19 Sep 2017 | Tags: sustainability
Companies have historically managed social and environmental risks as a way of protecting their returns. However, today firms are facing increasing pressure from the demand and supply sides to do more. A new "business with impact" approach focuses on both financial and social return generation as core objectives of operations. In other words, more than risk mitigation, "business with impact" is about maximizing social and commercial opportunities.
In an increasingly globalized and fast-paced world, where new generations are demanding progress but many constraints remain, running a business sustainably is not an easy task. We offer corporations a practical guide on how to become an impactful business by drawing on collaboration, networks and experience of others.
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Five steps to becoming a business with impact
1. Get outside help to test new strategies
Firms can use outside expertise to overcome internal resource constraints in finding profitable options that also generate positive social and environmental returns.
Resource-short firms can also test small-scale impact investments – lessons learned from these pilots can show areas for improvement, and successful ideas can be scaled up when time and budgets permit.
Entering emerging markets can offer opportunities for involvement in social and environmental projects, at the same time providing fresh sources of commercial return.
A private fashion retail chain partnered with its corporate foundation, a government development agency, and a consulting group to raise worker conditions and productivity simultaneously.
The collaborators designed a program to improve worker-manager relations and train workers in lean manufacturing.
Total take home pay rose 15%, providing a social return to employees – while productivity rose by 20%, generating commercial returns.
2. Learn from your long term thinking clients
Female customers in the US could inherit USD 7 in every USD 10 that passes to the next generation over the next four decades. Nearly seven in ten of them judge business success on social, political, or environmental outcomes – and not financial profits alone.
The millennial generation wants investments that make long-term financial and societal returns. The richest ones favor companies over foundations so they can use their wealth to have a positive impact on society while also making money.
Firms like Unilever realize that long-term investors want long-term business thinking and behavior.
The company does not believe that there needs to be a trade-off between sustainability and profits, but acknowledges short-term financial pressures can distract from doing well for society and the environment.
Unilever has sought to address these pressures by ending earnings and quarterly reporting, focusing instead on integrated reporting and matching executive pay to long-run performance.
3. Try the family office five-point plan
In 2016, nearly half of the biggest family businesses were engaged in impact investing, according to Ernst & Young and the Center for Family Business.
Firms can use a family office’s five-point plan to create a business model that aims to generate profits and social returns. Invest, measure your returns, and tweak the operating model so that owners and society both benefit.
Mountain Hazelnut’s business model was founded with a vision for generating social and financial return objectives in tandem.
Making hazelnut samplings available to Bhutanese farmers can diversify farmers’ income streams and protect against environmental damage.
The business evaluates financial, social, and environmental returns to adjust its strategy with the aim of doing well for society… as well as its investors.
4. Learn from impact investors' experience
If you’re making a new investment, collect data on financial returns and societal benefits from the start. Data on social good can have commercial value later down the line.
B Corporation certification can spur you to collect consistent data on your social and environmental impact, and offer your firm external expertise on how to benefit society more while making money.
Look at your value chain holistically – measure and monitor your social and environmental footprint alongside your financials. This will help you identify both commercial and social value.
Impact investors have worked extensively on measuring social and environmental return opportunities (and risks) in supply chains.
One firm, developed by researchers at MIT, marries blockchain technology with supply-chain analysis.
This allows firms to see more easily across complex supply chains, and to identify areas where investment could generate financial profits and positive social or environmental outcomes for society.
5. Use your networks to share impact best practices
Two-thousand Certified B Corps share their top tips on how to make money and do well for society, drawing on expert knowledge across 50 countries and 130 industries.
Businesses can benefit from more sustainable and global markets – networks are critical to raising the USD 5-7 trn per year needed to meet the UN Sustainable Development Goals.
Top Glove Corporation Bhd introduced an oral hygiene initiative to promote better employee health and wellbeing while saving costs through absenteeism.
The firm expanded its health program to include health monitoring, investment in sports facilities, and nutritionist-designed food in company canteens.
Top Glove is sharing its best practices in externally-run, research-based studies with bodies ranging from insurers and universities to the Malaysian Ministry of Health.
Join the business with impact conversation on Twitter #YouCanAdapt.
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