Can businesses contribute to address grand challenges and unmet social needs?

Grand societal challenges like climate change, access to food and clean water, health and education require concerted and systemic efforts. Can businesses contribute to address grand challenges and unmet social needs?

Capitalism is an engine for meeting human needs, improving efficiency, job creation, and building wealth (Sweezy 2004). The continuation of this notion is under threat as businesses realise their inability to contribute to grand challenges and unmet social needs (Porter & Kramer 2011). This response supports the view that businesses acting as businesses, not charitable donors, are the most crucial force for addressing grand challenges and unmet social needs (Porter & Kramer 2011). Businesses can pull from a firm's resources, scale at speed and build on business knowledge from a firm's headquarters (Simanis & Duke 2014). Businesses can address grand challenges and unmet social needs by focusing on the centre of their operations, not the margins (Porter & Kramer 2011).

Grand societal challenges are defined, and the associated facets are discussed to demonstrate the difficulties that businesses face when contributing to solutions. The benefits of paradoxical thinking, and a departure from traditional leadership methods, are presented (Miron-Spektor et al. 2018). It is argued that paradoxical thinking increases the likelihood of close collaboration (Stamm 2012). Through this lens, the concept of shared value is introduced to demonstrate how considering social harm as an internal cost spurs social innovation, contributing to addressing grand challenges and unmet social needs (Porter & Kramer 2011). This point is further strengthened by considering B-Corporations, which drive sustainability and social innovation (Polman 2017). Three forms of social innovation are outlined, along with robust examples of businesses that have made significant contributions to addressing grand challenges and unmet social needs. The difficulties businesses may face when carrying out each form of innovation is critically discussed. The remarkable parallels between marketing and social innovation (Bhattacharya 2013) are presented to make clear that marketing principles and stakeholder centricity are significant in the field of social innovation.

Grand societal challenges are characterised as those which are highly significant yet potentially solvable. Examples of grand challenges include urban poverty, insect-borne disease, global warming, economic inequality, digital divides, poverty, political instability, environmental degradation and global hunger (Eisenhardt et al. 2016; Schad & Smith 2019). Solutions are widely unknown; however, technical and social progress is necessary (Ferraro et al. 2015). Three main analytical facets of grand challenges are identified: complex, uncertain, and evaluative (Ferraro et al. 2015).

Firstly, grand challenges are complex due to the extensive array of actors and how they interact (Dooley 1997). Root causes are assumed to be single actors but are more often systems and institutions (Sterman 2001). Solutions to those causes often expose or create new problems (Callon 1998). For example, the initial promotion of ethanol fuel was based on the energy source reducing overall greenhouse gas emissions. Ethanol came to be criticised as a "crime against humanity by the United Nations for diverting corn from feeding the poor" (United Nations 2007). Change and plurality can result in businesses making decisions most salient to them, which further limit resources. Car manufacturers seek to accommodate economic targets and regulatory carbon emissions by increasing efficiency, which creates new problems related to the scarcity of lithium, cobalt, and nickel batteries (Schad & Smith 2019). Interlocking issues result in dynamic and nonlinear grand challenges (Senge 1990). Literature suggests that overconfidence in salient solutions leads to new problems (Schad & Bansal 2018).

Secondly, another facet of grand challenges is that they are radically uncertain. Outcomes of any possible solutions carry Knightian uncertainty (Ferraro et al. 2015). Knightian uncertainty occurs when it is impossible to give possible future states or assign probabilities (Knight 1921). Uncertainty is a result of a lack of information to form a basis for definitive decision making. New leadership methods that embrace inconsistencies are needed to address grand challenges (Schad & Smith 2019). For businesses to navigate this uncertainty, they must be 'consistently inconsistent' and act decisively committing to deliver for those on both sides of a tension (Smith 2014).

Thirdly, grand challenges are evaluative, meaning they cut across boundaries and implicate multiple worthy criteria (Ferraro et al. 2015). It is not possible to define them as solely economic, political or social problems (Ansari et al. 2011). In addition, proposals for acceptable solutions differ between different actors (Landry 1995). It is argued that businesses can contribute to grand challenges and unmet social needs by moving away from traditional leadership models, which focus on a clear mission and communications, and fail to consider the variety of stakeholders and evaluation criteria. This risks bias accommodation of one stakeholder group, resulting in an 'us' and 'them' divide (Schad & Smith 2019). A divide that works against the notion of collaboration that is required to make meaningful contributions (Kramer et al. 2020) to grand challenges and unmet social needs.

In summary, the facets of grand challenges require businesses to navigate a complex, uncertain and evaluative landscape (Ferraro et al. 2015). Businesses can make contributions by rejecting traditional leadership approaches, which require a distinction between the focus of a business; making money or addressing a social issue. This is described as paradoxical thinking which engages competing demands, change and stability, uncertainty and certainty, profits and unmet social needs (Schad & Smith 2019). In paradoxical thinking, tensions related to grand challenges are surfaced and considered rather than avoided (Miron-Spektor et al. 2018). Societal grand challenges must be addressed through collaborative efforts (Kramer et al., 2020). Businesses engaging in paradoxical thinking can contribute to grand challenges due to emphasis on collaborating with suppliers, customers, crowdsourcing and even competitors (Stamm 2012). Acknowledging the possibility of contributions to grand challenges through close collaboration, it is essential to consider the concept of shared value.

Grand challenges can be addressed when value is created for both shareholders and society simultaneously. This is described as creating 'shared value' (Kramer et al. 2020). Shared value can be defined as 'policies and operating practices that enhance a company's competitiveness while simultaneously advancing the economic and social conditions in the communities in which it operates' (Porter & Kramer 2011). The concept of shared value recognises that economic needs do not solely define markets; societal needs play a role. The concept views social harms and weaknesses as internal costs for businesses, such as costs associated with wasted energy and raw materials or the need to compensate for poor education in training (Porter & Kramer 2011). Businesses can create shared value and address grand challenges through innovation using new technologies, operating methods, and management approaches. Significantly, this does not necessarily raise costs for the business (Porter & Kramer 2011). The concept of shared value is said to 'reset the boundaries of capitalism' and applies equally to advanced and developing economies with opportunities differing across companies and industries – the scope is broader than has been past recognised (Porter & Kramer 2006). The rise of B-Corporations aligns with the creation of shared value.

Businesses can contribute to grand challenges and unmet social needs by becoming certified B-Corporations which B Lab verifies based on value creation for non-shareholding stakeholders such as employees, communities and the environment (Kim et al. 2016). B-Corporations are 'redefining' business success by using innovation, speed, and capacity for business growth, alleviating poverty, building communities, and reducing harmful environmental impact (Honeyman 2019). B-Corporations meet the highest social and environmental performance, transparency, and legal accountability (Honeyman 2019). As businesses, they contribute to grand challenges and unmet social issues themselves and become essential catalysts of broader social change (Kim et al. 2016).

To demonstrate how businesses can address grand challenges and unmet social needs, consider Ben and Jerry's. The company became a B-Corporation to achieve an increased social and environmental purpose and demonstrate its commitment to continual improvement. A study found that brand affinity levels for Ben and Jerry's doubled among groups aware of the company's efforts to contribute to unmet social needs (Stammer 2016); businesses can contribute to grand challenges and unmet social needs, and it also pays for them to do so. Businesses can contribute further to grand challenges when there is recognition that money can be made (Kramer et al. 2020). Business models supporting the United Nations' Sustainable Development Goals are estimated to create economic opportunities worth up to $12 trillion by 2030. Estimates suggest three hundred and eighty million jobs will be created along with significant efficiency gains. Businesses will benefit from enhanced reputations as companies that care about sustainability and driving social innovation (Polman 2017).

Social innovation can be defined as "a novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals' (Phills 2008 p.39). Social innovation is the best approach businesses can use to produce lasting social change (Phills 2008). Social innovation changes a society's cultural, normative, or regulative structures (Hämäläinen & Heiskala 2007). Three main forms of social innovation are identified in the literature: incremental, institutional, and disruptive (Nicholls et al. 2015).

Incremental innovation aims to address identified market failures more effectively with a focus on products. This form of innovation is used by charities, not-for-profits and so-called 'bottom of the pyramid' commercial firms (Nicholls et al. 2015). How businesses can contribute to grand challenges is discussed by considering how businesses can operate at the bottom of the pyramid (BoP) with a specific focus on improving access to scarce resources and new distribution methods.

Businesses can contribute to addressing grand challenges by incorporating the BoP into different levels of the supply chain as suppliers, producers, distributors or retailers (Sodhi and Tang 2016), making growth more "inclusive" (Sodhi and Tang 2016). Operating at the BoP increases income levels and quality of life through increased access to safe water, health services and education (Karnani 2007). The notion of doing business at the BoP, rather than seeing it as a philanthropic effort, has been coined as an effective way to fight poverty and profit (Prahalad 2009). It is argued that multinational corporations should environ market entry at the very bottom of the income pyramid, with a focus on segments earning less than $1500 a year (Prahalad 2009). This market can represent a substantial opportunity for businesses as it consists of more than 4 billion people (Simanis & Duke 2014).

Businesses can address grand challenges by engaging with BoP segments whilst reaping benefits. Namely, an increased customer base is created as those supported subsequently become consumers. Businesses also benefit from corporate social responsibility (CSR) benefits. Many countries require firms to invest in CSR. India requires firms to invest 2% of their profits into CSR (Sodhi and Tang 2016). Therefore, businesses can address grand challenges and unmet social needs through engaging BoP segments whilst simultaneously achieving profitable growth and fulfilling CSR requirements.

It is argued that limited access to scarce resources renders addressing grand challenges at the BoP untenable (Sodhi and Tang 2016). However, the examples below demonstrate how businesses can contribute to grand challenges whilst increasing access to scarce resources. Over 40% of Africans lack access to a potable water supply (Purkayastha 2009). Lack of water supply has detrimental effects on public health, limiting entrepreneurship due to rendering basic production impossible (Sodhi and Tang 2016). The company Kickstart, co-founded by Martin Fisher and Nick Moon, helps poor farmers improve productivity by developing, designing and manufacturing practical equipment. The product range includes a manually operated micro-irrigation pump to allow easier access to water for growing crops. The products are marketed low-cost to farmers who would like to produce and sell cooking oil from oilseeds such as sunflower and sesame (Sodhi and Tang 2016).

Similarly, even within countries that export to the West, energy can be a constrained resource (Sodhi and Tang 2016). Businesses have contributed to addressing this global challenge and unmet social need by finding innovative solutions to harvesting energy from alternative sources. For example, Solar Cookers International promotes solar cookers in underdeveloped countries. As part of the organisation's initiative, solar ovens manufactured by US-based True Vineyard Ministries were distributed to help widowed women in Rwanda start bakery businesses, enabling micro-entrepreneurs to begin producing products (Sodhi and Tang 2016).

Institutional innovation is defined as a novel, useful and legitimate change that disrupts, to varying degrees, the cognitive, normative, or regulative mainstays of an organisational field (Raffaelli & Glynn 2015). Institutions order the interactions and activities of a collective (Scott 2008). They are inert and resistant to change and innovation (Raffaelli & Glynn 2015). Despite this, institutions do change with varying degrees of disruption (Leblebici et al. 1991). Institutional innovation aims to challenge these rigid market structures and patterns to generate new or additional social value or outcomes (Nicholls et al. 2015).

Institutional innovation within the finance sector demonstrates this, where financial institutions have innovated to serve new or underserved populations with products and structures (Battilana & Dorado 2010). The development of mobile money transfer services in Kenya demonstrates a contribution by a business to solve an unmet social need. M-Pesa provides mobile phone banking services at very low prices, allowing people to pay others using mobile-powered microtransactions (Dodgson et al. 2013).

A mere 19% of Kenya's 35 million population held a bank account in 2005, resulting in a large population majority relying on self-organised community-level informal financial services, informal money lenders, or were completely excluded from any form of financial services (FSD Kenya 2007). Complete exclusion from financial services limits citizen's ability to acquire savings to invest and makes them vulnerable to financial shocks by restricting access to credit and insurance (Jack and Suri 2014).

Financial exclusion is a recognised social need to which businesses have made substantial contributions through the innovation of microfinance (Dash 2012). M-Pesa provides a clear example of inclusive innovation, described as developing and implementing new ideas that create opportunities to improve the social and economic well-being of disenfranchised members of society (George et al. 2012). Access to capital expands opportunities for citizens, and the availability of micro-finance on mobile phones overcomes the problems of reach into rural and impoverished areas, allowing the disenfranchised to participate in the broader economy (George et al. 2012).

While examples demonstrate that businesses can contribute to addressing grand challenges and unmet social needs through institutional innovation, it is argued that the issue of navigating new institutional contexts could constrain their abilities (Onsongo 2017). Business efforts consist of instituting divergent change while building legitimacy (Aldrich & Fiol 1994), which is particularly difficult within BoP contexts. In the case of M-Pesa, which is a former subsidiary of Vodafone, the network company contended with issues surrounding capital, technology, human resources, literacy levels, and an unreliable transportation system (Onsongo 2017).

Increased legitimacy for social innovations follows a strategy for addressing or mitigating the institutional voids in a particular setting (Onsongo 2017). Exploiting institutional voids at the BoP can allow businesses to contribute to global challenges and unmet social issues (Onsongo 2017). Institutional voids are described as voids, absences or weaknesses in formal market institutions in BoP settings (Aldrich & Fiol 1994). M-Pesa exploits the void between the financially excluded and the formal economy, demonstrating how addressing grand challenges and unmet social needs must go beyond the sovereignty of specific policies. Solutions require interventions that cross institutional boundaries (Hajer 2003). It is argued that Western-style institutional arrangements do not consistently align with BoP settings' norms and value systems. A 'thinking out of the box' approach is required to address institutional voids in a way that legitimises instead of invalidating idiosyncratic local norms (Onsongo 2017). Engaging in institutional innovation is described as a way 'to unlock the unlimited potential of ourselves and our organisations' (Hagel & Brown 2013).

Disruptive innovation aims to change cognitive frames of reference to alter social systems and is focused on politics. It aims at systems change and is generally fuelled by 'political' actors, groups, or networks striving to reframe issues to benefit disenfranchised groups or modify power relations and social hierarchies. It is characterised by mass participation in social movements, on the one hand, or loose coalitions of individuals connected through a shared issue or a technology, like social media, on the other (Nicholls et al. 2015).

An excellent example of disruptive innovation is seen executed by Muhammed Yunus, the founder of Grameen Bank. Yunus broke a cycle of poverty by pioneering microcredit and microfinance, which essentially allowed entrepreneurs to qualify for traditional bank loans. This followed experience witnessing how women in slums in Bangladesh were unable to make a profit, despite having skills to produce usable goods like chairs, brooms and kitchen utensils. This was due to an inability to access raw materials, except through a middleman who would buy back the goods, leaving the women with very little profit - accessing materials without an intermediary involved a moneylender, where interest rates would exceed any potential gains. Yanus, pulling on the resources of Grameen Bank (Schad & Smith 2019) and crucial outside funding external funders such as the Ford Foundation (Wykstra 2019), was able to offer microcredit to the extreme poor to assist them with improving their life conditions (Schad & Smith 2019).

The core difficulties of microcredit are recognised, including the cost where the overheads are often more than the loan itself, making it more difficult to lend profitably. Additionally, predicting who will repay is difficult in communities where lending has long taken place only between those with social ties like local moneylenders or family and friends. However, Yanus overcame these difficulties. Firstly, Yanus made repayments start immediately in smaller, more regular payments. Secondly, Yanus offered group loans so borrowers from different households would be pressured to help each other pay. Finally, it was not initially necessary to have physical branches because weekly meetings in villages were held to pay and collect payments (Wykstra 2019).

While many scholars have recognised that microcredit improves day-to-day life, no recent microcredit studies found evidence that income increased within those offered credit. This suggests that the average effects of these loans are minor (Meager 2019). Scholarly responses to the impact of microcredit have been summarised as 'modestly positive, but not transformative' (Banerjee et al. 2015). This suggests that while businesses can offer microcredit to address global challenges, the effects may only be a contribution and not entirely transformative.

Marketing and social innovation have remarkable parallels (Bhattacharya 2013). Marketing is described as 'the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offers that have value for customers, clients, partners, and society at large' (AMA, 2017). Social innovation includes tackling the difficulties involved with "dissolving boundaries and brokering a dialogue between the public, private and non-profit sectors" (Phills et al. 2008). This definition is rooted in finding solutions to social needs and problems. Both definitions are grounded based on value creation for stakeholders (Bhattacharya 2013). Both marketing and social innovation involve dealing with multiple stakeholders. Marketers deal with partners, clients and society (Bhattacharya 2013). Within the social innovation domain, a high level of collaboration is required. Collaboration has been coined as the only way to achieve scale and solutions for social progress (Scott 2015).

To demonstrate marketing's relevance to the success of social innovation, a framework is proposed – the 3 C's – co-creation, communication and calibration (Bhattacharya 2013). Firstly, it is argued that co-creation matters at each basic stage of social innovation (Bhattacharya 2013) which involve idea generation, prototype production, assessment, and scale up (Mulgan et al. 2007). The involvement of stakeholders in formulating and implementing social innovation ideas leads to greater buy-in and success and has been increasingly important (Bhattacharya 2013). The rise in open innovation demonstrates this whereby external knowledge and paths to market are used to complement internal innovation processes. Business objectives initially fueled open innovation, but increased attention to grand challenges and unmet social needs has seen open innovation applied in the social sphere (McGahan et al. 2020). The COVID-19 pandemic has seen businesses contribute to grand challenges on an unprecedented level. Siemens, a German multinational, offered its manufacturing network for medical device design. Scania, a truck manufacturer, worked with Karolinska University Hospital to convert trailers into mobile testing units and offered acquisition personnel to source protective equipment (Dahlander & Wallin 2020). Using co-creation enhances the success of social innovation by connecting stakeholders and creating a "community of virtue", which increases social capital which empowers social action (Bhattacharya 2013).

Secondly, marketing's relevance to social innovation is demonstrated through the need for stakeholders to understand and adopt the innovation to communicate it (Bhattacharya 2013). Awareness of innovations is often low, and stakeholders are often sceptical of social innovation programmes as the full potential is often ambiguous, particularly within communities that often feel as though they are being exploited. While communications can be used as an effective trust-building mechanism, they should be tailored to the sociocultural context to which it is introduced. A blindness prevention initiative faced low adoption in Africa when its communications featured images of those living in an Indian Slum (Bhattacharya 2013). Additionally, communication channels should be considered. Consumers respond more positively to information from independent sources (Yoon et al. 2006). Through internal organisational channels, messages received by stakeholders are less successful in overcoming scepticism than those from third parties (Bhattacharya 2013). Communications are essential to any innovation as businesses can be understood as 'networks of conversations' where strategy and innovation takes place via the process of sense-making across teams, business networks and communities.

Finally, calibration of social innovation is essential for maximising returns in social innovation investment. Psychological and behavioural responses of those who interact with the innovation should both be recorded. Namely, there are three areas businesses should explore: stakeholders' understanding of the innovation, how useful it is to them, and the level of unity they feel with the business. These three concepts underlie every strong stakeholder relationship, and the insights allow strategic decisions to be made about how to maintain the continual improvement of an initiative (Bhattacharya 2013).

The landscape in which businesses operate is dynamic and nonlinear (Senge 1990). Businesses can respond by maintaining commitments to both sides of tensions (Smith 2014) and collaborate to make meaningful contributions to grand challenges (Kramer et al. 2020). Businesses that consider social harms as internal costs drive social innovation (Porter and Kramer 2011), contributing to addressing grand challenges and unmet social needs. B-Corporations demonstrate this by 'redefining' business success using social innovation to address grand challenges and unmet social needs (Honeyman 2019). While this response strongly argues that businesses can contribute to addressing global challenges and unmet social needs, difficulties businesses face are presented, particularly when operating at the BoP. However, it is the novel practical solutions presented which make this argument particularly compelling as businesses strive to find solutions for stakeholders that are more "effective, efficient and sustainable" (Phills 2008 p.39). It is this stakeholder centricity that makes marketing significantly relevant to social innovation (Bhattacharya 2013).