Where's the good in that? A millenial unpicks that pithy but perilously imprecise phrase: Doing well by doing good

DOING well by doing good - sounds a little too good to be true. Turning a profit by (take note, not "and!") making the world a better place. Who could possibly say no to that? Greta Thunberg and Adam Smith, that's who. But who cares what a 16-year-old Swedish climate activist and an 18th-century Scottish moral philosopher might have to say about a 21st century business slogan, you might ask.

Less rhetorically, who is it that cares about the catchphrase in the first place? "Doing well by doing good" seems all the rage at the moment, brandished at every opportunity as companies scramble for a piece of an exploding sustainable business pie (an irony if there ever was one). Even financiers, skipping around their inner Mr Burns, are pouring resources into ESG products - because clients demand it.

The next five years promise an estimated US$2.1 trillion in climate-related sustainable business opportunities alone, according to a report last month from international climate change non-profit CDP.

Similarly, a Deloitte global survey released in May found that 42 per cent of millennials said they began or deepened their relationship with a business because of its perceived positive impact on society and/or the environment, and 37 per cent ended or lessened their relationship because of the company's unethical behaviour.

With that much money at stake, and the state of our morals in play, "doing well by doing good" deserves some extra scrutiny.

Rhetorically speaking, "doing well by doing good" works in two possible ways. First, it can suggest that doing good is itself financially rewarding. Second, it can claim that consumers (like the millennials in Deloitte's survey) demand "good" products and services, and that supplying them is, naturally, profitable.

The first argument doesn't venture much. "Do well by doing good" isn't so much arguing that doing good is profitable, it's arguing that doing good can be profitable. Which isn't saying much at all. It doesn't take much effort to think of ways that doing good can be unprofitable, or that doing evil can be profitable.

The second argument is a much thornier issue. It effectively positions consumer demand as capable of determining and realising public good. Here, the market mechanism is treated as an amoral tool for public good that can relay demand and deliver supply without distortion.

This misuses the free market. Adam Smith, the father of modern economics, understood the invisible hand of the market as transmuting private gain into public interest.

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest," Smith said famously.

Every individual "intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention".

At its heart, Smith's market is a morals-ridden, if mysterious, distortion. Individual units of self-love enter, and an aggregated public good inexplicably emerges.

"Doing well by doing good," on the other not-so-invisible hand, relies on the market's avowed demand for public good to determine that very same public good.

Of course, no one today actually cares that the phrase doesn't conform to Smith's theory - not even us pedantic millennials. That's not where the cultural cachet of "doing well by doing good" resides. The phrase is catchy, and it feels good.

But that's precisely its danger. It leverages the feel-good of profits and public good while implying that there is a concrete, causal relationship between them. This slippage allows for all kinds of conflation to happen right under our noses.

Moral accountability

When a company is understood as "doing good" simply on account of providing a product or service that the market considers "good," it gains leeway to transfer its moral accountability to the market. The company suddenly feels a lot less responsible if its product turns out to be not so good, or, in fact, quite evil.

This sort of "just giving them what they want" argument is par for the course when it comes to a firm's usual profit-making operations (see: Big Tobacco), but "doing well by doing good" extends that leniency to the provision of public good.

The same is true when a company makes a "win-win" decision that produces both profit and public good. Consider the studios that finally greenlight a bevy of films starring women and ethnic minorities once they see the first few make billions off of previously untapped markets. The fact remains that the profit incentive alone was more than sufficient to induce the action.

While there is certainly nothing wrong in pointing out that public good - a desirable outcome - was produced in the process, framing this as "doing well by doing good" obscures the sufficiency of the firm's profit incentive.

Instead, the happy externality of public good is conveniently hitched to the profit motive. A causal relationship is created by the sleight-of-hand of sheer pithiness and warm fuzzies. This compromises our ability to distinguish between private and public interest, between profit and good. We lose this ability not because these things are intrinsically indistinguishable, but because they have been presented as such.

Mission, motto or mumbo-jumbo?

So I'll come out and say it: "Doing well by doing good" is a branding exercise. It takes inventory of what a firm would be doing anyway, and finds a way to package it to consumers and investors who mean well, or are desperate to feel good about what they are paying for.

In that sense, the phrase is worthy of this sort of anal-retentive scrutiny because it represents a larger, more important trend in the business of sustainability. In the trillion-dollar market for sustainability and millennial consumption, what seems to really count is being perceived as doing good.

The same Deloitte survey asked millennials what they believed businesses should try to achieve and then what they believed businesses actually achieved. Respondents' answers included generating profits, innovation, efficiency, job creation, producing quality goods, improving employees' skills and livelihoods, improving society and the environment. Across the board, there were more millennials who believed that businesses should achieve these goals than there were millennials who believed businesses actually did achieve these priorities - other than in the fields of profits, innovation and efficiency.

The biggest gap was for generating profit. Some 55 per cent said that businesses actually generate profit, but only 28 per cent said that businesses should generate profit.

But the Deloitte report's bolded conclusion from millennials' dismal attitude towards business? "These results speak to an image problem for business leaders."

Apparently, the results speak to neither businesses' failure to meet these other goals, nor even millennials misunderstanding the real purposes of businesses. It is simply a branding problem.

Branding problems need branding solutions, and the win-win romance of "doing well by doing good" is one hell of a brand.

To be clear, I am not here to argue that financial success and public good are utterly incompatible. Rather, I am saying that pursuing both simultaneously is more complicated than the proliferation of corporate social responsibility branding efforts suggests.

In her research on corporate social responsibility, "doing well" is a measure of more than just profitability, said National University of Singapore Business School senior lecturer in finance Zhang Weina. It refers instead to the overall valuation of the firm.

"To be more precise, it is the present value of all the future value created by the firm."

In that sense, "doing good" is now baked into measures of "doing well," because firm valuation includes public and shareholder perception of the good the firm does and will do.

The more interesting questions are "when, how and why corporate social responsibility can enhance firm value rather than a blanket statement of yes or no," said Prof Zhang.

"So far, we have found there are significant variations in the relationship between 'doing well' versus 'doing good' across countries, geographical locations, industries and time periods."

Relating financial success and public good, then, seems to require a lot of homework on the part of the researcher, consumer and investor.

To return to the millennials who think businesses should do more than just generate profits - from one to another, here are a couple of pithy phrases more meaningful than "do well by doing good".

Caveat emptor

If it seems too good to be true, it is. Caveat emptor - buyer beware. There is no shortcut to doing good.

If you want to consume or invest in "good" products, you will have to determine for yourself what "good" really means to you and whether those products can deliver. No one else can, will or should do that for you.

There is an understandable existential anxiety to living in a world as globalised and well-informed as ours. More than at any point in history, we have the means to find out just how much injustice is perpetuated by virtue of our mundane existence.

All it takes is a few clicks over at slaveryfootprint.org for an estimate of how many 21st century slaves work for you (yes, you!) in the supply chains that produce our phones, clothing, and coffees. Being a good person seems terribly complicated, today. Being a good company is even more fraught with all the inconsistencies of business dealings: financing dirty energy at one end of the business while trumpeting sustainability at the other, for instance.

Into this depressing, convoluted reality descends a tantalisingly simple mantra: "Do well by doing good."

But the human family has always had robust religious and philosophical traditions for determining what is good, for wrestling in moral morasses. We squander our intellectual, cultural, and moral inheritance when we defer to catchily branded market determinations of good, and neglect to advocate for all our other values.

Put another way, this is an opportunity for business to contribute to the public good - to be corporately responsible. Instead of crowding out society's other mechanisms for determining and realising public good, why not allow those mechanisms to inform business decisions, without couching it in the language and logic of business?

This might mean doing well enough and doing good. This might even mean doing more good by doing less well.

As a 26-year-old millennial, I hesitate to direct this sort of strident moralising at not just my peers, but readers older, wiser, and more experienced than I. But I find myself being held accountable, in turn, by moralists younger, more foolish, and less experienced than I.

At this year's World Economic Forum in Davos, sixteen-year-old Greta Thunberg stared down some of the richest, most powerful people in the world, giants like Salesforce CEO Marc Benioff, and shared in no uncertain terms what she thought of them.

"Some people, some companies, some decision-makers in particular, have known exactly what priceless values they have been sacrificing to continue making unimaginable amounts of money - and I think many of you here today belong to that group of people."

Adam Smith would say that "doing well by doing good" has it exactly backwards, and ask us to concentrate on doing well so the invisible hand can do good.

Greta, I think, would instead take issue with the phrase's connotations of "business as usual," of minor modifications so we can have our cake and eat it - of hope claimed too cheaply.

"But I don't want your hope," she said in Davos.

"I don't want you to be hopeful. I want you to panic. I want you to feel the fear I feel every day. And then I want you to act. I want you to act as you would in a crisis. I want you to act as if our house is on fire. Because it is."

This isn't Davos, and I'm no Greta Thunberg. I'm not good enough to entirely forsake air travel and sleep in subzero tents instead of Davos hotels like Greta (not that I've ever been invited to Davos in the first place).

But I can keep asking myself what "good enough" is and how I keep allowing myself to settle for it -d and challenge you to do the same.

Hand me the good stuff

ADAM Smith's "invisible hand" didn't arise from a vacuum. It existed in its own particular moral milieu, one that must be acknowledged if we are to apply his free market ideas and assumptions to moral questions.

According to Alphacrucis College dean of business and professor of economics Paul Oslington, Smith's work built on those of contemporaries and predecessors such as the Bishop of Durham, Joseph Butler.

"By acting merely from regard to reputation, without any consideration of the good of others, men often contribute to public good," said Butler in his sermon Upon Human Nature, 50 years before Smith published The Wealth of Nations, the founding document of modern economics.

"They are plainly instruments in the hands of another, in the hands of Providence, to carry on the preservation of the individual and the good of society, which they themselves have not in their view or intention."

Our personal faith in God, Providence or the unfettered market notwithstanding, this model of the economy means that "doing well by doing good" - at least in the sense of profiting from the supply of the "good" products that consumers demand - simply feeds the wrong inputs into Smith's market machine. The effortless efficiency of the free market that Smith theorised is only possible when everyone acts in self-interest. Trying to use the mechanisms of demand and supply on behalf of others results in overproduction, underproduction, and externalities - market failures.

"Human ignorance for Butler, just as for Smith, means that humans should restrict their concerns to their own interests, which they are competent to judge," summarises Prof Oslington in the article Anglican Social Thought and the Shaping of Political Economy in Britain.

Consumers demanding social good from suppliers can certainly contribute to "the good". But this will not necessarily be the most profitable option for the supplier (if it is profitable at all). In Smith's model, the interests of suppliers and consumers only coincide perfectly when all actors are simply self-interested.

"Doing well by doing good" in the sense of doing the good that consumers have asked for, however, confuses all of that by mixing market efficiency with publicly interested consumers.

The effortless efficiency of the free market that Adam Smith theorised is only possible when everyone acts in self-interest.