Business investment creating value for society and the environment
Written by Shelley Anderson and Jenni Mulligan, December 2019
Introduction
The idea of businesses existing only to create profit or shareholder value and not to create value for society and the environment is changing rapidly. A quick internet search reveals many reliable sources of information and access to networks and organisations providing guidance, resources and forums for collaboration on and shared understanding of realising and scaling up the positive impacts of this approach.
Social impact investing is on the spectrum of investing, which ranges from philanthropic grants or donations to charity (typically irrevocable) through to mainstream investment (see figure below). One of the defining features of social impact investing is the flow from the input of resources and development of strategies to deliver outputs that generate outcomes and finally achieve long lasting impacts (or legacy).
Spectrum of Investing
The approach is similar to frameworks developed for not-for-profit organisations and social enterprises, such as Theory of Change. Theory of Change is a framework used to understand the links between inputs and the achievement of long-term goals by defining these goals first and mapping backwards to identify the preconditions for success.
Businesses seeking to create positive social, economic and environmental legacies can apply these concepts to align with their values, while increasing their brand value (e.g. community investor/social innovator/social procurer) and providing impact data for strategic management and decision-making. Impact investing also extends the value of the contribution by investing and re-investing, compared to fixed donations or grants at the philanthropy end of the spectrum.
This article outlines key elements towards mapping and understanding how much social change occurs because of business investment. These elements are inputs, social impact strategy, outputs, outcomes and impacts as shown in the figure below.
Figure 1: Business investment for social impact process diagramme.
There are differences between outputs, outcomes and impacts but these can be conceptualised as: what was delivered, the ‘outputs’, mid-term ‘outcomes’ and long-term ‘impact’. The Impact Management Project (IMP) goes further to describe ‘Impact’ (based on global consensus), as comprising five dimensions: what, who, how much, contribution and risk.
Inputs
Embarking on a social investment strategy to achieve long-term social goals logically requires the commitment of inputs. Inputs may be directly financial (i.e. cash), comprise the provision of ‘in-kind’ materials, products or services or include corporate volunteering. Cash inputs may be used to leverage contributions by other organisations, since it increases the likelihood of success of an investment. In-kind services may extend to administrative, managerial or legal advice if you are working in a partnership with limited resources, such as a small charity.
Regardless of the arrangement, businesses need to define and understand the long-term goal to ensure the type and amount of input or contribution produces a net benefit and long-term impact.
Social Investment Strategies
What is the best strategy in which to invest your resources and how is it done? The following sections use case studies to illustrate how businesses may create value through community investment via the three investment strategies.
Corporate Community Investment (CCI)
Corporate Community Investment (CCI) helps the communities in which you operate whilst achieving business return on your investment. LBG Corporate Citizenship posits CCI as part of the broader responsible business practices of an organisation and has conducted annual surveys over the past few years on the trends, innovations and challenges. Positive headlines from Australia and New Zealand in the 2017 survey included:
budgets and flagship partnerships remain strong
workplace giving is a priority
corporate volunteering is a real opportunity for business
a desire to align with the government
The major challenges were leadership buy-in, stakeholder communications impact, innovation and presenting a business case for investment in CCI. The 2017 survey also found that CCI practitioners would most likely need help with impact measurement and the narrative of their CCI investments in the future.
So, how are companies doing it?
An internet search produced the following case study of one of Australia’s leading retail property groups – Vicinity Centres. The “Vicinity Centres” CCI Insight Report November 2018 is the result of participating in the LBG Australia & New Zealand (A&NZ) benchmarking for 2018. Vicinity Centres’ stated purpose is to enrich community experiences and create places where people love to connect by creating unique and relevant consumer experiences, delivering value to retailer partners and striving for excellence.
In 2016, Vicinity Centres identified youth disengagement and unemployment as an important issue that impacts the communities in which they operate and the amenity and performance of their centres. Therefore, establishing a community investment program (in partnership with Beacon Foundation) to address this issue not only makes a valued contribution to all the communities in which they operate but also supports their purpose and mission.
This year, Vicinity Centres undertook their first ever Social Return on Investment (SROI) study and found that for every $1 Vicinity invested in Beacon’s programs since January 2017, there has been a positive ongoing social benefit of more than $22 each year. This equates to an annual social benefit for every student participating in the program of $17,482.
In terms of social impact (or what’s changed), the Insight Report included the number of positive changes in behaviour/attitude (222), developed new skills or increased personal effectiveness (266) and improved quality of life/well being (23). These measures most closely align with the definition of outcomes in the Business Investment figure (mid-term results).
Vicinity Centres have also invested in social procurement initiatives, which are discussed in further detail later in this article, including:
facilities management services undertaken by social enterprises across Australia
creating jobs for marginalised groups through existing service providers
It does highlight the interconnection of various social strategies (or program diversity) for delivering long-lasting community impact.
Social Innovation
Patagonia was listed No. 6 on Fast Company’s 2018 edition of the World’s Most Innovative Companies ‘for growing its business every time it amplifies its social mission’.
Patagonia sells clothing and gear for outdoor adventures and is ‘in business to save our home planet’. It employs several social investment strategies (and environmental activism) to do so. Right now, Patagonia is running a program donation campaign where they will match all donations to environmental protectors up to a maximum of $10,000 per donation until a maximum match of $10,000,000.
In the Fast Company interview, CEO Rose Marcario summarises five products that point to Patagonia’s future. This summary also provides an overview of their social and business value creation and new offerings (products and services) to the market including:
repaired and refurbished clothing through the Worn Wear “recommerce” platform – a hub for repairing, sharing and recycling gear (trade in for credit) and therefore cheaper purchase price
Patagonia Provisions “because food and adventure often go together” – recognises the opportunity and need for positive change in the food industry, including engaging with the Regenerative Organics movement
Tin Shed Ventures – Patagonia’s corporate venture capital fund. It invests in environmentally and socially responsible start-up companies, including textile innovations and a venture working with fisherman along the South American coast to convert castoff fishnets into consumer products
Fair trade products – each purchase sends more money back to factory workers who earn premiums for allocation as cash, a collective social investment or both. For example, employees at Hirdaramani Apparel in Sri Lanka voted to use their Fair Trade premium to open a free day care centre and implement a health and hygiene program
Patagonia Action Works – connects individuals to organisation working on environmental issues in the same community (1510 environmental grantees, including many in Australia)
What about companies that innovate for positive social impact on their customers? Smart Energy, New South Wales Australia, is one example. The goal is to offer cheap, clean energy solutions through residential solar panel installation while taking advantage of technology to further offer customers the best support and information. This includes:
monitoring electricity use
batteries
cloud technology to improve customer access to data and other information
Lean methodology (to improve work processes) and database learning
Innovation with social impact internally, and for an engaged workforce, includes online learning to train field specialists and build a distributed workforce, creating hybrid roles to better suit employees and designing out repetitive daily tasks. It might even create intrapreneurs!
Social Procurement
In August 2018, Australia Post produced White paper 4: Unlocking the value of social procurement and supplier diversity: Leading practice insights. This is the fourth paper of a series that explores the UN Sustainable Development Goals (SDGs) and Australia Post’s role in championing them, in this case, Goal 8 (Decent Work and Economic Growth), Goal 10 (Reduced inequalities) and Goal 17 (Partnerships for the Goals).
Australia Post’s strategy covers procurement from social enterprises, indigenous businesses, disability enterprises and other social-benefit suppliers: “Social procurement leverages an organisation’s buying power to deliver social value, above and beyond the value of the goods or services being procured”.
White paper 4 is intended to provoke thought and discussion around how to embed social procurement as a business as usual activity.
There are some common elements in the social procurement frameworks adopted by businesses and corporations in the case studies provided. One is working in partnerships or joint initiatives with social enterprises. Organisations such as Social Traders, for example, create jobs for disadvantaged Australians by linking social enterprises with business and government. A second is creating jobs for marginalised groups through existing service providers such as Supply Nation and Buyability.
Vicinity Centres (discussed under CCI) adopted the second approach by requiring their Contractor (Glad Group Integrated Property Services) to include disadvantaged youth in their employee base. Glad Group in turn partnered with a social enterprise/s to identify suitable roles, walk candidates through pre-employment orientation, and provide ongoing training and support for those successful.
Social procurement enables social enterprises to scale up their activities and increase their reach, which in turn creates flow-on effects. However, as the White Paper details, the scaling required to meet demand is one of the sectors’ key challenges, along with perceptions, current mindsets and moving away from transaction-only relationships (built on KPIs in contracts, for example).
Social Investment Meets Sustainability
Australian property group Mirvac’s This Changes Everything strategy is a hybrid of the three investment streams integrated into their overarching sustainability framework. The strategy includes directing $100 million towards organisations that are purpose-driven by 2030. Of the six key areas identified for delivering positive impact, three are about communities (including their own people). Mirvac also recognises its ability to impact the communities in and around its assets by listening to stakeholders, understanding what’s important, making collaborative decisions and creating places where people feel safe happy, healthy and connected.
Marrick & Co, in Sydney’s Inner West, is a One Planet Living community, which is a place that embodies Mirvac’s ten principles for social, environmental and economic sustainability. Some examples of how design and investment initiatives are used to support culture and community include adaptive reuse to retain heritage buildings, seed funding by Mirvac to establish a One Planet Living Community Group and Facebook Group to help residents connect and form interest groups and relationships and, creating places for interactions through shared library space, communal gardens and common spaces.
Mirvac has also made great progress addressing sustainability across their supply chain. They have released a vendor code of conduct, helped to establish a Sustainable Supply Chain School and joined Social Traders and Supply Nation. The Sustainable Supply Chain School of Australia is an online forum to help the property, construction and infrastructure sectors improve their knowledge of sustainability issues. For registered users, the school provides a self-assessment tool and includes learning modules on topics such as modern slavery and supplier diversity and indigenous procurement. This network includes links to organisations like Supply Nation, whose vision is for a sustainable indigenous business sector.
The Impact Challenge
There are many examples of social investment strategies that are championed by corporations and businesses to meet the social needs of the community, co-create for social and environmental value alongside financial value and, redirect money already being spent towards marginalised groups, all with positive outputs and outcomes.
While the concept of positive impact is at the heart of social investment, the definition and measurement of impact is less clear. Perhaps because some are emerging strategies and long-term data is yet to be collected and analysed. It is also possible that the desired legacy (e.g. improvement of social issues that are most relevant to long term success) and logic model (e.g. Theory of Change) are not completely understood.
Nonetheless, as more companies and businesses realise the value of social impact investment, strategic partnering and stakeholder engagement as part of core business; it is likely that there will be convergence of resources, knowledge and insights across sectors (including financial investment and innovation foundations). Then the challenge for businesses becomes making sure that impact indicators, tools and processes serve their own impact strategy and inform decision making to create sustainable value for their business and society.
Look out for our February 2020 blog, where we drill a little more into the approaches and challenges around Outcome and Impact planning, data collection, measuring and reporting.
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