Not just for profit
Encyclopedia
Not Just For Profit 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.
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.
reporting - demanding that a company's responsibility be to stakeholders rather than shareholder
s. 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.
) 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.
) 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.
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.
(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).
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.
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.
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...
organizations, not only by their ability to generate profit
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
as is done traditionally, but also by their determination and success in driving a benefit for people and/or the planet and operating sustainably
Sustainability
Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...
. The concept is applicable to companies of all sizes and all levels of maturity, from a startup company
Startup company
A startup company or startup is a company with a limited operating history. These companies, generally newly created, are in a phase of development and research for markets...
to global enterprise. The NJFP concept builds on the triple bottom line
Triple bottom line
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
(TBL) reporting used in large corporation corporate social responsibility
Corporate social responsibility
Corporate social responsibility is a form of corporate self-regulation integrated into a business model...
(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 UniversityBournemouth University
Bournemouth University is a university in and around the large south coast town of Bournemouth, UK...
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
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
correspondent for the Far Eastern Economic Review
Far Eastern Economic Review
The Far Eastern Economic Review was an English language Asian news magazine started in 1946. It printed its final issue in December 2009. The Hong Kong-based business magazine was originally published weekly...
in Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
and more recently a writer based in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, wrote the comment article 'Not just for profit, or not just?' for The Guardian
The Guardian
The Guardian, formerly known as The Manchester Guardian , is a British national daily newspaper in the Berliner format...
, debating the benefits of leveraging clone drugs in the third world
Third World
The term Third World arose during the Cold War to define countries that remained non-aligned with either capitalism and NATO , or communism and the Soviet Union...
.
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
East Midlands
The East Midlands is one of the regions of England, consisting of most of the eastern half of the traditional region of the Midlands. It encompasses the combined area of Nottinghamshire, Derbyshire, Leicestershire, Rutland, Northamptonshire and most of Lincolnshire...
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 lineTriple bottom line
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
reporting - demanding that a company's responsibility be to stakeholders rather than shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s. 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
Stakeholder theory
The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. It was originally detailed by R...
, 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
Brundtland Commission
The Brundtland Commission, formally the World Commission on Environment and Development , known by the name of its Chair Gro Harlem Brundtland, was convened by the United Nations in 1983...
of the United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
in 1987.
People
"People" (human capitalHuman capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...
) 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
Global Reporting Initiative
The Global Reporting Initiative produces one of the world's most prevalent standards for sustainability reporting - also known as ecological footprint reporting, Environmental Social Governance reporting, Triple Bottom Line reporting, Corporate Social Responsibility reporting...
(GRI) has developed guidelines to enable corporations and NGO's alike to comparably report on the social impact of a business.
Planet
"Planet" (Natural capitalNatural capital
Natural capital is the extension of the economic notion of capital to goods and services relating to the natural environment. Natural capital is thus the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future...
) 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
Global Reporting Initiative
The Global Reporting Initiative produces one of the world's most prevalent standards for sustainability reporting - also known as ecological footprint reporting, Environmental Social Governance reporting, Triple Bottom Line reporting, Corporate Social Responsibility reporting...
, CERES Community Environment Park
CERES Community Environment Park
The CERES Community Environment Park, or Centre for Education and Research in Environmental Strategies, is an award-winning urban environmental centre located in urban Brunswick East, Victoria, Australia...
, Institute 4 Sustainability and others.
Profit
ProfitProfit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
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
Triple bottom line
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational success: economic, ecological, and social...
. 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 investingSocially responsible investing
Socially responsible investing , also known as sustainable, socially conscious, or ethical investing, describes an investment strategy which seeks to consider both financial return and social good....
(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
Kofi Annan
Kofi Atta Annan is a Ghanaian diplomat who served as the seventh Secretary-General of the UN from 1 January 1997 to 31 December 2006...
at the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
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
City of London
The City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...
. 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
Friends Provident
Friends Provident was an organisation offering life insurance based in the United Kingdom. It was founded as a mutual Friendly Society for Quakers, although it was demutualised in 2001 and became a publicly listed company, no longer linked with the Religious Society of Friends...
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
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
/Venture Capital
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
, 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
Sustainability
Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...
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
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
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 WarVietnam War
The Vietnam War was a Cold War-era military conflict that occurred in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. This war followed the First Indochina War and was fought between North Vietnam, supported by its communist allies, and the government of...
and apartheid in South Africa
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...
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 ShellRoyal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
in Nigeria
Nigeria
Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...
. 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.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