Creating conditions for positive business engagement in society
Leading businesses increasingly recognise the need to go beyond traditional corporate social responsibility approaches and see contribution to societal good as a strategic imperative.
Some are engaging for commercial return, recognising opportunities to develop new value. This might be through access to additional revenue from new markets, to solve a problem and/or to build new strategic capability.
Each of these motivations results in different pitfalls for which there are some useful ‘remedies’.
1. Accessing new markets
Most businesses are aware of the value in the bottom of the pyramid. Some have noticed that this segment is also more resilient to economic flux and that businesses that have engaged here have received significant public visibility – all good reasons to develop a new market.
Some companies get this right. Grameeen is the much touted example. Another example comes from the insurance world. One issue confronting the poor is the lack of any support system – if a child is sick or a shop burns down, there is no access to bridging funds or reparations. In many cultures this is addressed by women pooling funds to support each other through crises. Recently AXA created an initiative to support groups of these women (working through PWDS in India) to access family health insurance. Based on a community verification and penalty scheme, operating costs are kept low. This is a positive example of a company engaging with new markets in a way that is in line with existing structures and which meets real needs.
Other companies don’t get this right. A large water company tried to set up a water purification scheme in India. This provided entrepreneurs with the equipment to purify water, at an ongoing cost for maintenance over a ten year period. This wasn’t successful – it required new entrepreneurial structures, forced communities into long term debt but also, importantly, didn’t address the real problem – prevention of dirty water would be better than cure.
The main pitfall with this motivation is lack of alignment to communities and this is best solved by operating closely and within communities to determine and meet their actual needs.
2. Solving a problem.
Often this is driven by CSR practitioners or corporate philanthropists as a more sustainable alternative to traditional ways of donating. This may take various forms – the Carbon Trust was tasked with creating new businesses to shift sectors towards low carbon alternatives, M&S recently looked at how a new initiative could solve both a growing skills shortage in the food industry and help employ young people.
Both of these initiatives – like most other initiatives of this type – suffered from a lack of inherent commercial rationale. They were looking for solutions where unmet customer needs (and therefore a commercial value proposition) were not the main focus. This made creating a business case very difficult.
These cases were ‘cracked’ by developing an indirect customer (e.g. suppliers, philanthropic funders), using new business models (e.g. long term equity upside) or finding a value differentiator (e.g trusted brand ).
A solution to a lack of inherent commercial rationale is therefore using ‘extreme’ commercial creativity.
3. Strategic engagement
These forward thinking pioneers are actively creating the customers, capabilities or resources for their future. A great example is Interfaces Net Impact programme. It pays fishermen for old nets and then transforms these into tufting material for carpets. Fishermen from poor communities receive value from a ‘waste’ product. These nets are no longer thrown into the ocean and loss of marine life is prevented. Interface has a differentiated input for its carpets and new capabilities in setting up partnerships and accessing resources. Currently we are working on another Interface initiative to alleviate poverty, create a secondary market for used carpet and develop capability for global recycling.
A pitfall of companies operating with a strategic intention is the negative effect of ‘unintended consequences’. For example by enriching only part of the population resentment may be stirred up which results in domestic violence or tribal warfare.
Uninitended consequences can (often) be addressed by organisations taking a systems thinking approach to any new initiative.
For any organisation venturing into this space three new competences need to be built:
– extreme partnering: bringing together unlikely play mates with different agendas and resources towards achieving a common goal (e.g. AXA, PWDS charity, local women),
– lateral innovation: designing business value in entirely new ways, and
– ecosystem thinking: making sure that supporting initiatives and structures are in place to provide all the elements required (for example
Interface recognised the need for a banking partner for its networks initiative).
There are tremendous benefits for companies venturing into social change. From the bottom line benefits (e.g. new customers or premium products), to risk mitigation (e.g. diversified sourcing) to intangibles (e.g. employee loyalty, customer aw
I’d go further and say that no business can, over the long term, separate itself from the society that supports it – as suppliers or customers. Positive engagement with society is an imperative for business to build a robust and resilient global future.
This article is an excerpt from a talk Nicola did for Deloitte at a Net Impact event. She is focused on creating new commercial solutions for social and environmental change and is interested in exploring thinking and opportunities in this area. What is your experience in this area? Any lessons you’d like to share? How could your company engage better with society?
Please contact her on firstname.lastname@example.org for further information.