Closing the gap between business and social impact

Closing the gap between business and social impact

October 24, 2019

Why do we need a social sector? Shouldn’t businesses create economic opportunities and governments ensure a just distribution of these opportunities and set incentives and boundaries such that the environment is protected? Does the social sector only exist because other sectors fail?

I had the chance to work in the social sector for a year as a BCG secondee at Yunus Social Business (YSB), exchanging regular for-profit consulting work for social business venture building. This is what I have learnt:

The social sector can’t and shouldn’t need to rectify all the inequalities and environmental damages in the world. However, it can make a truly positive impact and lead the way towards greater change of adjusting the way we do business.

LEADING THE WAY TOWARDS GREATER CHANGE

As leading the way towards greater change is what Yunus Social Business aspires to do, let me take a step back to explain what I did at YSB and what my work was aiming to achieve.

YSB tackles poverty as well as other social and environmental problems through two connected parts: (1) investing in and supporting social businesses through YSB’s philanthropic venture capital funds in Brazil, Colombia, Uganda, Kenya, and India and (2) supporting companies to implement social business initiatives through YSB’s social innovation teams; that is, supporting social intrapreneurs (entrepreneurs within companies). In both parts YSB harnesses the power of business to solve social and environmental problems.

I joined the corporate innovations team in Europe and have been part of the support of:

  • A German family-owned business to plan and implement a plastic recycling factory in India, moving the company towards a circular business model, while also creating social benefits to waste pickers in the form of access to healthcare and education for their families
  • Merck to build a sustainable business model to bring integrated primary healthcare services to underserved communities in Kenya
  • MAN to run an Impact Accelerator, which supports social entrepreneurs in the mobility/transport/logistics sector through mentoring support from MAN and the YSB network
  • A global furniture company to ideate how to integrate social business solutions in their last mile services and how to create a fair gig economy

These initiatives have a direct positive impact on societies and the environment. However, this direct effect is only half of the story. Personally, I'm even more excited about the indirect impact these initiatives have on the corporate partners since it relates to the bigger picture on driving greater change.

The indirect effect YSB aims at is to change companies themselves by showing them how to use business practices not just for profit maximization, but also to achieve social or environmental goals.

Even though purpose-driven business is a buzzword these days, this isn't a new idea—businesses all over the world have taken responsibility for communities and society for a long time. However, given the complexity of many companies today, purely financial incentives are often the most powerful. They are easily measured as performance indicators and, as such, can be run smoothly through the organizational structure: set by shareholder, implemented by top management, and passed on through all levels of middle and lower management to every employee.

Social business initiatives focus beyond profit maximization, which can result in a fundamental mindset shift. While they operate under a boundary condition of no losses to the company, the initiatives aim at maximizing social or environmental impact within that framework. As employees, managers, and shareholders experience the positive effects driven by these initiatives, their perspectives on business also change—as anecdotal evidence read about Tom’s experience from the MAN Impact Accelerator. These initiatives act as catalysts for a mindset shift with the potential of making a difference to the company as a whole.

The greater change of adjusting the way we do business means that more companies take into account their overall effect on society, their Total Societal Impact in BCG’s terms. The social sector can accelerate this change.

SOCIAL BUSINESS INITIATIVES MAKE BUSINESS SENSE

Importantly, even under the conditions of profit orientation, social business initiatives make business sense for companies. Social business initiatives help to build a trustworthy and responsible brand for customers, the public, and current and new employees. They can provide a sense of purpose that extends well beyond these initiatives. Hence, it can result in more sales, better talent attraction, and more engaged, productive and creative employees

As BlackRock CEO Larry Fink says in his 2019 Letter to CEOs “purpose is not the sole pursuit of profits but the animating force for achieving them.” Ideally, the link between purpose and profits is not the only argument to engage in social business initiatives, but it is combined with a genuine motivation to have a positive impact in the world.

Understanding this business case for social business is part of a research project on social intrapreneurship, which YSB is conducting and in which I have been involved, in addition to the projects mentioned above. In qualitative interviews and quantitative studies, the team tries to show and prove these positive effects of corporate social business initiatives on customers, job seekers, and employees.

Based on some preliminary insights from this project and the experience from my secondment, I believe that for many of these business benefits to accrue, the initiatives need to be linked to the core of a company's strategy and corporate identity. For instance, the German family-owned business, that I worked with, engages—as a plastics manufacturer—in plastic recycling, directly tackling the problem they can address best given their resources and expertise. Additionally, it links to who they are as a company, which is changing from being just a plastic manufacturer to being part of a circular economy. The link to the core of the company is essential to make the social and environmental orientation of the company credible and believable to the respective audience.

THE INVOLVEMENT OF EMPLOYEES IS CRITICAL

The involvement of employees is critical to connect the initiatives to the identity of the company. This includes internal communications about the initiatives and strategies to give employees a chance to contribute to the initiatives. For example, in the case of Danone, managers had the opportunity to work in the field on their social business initiatives for some time. Returning to their regular position, they bring back their social business experience to the day-to-day business.

Interestingly, I was not only supporting such initiatives, but my BCG secondment was a form of employee engagement in and of itself. One of BCG’s values is Social Impact, and making the world a better place is core to what we do. As such, BCG supports secondments at its global social impact partners, such as YSB and WWF, and, more broadly, conducts social impact projects with our clients in the public, social and private sectors. This work is core to BCG’s identity, and we are ambitious about ensuring it continues to grow.

This brings me to the larger point, on which I want to close this post. There are many parts to adjusting the way we do business. We all play a part in it. This doesn't mean that we all need to be change agents, social entrepreneurs or intrapreneurs. We can also support those that drive the change and be open to doing things in new ways. I encourage you to reflect on what you and your company are doing or could be doing.

This is how the gap between business and social impact can be closed, or at least narrowed, and the current social sector can lead the way. After all, if a company doesn’t make the world a better place, why should it exist?

October 24, 2019

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