Navigating Societal Impact: Understanding Business and the Public Good vs. Common Good
In today’s business discourse, the terms “common good” and “public good” are often used interchangeably to describe societal impact. But are these the same? Or does conflating them hide important differences for managers?
To understand the root of these two concepts, we must go back to the 1950’s and 1960’s, when economists created a typology of four different types of goods/services that satisfy human needs. These economic goods differ to the extent that individuals can be prevented from using them (excludable) and that the consumption by one person reduces the amount available for others (rivalrous).
Two types of economic goods, private goods and club goods, are excludable. This is where most businesses operate, as they can charge people a fee to own or access items and services (like a new laptop or Netflix). The other two types of economic goods, public goods and common goods, are non-excludable. Because of this, businesses tend not to operate in these areas as it is difficult to monetize things that anyone can freely access. They avoid these goods unless there are mechanisms in place like government contracts or regulations that allow them to run sustainably and profitably.
Where public and common goods diverge in their rivalry. On one hand, public goods are non-rivalrous, meaning that one person’s use does not reduce their availability to others. Examples include:
National Defense: Everyone is protected, and one person’s protection does not diminish another’s.
Public Parks: Open to all, and one person’s use does not prevent others from enjoying the park.
The main challenge with public goods is the free-rider problem, where individuals benefit without contributing to the cost. This typically necessitates government intervention to ensure their provision and maintenance
When businesses engage with the public good, they usually do so by supporting the mission of government, often through collaborating with public agencies. The free-rider problem necessitates government intervention in these markets, which often leads to the provisioning of goods and services through the private sector via contracts and public-private partnerships. When businesses build their model around serving the public sector, or pursue dual-use technologies, they are supporting the public good. Some examples of business for the public good include:
Public health: Businesses can partner with government agencies to deliver healthcare services. National Resilience, for instance, collaborates with government entities to produce and distribute essential vaccines and therapies, ensuring public surge capacity for emerging viruses and access for underserved and disadvantaged communities
Education: Private companies can collaborate with public schools to provide educational resources, technology, or extracurricular programs, enhancing the quality of education. EVERFI partners with schools to offer digital learning solutions that address critical skills like financial literacy and health education.
On the other hand, common goods are rivalrous, meaning that their consumption by one person reduces their availability for others. Examples of common goods include:
Fish in Oceans: Available to all who fish, but overfishing can deplete the resource and reduce fish populations for everyone.
Groundwater: Excessive extraction can lower the water table, reducing availability for others and causing land subsidence.
Common goods face the “tragedy of the commons,” where individuals, acting in their own self-interest, overuse and deplete the resource. Sustainable management requires regulatory frameworks and community-based approaches to ensure equitable use and conservation.
When businesses engage with the common good, they are assuming a broader engagement with society through the integration of moral codes into their operations. The commons problem requires a focus on sustainable management and community-based organizing to ensure that shared resources are used equitably and responsibly. Oftentimes, as is the case with biodiversity, air quality, and freshwater resources, the scope of commons problems extends beyond the authority of any single government, requiring collaborative governance. Businesses that prioritize environmental stewardship and communal well-being are working toward the common good. Some examples of business for the common good include:
Inclusive practices: Businesses create and maintain an environment where all individuals can participate fully and fairly in the company’s success. Salesforce’s Ohana culture emphasizes family values and fosters an inclusive workplace where all employees are encouraged to bring their authentic selves to work.
Shared prosperity: Private companies distribute value equitably among all stakeholders, including employees, customers, suppliers, and the broader community. Subaru’s Share the Love campaign allows customers to choose charities and community initiatives that they want a percentage of their new vehicle’s sale price to go toward.
So for managers and entrepreneurs interested in broadly engaging the public or common good, where can they start?
Engage strategically with government agencies and regulatory frameworks. Provide public goods through partnerships with public organizations and adopt operational practices that ensure conservation and regeneration of the environment and communities.
Explore innovative business models that challenge conventional thinking about problems and solutions. Find new ways to deliver products and services that meet societal needs while creating shared value for both the business and the community.
Emphasize ethical initiatives that enhance moral standing in society. Invest in projects that uplift the company’s communities and benefit society as a whole.