Personal Finance

Effective business pursues both profits and social good

turkana

A tailoring class at Loiyangalani polytechnic constructed and equipped by the Lake Turkana Wind Power (LTWP) project in Laisamis Constituency Marsabit County on February 7, 2019. PHOTO | SALATON NJAU | NMG

A video of Oxfam executive director Winnie Byanyima speaking at the World Economic Forum 2019 went viral. She was responding to a comment about the panel not appreciating the progress made with job creation.

Her well-articulated response resonated with many people. Citing examples from their work, she demonstrated that those were not jobs of dignity and reminded us that the quality of jobs matters. How businesses treat their employees matters. “So, don’t tell me about low levels of unemployment,” she said. “You are counting the wrong things. You’re not counting the dignity of people. You’re counting exploited people.”

This conversation highlighted the important subject of business and social good. Economic and social value are no longer seen as mutually exclusive. The most effective organisations pursue both profitability and social good.

Deloitte’s 2018 Global Human Capital Trends report notes that “organisations are no longer judged only for their financial performance, or even the quality of their products or services. Rather, they are being evaluated on the basis of their impact on society at large”.

The report recognises the growing importance of social capital in shaping an organisation’s purpose, guiding its relationships with stakeholders, and influencing its ultimate success or failure.

Business priorities are shifting. In a recent global survey, 65 percent of CEOs rated “inclusive growth” as a top-three strategic concern, more than three times greater than the proportion citing “shareholder value.”

Today’s businesses exist in a complex world. The “system” they operate in includes diverse actors, sectors, and levels with interconnected opportunities and challenges. Organisations need to develop a systems mindset and analyse relationships between the parts to understand the situation for better decision-making.

External trends

They must consider external trends and integrate others’ perspectives. To do this they need to nurture positive relationships with customers, employees, local communities, regulators, and other stakeholders.

Business leaders agree. In his book The Bigger Deal, Sunny Bindra writes that a great business does things for the greater good of as many people as possible and aims to stick around. “A business should be an ecosystem that aims to keep many elements in harmony. Imbalance in the shared value system causes the system to collapse, eventually,” he says.

How does business combine revenue growth and profitability with the need to respect and support its stakeholders and the environment?

By shouldering their responsibility to be good citizens both inside and outside the organisation. This can be through fostering diversity and inclusion, positive employee treatment, providing a safe working environment, employer-supported volunteerism, and sustainable practices that address environmental challenges like sourcing raw materials from sustainable sources, energy efficient lighting and minimising travel.

Other practices include increasing community and employee engagement, promoting good governance by being transparent and making ethical decisions, and enhancing collaboration.

Businesses can also address social problems through their products and markets. Harvard professor Michael Porter makes a case for letting business solve social problems when explaining the concept of shared value.

In the past, we tended to see solutions in government and non-profits. The reality is we are not making fast enough progress; there is a problem of scale. Accountability is key — people want to know they are supporting good businesses. Our hyperconnected world makes it easy to track this information. We share information about companies and express views to a wide audience in real time.

Millennials

Recognising the power of millennials, author and executive coach Rhett Power observes that incorporating social good into business is especially important as millennials reach the height of their spending power. They’re willing to make a purchase to support a cause and pay for environmentally sustainable products.

His view was reinforced by the 2018 Deloitte Millennial Survey whose message was clear: Young workers are eager for business leaders to be proactive about making a positive impact in society—and to be responsive to employees’ needs.

The 2030 agenda for sustainable development seeking to transform our world is a plan of action for people, planet and prosperity. Thus, more businesses should adopt a triple bottom-line approach that prioritises people and the planet in addition to profit.

Organisations should measure, understand and communicate performance through integrated reporting that combines the analysis of financial and non-financial performance.

Businesses won’t solve social problems effectively on their own. Partnerships with government and civil society are critical. Drawing on different strengths, we can create something far greater than the sum of our parts.