Facebook’s Shared Value Status: It’s Complicated

Facebook and Google are committed to getting the 5 billion people around the world without Internet access online. Facebook recently launched Internet.org, a consortium of tech companies pledging to remove technological barriers to Internet access. Google, with a longer history in improving Internet access through Google.org, announced Project Loon, which will use a network of high-altitude balloons to connect remote regions of the world to the web.

These social programs are not negligible. According to a McKinsey study, Internet access has a significant impact on GDP for “aspiring” countries. But for Facebook and Google, these social programs are also a market development opportunity. Most of the people who the companies help connect will become Facebook and Google users, and potentially drive incremental profit for the companies. This strategy is a textbook example of shared value. Facebook and Google have identified a social issue tied to profitability, thus providing the business case to invest and scale a solution that could create positive social impact and drive business growth. Facebook and Google are using capitalism to do good.

Yet Bill Gates has questioned how “good” these programs really are. He recently criticized Google’s Project Loon saying, “When you’re dying of malaria, I suppose you’ll look up and see that balloon, and I’m not sure how it’ll help you. When a kid gets diarrhea, no, there’s no website that relieves that.”

He’s right. Internet access has the potential to improve people’s lives, but it doesn’t exactly address pressing global goals like those outlined in the UN Millenium Declaration—goals such as eradicating extreme hunger and poverty, or combating HIV/Aids, malaria, and other diseases. Bill Gates would know. The Bill and Melinda Gates Foundation has taken philanthropy by storm not just with $27 billion in grants awarded, but by rethinking how the social sector should work in the first place.

Meanwhile, shared value is always unique to a company and business model, because the point is to use the core of the business to profit from doing good. For instance, a pharmaceutical company like Novartis can profit from and make a significant social impact by investing in health care access in rural India. Novartis’ shared value strategy aligns with a business need to distribute its pharmaceuticals in India. This differs from McDonald’s attempt to increase health care access through Ronald McDonald House Charities (RMHC), where there isn’t a natural business alignment between selling Big Macs and access to health care—that is, there is a difference between shared value and philanthropy.

If the right social issue for a company to tackle is unique to its business model, then it may mean that companies don’t take on the most pressing problems in the world. Internet access isn’t a global development goal, but it’s the right social issue for Facebook and Google to take on, because they want to solve it. It aligns business and social incentives.

So companies such as Facebook and Google could use their vast resources to have more of an impact on the world from a philanthropic perspective. But it also doesn’t make sense for Facebook or Google to invest in malaria from a shared value perspective.

So if Internet access is a shared value strategy for Facebook and Google, why are they calling it philanthropy? Yesterday in the New York Times, CEO Mark Zuckerberg downplayed the shared value benefits of Facebook’s investment, assuring that Facebook was “ … focused on [Internet access] more because we think it’s something good for the world rather than something that is going to be really amazing for our profits.”

It’s no surprise that Bill Gates and others are criticizing these companies—they’re trying to pass off their shared value strategies as philanthropy. What’s more, Google’s Internet access initiatives are coming from Google.org, Facebook’s from Internet.org. Rather than just owning the corporate strategy, they’re creating new entities to present them in a philanthropic way (for example, by creating a RMHC instead of operating through McDonald’s).

This isn’t the right way to do shared value. American economist Milton Friedman called it decades ago. In 1970, he said, “Social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.” By hiding shared value under the cloak of philanthropy, executives are misrepresenting their motives and treating shared value strategies like philanthropic strategies. And corporate philanthropy doesn’t scale, shared value does. Likewise, I don’t expect to see Facebook and Google invest billions in their “.orgs” anytime soon.

There’s nothing wrong with profiting from changing the world. Just don’t pretend you’re doing it solely for the sake of doing good.

Read more stories by Paul Katsen.