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E1 Value and societal impact of products and services

A) Starting point and goal

 Today, products and services primarily benefit customers. Considering the overall system of our planet, the mere satisfaction of demand cannot be the single objective of Common-Good oriented enterprises. We have to evaluate the societal impact and the reasonability of products and services.

The goal of the Economy for the Common Good is to ensure that only things which humans need for a modest and sufficient way of life are produced worldwide in the most ecological way possible. Companies should receive impulses for developing and supplying reasonable and socially and ecologically compatible products and services. The goal of Common-Good companies is to provide all members of society with the sufficient measure of useful products and services that is necessary for a physically and mentally sound existence - and to produce them in the most socially and ecologically compatible way possible.

Moreover, through their products and services, Common Good companies aim to effect a socio-cultural change directed towards solving the great challenges of humankind such as poverty eradication, nutrition for all, education, health and solutions for social grievances.

The question of the actual reasonability of products and services can be answered by asking which basic needs a product or service meets - directly or indirectly - and which possible or actual negative effects the manufacture, use or disposal of such products and services have.

Moreover, we have to consider which customer group in the population pyramid is addressed. Inexpensive offers for basic needs of disadvantaged people in the lower strata of society must be given a more positive evaluation than offers for upper strata of society which can be characterized as “nice to have.”

According to John Crost, in evaluating the societal impact of products and services the following levels are to be considered [1]:

  1. Personal human growth
  2. Strengths of the community
  3. Basis of life on earth

Current consumer patterns, product usage and energy consumption are to be considered under the aspect of limited resources, social, personal and global effects as well as ecological consequences. In addition to the basic purpose of products, reasonable and moderate use (sufficiency) play a significant role here.

In evaluating and developing products and services, companies are called upon to find solutions for sustainable production methods and ways of life which allow us to master the necessary social and ecological transformation.

B) Prompt questions

For a systemic examination, the following questions can facilitate discourse in the company:

  • Which needs of the customer do the products / services (P/S) meet?
  • Which of the nine fundamental human needs (according to Manfred A. Max-Neef, see below) are fulfilled by the respective P/S in a singly positive, multiply positive or negative manner?
  • Which type of benefit creation results from the P/S of the company? (see below)
  • Which type of needs do the P/S meet indirectly in view of the customer structure?
  • In which way do the P/S serve the personal growth of human beings?
  • In which way do the P/S help promote the community in the private and professional spheres?
  • Which relation do the products have to growth limits on our planet?
  • How is the entire value chain to be assessed in social and ecological terms?

C) Evaluation table

 

Sub-indicator

First Steps
(1-10%)

Advanced
(11-30%)

Experienced
(31-60%)

Exemplary
(61-100%)

Products / services meet a basic need or serve the development of human beings / the community / the earth and generate positive use

 

Relevance: high

Up to 25% of P/S meet a basic need or have a positive + proven effect on human beings / the community / the earth

 

A maximum of 25% of P/S have an inhibitive / pseudo-negative value

Up to 50% of P/S meet a basic need or have a positive + proven effect on human beings / the community / the earth

 

No products / services have an inhibitive / pseudo-negative value

Up to 75% of P/S meet a basic need or have a positive + proven effect on human beings / the community / the earth

Up to 100% of P/S meet a basic need or have a positive + proven effect and solve major societal problems

Ecological and social comparison of products / services to alternatives with similar final benefit

 

Relevance: moderate or high

 

Selective approaches: for ex. the company offers social and ecological niche products

In regard to social / ecological aspects the company offers above-average P/S

In regard to social / ecological aspects P/S are considerably above sectoral average

In comparison to alternative, highest-quality P/S in terms of social and ecological aspects, for ex. energy, eco-power, mobility: train / bus / solar operation

D) Special aspects regarding the evaluation

Differentiation from other indicators

The societal impact of products and services refers to the overall effect of entrepreneurial activities (business model) on humankind/society or advancement of human empathy and human values; as such, it overlaps with indicators concerning ecological sustainability (A1/D3/E3) as well as social indicators (D4/E2). Reasonability can be evaluated in particular by making a:

  • social comparison (social and cultural compatibility); and an
  • ecological comparison (environmental compatibility, sufficiency, frugality)

in regard to alternatives for similar end-users. Cars, for example, should not only be viewed in comparison to other cars, but also to all alternative means of mobility (trains, buses, etc.). The entire life cycle / value-added chain “from the raw material to disposal or reuse” as well as the social and cultural impacts of the product must be considered.

It is important to differentiate clearly between E1 and D1. Pioneers often say: “But my product gives the customer the following advantages …!”

This describes customer benefit, which is evaluated in D1; E1 pertains to the added societal value.

E) Means for facilitating the evaluation

The following structure can facilitate evaluation of a company’s key products / services:

Top 5 offered products / services (% of revenue)

Do the P/S meet a basic need (sufficiently) and are they vitally important?

(do they serve a simple life, a good life or are they a luxury?)

Positive effect on human beings / community / earth

Possible negative / actual consequential impact of P/S

 

          

Definition and aspects

To do justice to the complexity of this indicator, the products and services should be considered from various perspectives
Satisfaction of basic human needs: the purpose of a product or a service can be recognized by asking whether it serves to meet basic human needs and in what way utility is provided. Max-Neef’s Human Scale Development approach[2] provides assistance for measuring nine basic human needs as well as for classifying various forms of utility (for details see below).

Relation to negative consequences: the degree to which needs are met must be seen in relation to the negative consequences which result from production, transport, consumer behaviour and disposal or final storage. In addition, social and cultural compatibility should be considered, for example as regards area of use, impact on persons, addictiveness and use-unrelated status function.  Environmental compatibility, i.e., ecological impact such as effects on climate change, use of scarce resources, detriment to health, ecological footprint etc. must be considered too. Many products and services have only started to unfold their destructive force though current intensity of use (for ex. fossil energy carriers, animal food products).                         

Calculation:           % positive effect of a product / service

                              % negative consequences

Whether basic needs are met and which negative consequences ensue as a result is only one side of the coin. In addition, the solicited customer group plays a role. Companies which offer products / services to fulfil basic needs of the lowest, underprivileged stratum of society should get a higher score in regard to societal impact than should those who serve customers at the top of the population pyramid.

Moreover, one should assess whether social issues are supported or current social challenges are solved such as healthful nutrition for children, solutions for problems faced by refugees, integration of unemployed persons, education for underprivileged persons, social justice and data protection. The highest level of social impact is reached if that which a company offers promotes and drives socio-cultural change to a high degree (social business enterprise). This can be achieved through effective problem solution measures for the lowest, underprivileged strata of society.[3]

Personal growth/human development: increase in education, knowledge and vocational opportunities for as many people as possible is a basic prerequisite for peaceful cohabitation on our planet under the condition of a rapidly increasing global population and increasingly scarce resources. The broad effect which products / services have for human development and whether they are oriented towards underprivileged human beings, for ex, whether they serve to integrate long-term unemployed persons, is measured.

Development of community: products or services which have a positive influence on how people live and work together, for ex. through architecture, promotion of social contacts, leadership systems which enable departments of a company to work together better, etc.

 

Regeneration of the eco-system and conservation of natural resources: products / services which are produced or used in a more resource-efficient way than comparable products, for ex. zero-energy houses, nontoxic print products, etc.

 

Indirect satisfaction of needs and effectin the B2B areaservices which are purposeful per se can be oriented to the Common Good or be provided to a customer who violates the Common Good. Here it is important to distinguish between direct and indirect effects. On the one hand, companies meet customer’s needs directly; on the other hand, they contribute indirectly to the performance of the other company, thus having an indirect influence on its products / services.

 

Basic needs

 

According to Max-Neef, the following nine basic human needs can be identified worldwide and they can be met, for example, as follows:

 

  1. Subsistence: for ex. food, shelter, work
  2. Protection: for ex. social security, health care systems, job security
  3. Affection: for ex. friendships, family, relationship with nature
  4. Understanding: for ex. literature, educational systems, communication
  5. Participation: for ex. rights, responsibilities, work
  6. Idleness: for ex. games, sports, clubs
  7. Creation: for ex. skills, knowhow
  8. Identity: for ex. language, religion, tradition, values
  9. Freedom: for ex. equal rights

 

Form of providing benefits

 

According to Max-Neef we can distinguish five basic effects or benefits of products and services which extend beyond satisfaction of needs:

 

a)    the product/service fulfils several needs; for ex. nursing a baby fulfils a basic need for nutrition but also a need for affection, closeness and emotional security;

b)    the product/service fulfils one basic need; for ex. a sports event ONLY fulfils the need for recreation.

c)    the product/service meets inhibiting needs; for ex. television programmes fulfil the need for recreation but have the potential to inhibit creativity and autonomous creation.

d)    the product/service meets pseudo-needs; for ex. mechanical medicine (“a pill for every illness”) often fails to solve the basic problem, only treating some of the symptoms and, in the worst case, merely displacing them.

e)    the product/service meets negative needs such as nuclear power plants, weapons, slot machines and censorship, which even impede fulfilment of basic needs.

 

Negative consequences

 

Negative consequences are a possible initial filter for evaluating the societal impact of a product.

The following possible and actual negative effects of the range of P/S are to be evaluated:

 

  • Production/consumption of resources
  • Transport/consumption of resources
  • Excessive consumer behaviour
  • Disadvantaging of lower social strata
  • Health hazards/detriments
  • Damage to ecosystem
  • High usage intensity – does not comply with a sufficient lifestyle
  • Excessive energy consumption
  • Debilitating use such as addictiveness, dependence etc.
  • Pseudo-use; does not solve problems but treats symptoms instead

 

Further forms of differentiation

 

In addition, the following three categories can be differentiated:

 

Category 1

Category 2

Category 3

Sufficiency

Affluence

Luxury

Simple life

Good life

Excess

Basic needs

Elective needs[4]

Status symbols

 

The following prompt questions can help you assign your own products to the three categories:

  • Are these products/services designed to provide for a sufficient or “simple” life? Are they essential or do they form part of a basis for existence? (see nine basic needs)
  • Do these products/services secure a “good life,” i.e., are they not vital for life but simplify or enhance the “simple” life? (elective needs)
  • Are these luxury products which usually “only” serve one’s status and could be substituted by the more economical products of a simple or good life, which have less impact on resources?

 

Concrete examples for differentiating these three categories have been found. This list is merely an “initial proposal,” however; it must be expanded on and revised in future Matrix versions.

 

Sufficient products/services are:

 

  • Simple, home-made, fresh, primarily vegetarian food
  • Housing with water/heat/electricity (one living-bedroom with approx. 20 m² per person)
  • A sufficient amount of simple clothing
  • Education: formal education up to school-leaving examination; vocational education
  • Telecommunication/Internet[5] and computer
  • Basic medical care and health insurance
  • Mobility and participation in social life
  • Free and independent press/media

 

All of these products/services can be obtained for a version of the “good life” or the “luxury life.” It is not always easy to distinguish the two. In regard to housing, for example, one can differentiate between a social housing unit with fewer rooms than inhabitants, a representative residence in a popular residential area with over 20 m² per person (a “good life”) and a suburban villa and a secondary residence in the countryside (a “luxury life”). In particular, the border between a good life and a luxury life are not always clearly definable.

 

In any case, luxury products are products/services which either cost more than three times as much as the sufficient version or use more than three times as many resources.

 

Social Business Enterprises – what are they?[6]

The concept “Social Business Enterprise (SBE)” was coined by Muhammad Yunus to characterize enterprises which earn money and change the society they are active in by doing so. Thus, these are neither NGOs nor are they non-profit foundations. SBEs are founded with a social agenda from the very start (social mission), but it is also possible to transform established enterprises into SBEs. What is decisive for designating an enterprise as an SBE is that a social mission is a primary entrepreneurial goal and that this fact is clearly reflected in the decisions it makes.

Solving global problems

To develop into a social business it is advisable to embrace the eight Millennium Development Goals of the UN and to offer solutions for the major challenges of our planet.

 

The Millennium Development Goals are[7]:

 

  1. Eradicate extreme poverty and hunger
  2. Achieve universal primary education
  3. Promote gender equality and empower women
  4. Reduce child mortality
  5. Improve maternal health
  6. Combat HIV/AIDS, malaria and other diseases
  7. Ensure environmental sustainability
  8. Develop a global partnership for development

 

Solving problems / meeting the challenges of the Western world

 

In Europe’s societies there are also a number of societal problems which can either be addressed by governmental institutions or by NGOs or social business enterprises. To provide a solid foundation for evaluation of E1, the attempt has been made here to list some of the major societal problems:[8]

 

  • Resource-saving nutrition (organic farming, no gene technology)
  • Inexpensive and ecological living space, resource-saving heat/energy efficiency
  • Inexpensive and good-quality health care (extending beyond Western medicine)
  • Comprehensive basic and advanced training (extending beyond classic school education)
  • Poverty eradication and basic income
  • Migration, immigration and nationalism
  • Waste avoidance / recycling / up-cycling
  • Substitution of conventional products with renewable raw materials
  • Resource-saving mobility  (fewer passenger cars, more alternative options)
  • Demographic change: working and living situation of the elderly
  • Rural exodus: migration into cities
  • Regional stabilization – as counterbalance to globalization

 

Good Practice

Grameen Bank – micro-loans for the poor

A solidarity-based economic initiative evolved in one of the poorest countries of the world. The Grameen Bank (in Bengalese it means ‘village bank’) was founded by the economist Muhammad Yunus in 1983 to give the poor population start-up capital for small enterprises.  97% of the loans are granted to woman, and approx. 98% are re-paid. Borrowers simultaneously become members – partners – of the bank. They own 94% of the bank; the remaining 6% is owned by the state. This concept has been emulated in sixty developing countries.

 

Some criticism is raised against the the Grameen Bank and similar micro-loan models however, the claim being that only one fifth of the debtors manage to become economically successful, with the others remaining caught in the thralls of debt bondage. It has been claimed that financial intermediaries sometimes work on commission and coerce customers into taking out micro-loans.[9]

 

R.U.S.Z.  - Reparatur- und Servicezentrum

 

This social business was founded in Vienna with the aim of re-integrating long-term unemployed persons. The business activity, repair of electric devices, exclusively serves to fulfil this social purpose and it generates positive ecological effects too; electric devices are used for longer and as a result, fewer new ones are bought.

 

Gabarage – upcycling

 

Cooperation with the business aim of making new designer products out of old, seemingly worthless objects such as desks out of old books. One goal is to prevent waste and reuse resources; another is to provide workplaces and vocational measures for disadvantaged persons.

 

Göttin des Glücks - Modedesign

 

Fashion attire is made of 100% African cotton under 100% socially fair working conditions and payment of good wages in Mauritius. The goal is to create adequately paid workplaces while adhering to social standards in a developing country, to use pure, nontoxic natural materials and to pay fair prices along the entire added-value chain by creating fashion which meets the expectations of the Western world and fulfils its demand for such attire.

 

Community offices – The Hub-Vienna

 

There are growing numbers of sole proprietorships – cultural creatives – who usually work alone or in networks. Community offices have evolved as a measure for preventing isolation and conserving the resources needed for office space. Vienna is home to the prototype for co-working space, the Schraubenfabrik, which has been in existence since 2002. In 2010, the HUB-Vienna was founded as a local branch of the worldwide HUB movement, which not only provides community office space but also aims to provide creative space for social entrepreneurs. Most of the members are Social Business enterprises. Comprehensive trainings and networking options are offered.

Bibliography/Links/Experts

  • Ashoka Fellows – 2,000 Social Entrepreneurs who have been distinguished and supported by Ashoka.
  • Bornstein, David: Die Welt verändern. Social Entrepreneurs und die Kraft neuer Ideen, Klett Cotta, 2005
  • Feige, Achim: Good Business. Das Denken der Gewinner von morgen, Murmann, 2010
  • Spiegel, Peter: Eine bessere Welt unternehmen. Wirtschaften im Dienst der Menschheit, Herder, 2011
  • Yunus, Muhammad: Die Armut besiegen. Hanser, 2008
  • Yunus, Muhammad: Social Business. Von der Vision zur Tat, Hanser, 2010
  • Kotler, Philip et.al.: Vom Kunden zum Menschen, Die neue Dimension des Marketings, Campus, 2010
  • Senge, Peter M: Die Fünfte Disziplin, Kunst und Praxis der Lernenden Organisation, Schaeffer-Poeschl, 2011
  • Randers, Jorgen: 2052 – der neue Bericht an den Club of Rome, Oekom, 2012
  • Well-being Index for England and Germany

 

Editor: Angela Drosg-Plöckinger: a.drosg@mehrwerte.at; preliminary work: Christian Loy; assistance: Christian Rüther

 


[1]           John Croft: The Great Turning and Deep Ecology, Workshop Vienna 2012

[2]              Max-Neef, Manfred A.: Human Scale Development: Conception, application and further reflections: http://www.max-neef.cl/download/Max-neef_Human_Scale_development.pdf oder http://130.233.249.11/courses/sub12/wp-content/uploads/2012/10/Max-neef_Human_Scale_development.pdf

[3]             Kotler, Philip et.al.: Die neue Dimension des Marketings, Vom Kunden zum Menschen, Campus, 2010

[4]          Cf. the differentiation of basic needs/elective needs at http://www.verlag-fuchs.ch/_dokumente/VW_Kapitel1_4_locked.pdf

[5]           Cf. the ruling of the German Federal Court of Justice that Internet constitutes a basis of existence: http://www.spiegel.de/ netzwelt/netzpolitik/bgh-urteil-schadensersatz-bei-internet-ausfall-vom-provider-a-879481.html

[6]           Cf. Wikipedia entry on social business: http://de.wikipedia.org/wiki/Social_Business

[7]           Cf. Wikipedia entry on millennium goals: http://de.wikipedia.org/wiki/Millennium-Entwicklungsziele

[8]          Cf. the list of sufficient products/services

[9]           Cf. critical voices in the article published in Südwind-Magazin http://www.suedwind-magazin.at/start.asp? ID=242237&rubrik=7&ausg=201012 , in the Wikipedia article http://de.wikipedia.org/wiki/Grameen_Bank and the book review of a critical book on micro-loans at Spiegel Online: www.spiegel.de/ wirtschaft/unternehmen/mikrokredite-hugh-sinclair-rechnet-in-seinem-buch-mit-der-branche-ab-a-841303.html