decide how to classify and evaluate that message. In other words, perception is reality. Public value is the result of individual and collective evaluation processes through which value is generated collectively, in the sense of a co-creation.
One thing is certain: Today, in a public sphere marked by strong and self-propelling media dynamics, what counts more than ever is the perception and interpretation of facts and figures. The success or failure of business activity depends on social processes of opinion creation that can only to a limited extent be gauged in advance. In such processes, it is often difficult to determine whether the debate is dealing with supposed objectivity or deceptive subjectivity.