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Kuljit Karir and Sarah Stewart

Corporate Client Manager, Corporate Client Executive

Charities Aid Foundation

HAS THE ERA OF GDP AS THE MEASURE OF PROGRESS ENDED?

We recently had the privilege of attending the Crowd forum. The topic of the day was considering how the issues of the 21st century demand new economic frameworks.

Today, there is the very real threat of climate change (the number of natural disasters have quadrupled since the 1970s), biodiversity decline, soaring inequality and financial crises. A 2017 report revealed that 9 billionaires earned the same as the poorest half of the planet.

In her presentation, key speaker Kate Raworth gave a crash course in mainstream economics. She illustrated how the economics of the 20th century, with its focus on utility, efficiency and growth, was fundamentally flawed in that it overlooked the complexities of well being, both social and environmental. This, she argued, has aggravated the social divide and most certainly driven the exploitation of environmental resources.

The question we may immediately ask is: how do we reformat economics to be more holistic; to measure success beyond simple economic growth?

THE PARADOX OF COSTA RICA 

Based on traditional economics, the successes of Costa Rica would not be possible. This tropical Central American country was ranked happiest country in the Happy Planets index ranking. This, while generating a GDP per capita less than a quarter the size of many Western European countries and North America. Furthermore, Costa Rica has an ecological foot print the third of the size of the USA’s and a higher life expectancy of 79.1 years compared to the USA’s 78.8 years.

On the flip side, the USA, with a GDP of over $50K per capita is ranked 108th out of 140 countries in level of happiness and their ecological footprint has left much to be desired. This suggests that their material wealth does not necessarily translate into the wellbeing of its residents and does not encourage environmental preservation. 

21ST CENTURY ECONOMICS: THE DOUGHNUT MODEL 

Donut_blog

Raworth’s 2012 Doughnut model of economics provides us with a new framework for economics that looks beyond the flow of income. The model frames the economy within the boundaries of life’s essentials (food, shelter, justice, education, political voice etc.) and the planet’s life-supporting systems. A valuable aspect of this model is that it illustrates in comprehensive terms, the state of the world at present. Currently we have transcended boundaries on both sides, with environmental boundaries being breached in numerous places and billions of people still impoverished of life’s essentials.

No specific answers are given of how to operate within “the sweet spot” of this framework however; Raworth ascertains that the future of economics needs to be more regenerative and distributive if humanity is to survive the 21st century.

HOW DOES PHILANTHROPY FIT INTO THE DOUGHNUT MODEL?

So, looking at the world through this lens, the question that comes to mind is where does corporate philanthropy fit? How can businesses operate beyond a “growth at all costs” approach?

One thing is clear - businesses have the reach and capability to make a difference. They are large employers, manage vast supply chains, have deep expertise and touch the lives of people throughout their operations. The idea that corporate giving is more than just writing a cheque is a rapidly growing one; but the natural evolution of this needs to focus on sustainable giving; thinking about philanthropy in a holistic, non-isolated way and incorporating it into the broader sustainability agenda; using philanthropy as a way of operating beyond growth.

Patagonia is heralded as an example of the ‘anti-growth’ idea. One of their core principles is “to help reverse the steep decline in the overall environmental health of our planet” and this is enshrined in their mission statement: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Ironically, this anti-consumerism approach has meant that Patagonia’s turnover in 2017 was estimated to push past $200m. Growth came as a result of actively not pursuing it.

Aside from everything else, this approach requires companies to have a purpose which resonates with their employees and customers and allows them to stand for something. Philanthropy should be a natural extension of a business’ core operations and aimed at achieving the maximum impact through focusing on competencies. This should include thinking about the unintended impacts of operations and using CSR and corporate giving strategies to help alleviate this. Put this hand in hand with impact measurement, and you are looking at the foundations of a programme which is designed to be outcome driven, and run in partnership with beneficiaries to begin to address the inequalities raised in the Doughnut.

Is there space for philanthropy to help in an era of increasing disparity and deepening divides, within a new model of economics? We think so - if we treat the model as Kate designed it; to act “as a compass for human progress this century.”

To find out more contact our expert team today. 

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