Why doing good should be top business agenda in 2017

Business executives and especially those in the C-suites have 12 pristine months to make a difference first and foremost to their shareholders but more importantly to stakeholders.

The corporate sustainability agenda needs to be key in any business in 2017 as the current global trend is for companies to engage in doing good for the sake of good business in the future.

Globally companies are taking different trajectories in regards to sustainability with environmental and climate change-related issues taking first priority for companies in North America and Europe.

Companies in emerging markets are looking at the balance between social and environmental issues that will enable them to increase their revenues, cut costs and help in risk management in the coming years.

It should be noted that firms will engage in specific mechanisms which might be industry specific, country specific and sometimes even companies specific depending on the circumstances.

One theme which is common, is that of adopting innovative models that deviate from the standard approaches that will be able to add value to the businesses, especially in the form of stakeholder value.
Most of the initiatives need to be voluntary and based on the business case for each scenario as managers in a specific company will find appropriate.

In some instances, the law through regulations and standards may require a higher level of sustainability for companies. A case in point in Kenya is the Climate Change Bill which now requires a reduction of carbon emissions, meaning it is no longer a voluntary measure.

As managers undertake the business and strategic planning for 2017, it is critical that they look into how their businesses will address issues such as the high-poverty levels, unemployment, climate change, gender equality, local energy access, transportation, education and skills training, decent working conditions for workers, health, food and water security, among other issues.

The intervention adopted by the companies should not be viewed from a charity perspective but as an integral part of the business. As per the words of Milton Friedman, the social responsibility of any business is to make profit. 

Corporate sustainability provides new ways of doing business that can result in the business doing good, being socially responsible and at the same time make profit for the shareholders.

The secret source is to make sure that the social value is embedded in business processes. A good example is using sustainable procurement as the case has been for English Press, a printing company in Nairobi that has adopted sustainability by sourcing for paper from sustainable sources and ensuring its waste paper is recycled by another company.

All that businesses do should make business sense as the major moral obligation of any enterprise is to make value for its shareholders and hence all decision by the executives should drive the value of the business upwards. 

Sustainable Development Goals (SDGs) or the 2030 Agenda is a good framework for managers willing to integrate sustainability in their businesses.

This has actually been embraced by many companies who have already embedded the goals in their strategies or are in the process of doing so. Here in Kenya, Safaricom, the mobile telecommunications giant, has already embedded the 2030 Agenda in its strategy.

As can be imagined most of the companies have the SDGs on their radar screens, but the challenge will be mainstreaming the goals into their strategies as well as implementation of the same. 

In addition to the 2030 Agenda, the Paris Agreement on climate change will also provide another sustainability framework for corporates, from the climate change perspective. 

The winners in this new dispensation will be the leaders who will look at their businesses from a long-term perspective, and consider today’s costs as part of the bigger picture that will lead to better results in the coming two-five years.

Short-termism is becoming a thing of the past in the corporate world and those who embrace this faster will have a competitive advantage.

Traditionally, corporate social responsibility (CSR) has been the key word in businesses, especially in the developing world on how private sector engages with communities and in broader terms the stakeholders.

This was traditionally used as public relations gimmick but in the recent past this has changed to doing good which has proved to be good business.

When CSR is used for public relations it is no longer CSR but “cosmetic social responsibility’’ and hence is not aimed at increasing the value of the business in the long term.

Dummy cheques, charity works such as distributing mosquito nets and planting of trees have been the key activities.

These activities have no relation to the core business of the offering entity and was at the whims of the C-suites and ended up as value destroyers for both the shareholders and stakeholders.

The opportunity cost for the stakeholders was at the highest considering that the company in question could have engaged in a more relevant sustainable activity that would result in more benefits for the company.

As a starting point for the corporates, the SDGs and the Paris Agreement present a framework for implementing sustainability in business for value creation. This should be done on a long-term basis and from an organisational-wide perspective.

The New Year will therefore be the year when company executives should consider the sustainability agenda seriously as this will provide value to their shareholders as well as stakeholders.

Mr Mungai is the chief executive, Kenya Climate Innovation Centre, and 2016 Eisenhower Fellow.