Call it the light bulb moment. Corporate Australia has discovered how to solve one of its trickiest dilemmas – how do you earn profits and pursue social outcomes?
It’s a conversation dating back thirty years with the arrival of corporate social responsibility. But the latest approach is no longer just a question of arm’s length, feel-good philanthropy, now it’s a question of creating “shared value.”
Harvard Professor Michael Porter, a global authority on competitive strategy and economic development, says business leaders need to consider social good within the context of the core value business delivers.
“What we’re finding is there’s many, many societal needs – the environment, health, nutrition, savings – where you can actually make a profound impact, and profit at the same time,” he says.
People want to find programs and investments that sit in the nexus between core business, corporate success and value.
The fundamental idea is to find creative ways to combine social good with a profitable outcomes.
Michael Parks, General Manager, Governance, Integration and Reporting at Telstra’s Chief Sustainability Office, describes it this way: “People want to find programs and investments that sit in the nexus between core business, corporate success and value.”
This means forging company-wide sustainability programs that produce lasting benefits and building trust with customers. It’s a long-term approach where leaders consider profitable solutions that benefit communities and business partners.
For example, Australia’s Uncle Toby’s has integrated sustainable practices into its business operations. In recent years the company invested in research to identify a species of oats which could be grown closer to the point of cereal production, and provide a more regular income to Australian farmers.
It’s a solution that Porter says creates shared value by bringing the vitality of oat farming back into the community. “They invested money in R&D, they invested money in education and they created a new contract with their growers that took some of the risk of drought. That’s shared value.”
In other words, Uncle’s Toby has a focus on mutual benefits – its own bottom line and creating thriving local agricultural communities.
The idea is catching on across Australia through initiatives such as the Shared Value Project. Corporate members including NAB, Bendigo Bank, PwC, Nestle and Bupa have united to create social good. Project founder Rhodri Ellis-Jones, says the concept of shared value applies to different sectors of the economy.
“Shared Value is built around a core competency, focussed on creating competitive advantage and business growth so employees are intrinsically involved in the good created,” he says.
Managing risk, realising benefits
From a corporate perspective, the sustainability and shared value story synchronises with global reporting initiatives and standards organisations governing the behaviour of industry sectors.
Unlike traditional corporate social responsibility, shared value programs are derived from core business objectives, and existing capacities. The idea is to create social good by doing a core function in a better, more productive or more innovative way. Competitive advantage is achieved when an organisation’s processes are not only more efficient, but more deeply embedded in communities of stakeholders, suppliers or customers.
As they grapple with this process many large companies turn to international ratings to accurately track and benchmark the success of sustainability programs. This helps them compare progress with international counterparts, and promote their efforts to interested stakeholders.
Financial institutions such as ANZ Bank are also seeing the results in terms of public recognition. In January the bank was ranked number 19 in ‘Global 100 Most Sustainable Corporations in the World’ at the World Economic Forum in Davos, Switzerland.
This ranking was the result of programs such as MoneyMinded, which provides financial management skills to individuals in vulnerable communities in Australia, and around the world. By partnering with the Brotherhood of St Laurence, the program has helped Australians from low socioeconomic backgrounds save more than $8.9 million over a decade.
The program operates successfully in 17 different countries in the Asia Pacific region, with 92 percent of respondents reporting the program helped them achieve savings goals, while boosting their self-esteem.
We look for an accord of values in our employment relationship. Where such an accord is alive and real throughout a company, we see another source of competitive advantage.
While the bank benefits from increased business through MoneyMinded, it also creates a less risky investment portfolio, due to increased vigilance. Agri-businesses associated with high levels of pollution, companies with poor reporting practices, and business associated with human rights violations are excluded from the company’s investment portfolio.
Another example is Australia’s largest diversified property group, Stockland.
The company conducted a proprietary liveability study across its residential communities to focus on elements that contribute to higher customer satisfaction (or liveability). The approach ultimately drove sales growth.
Back to the future?
Looking ahead, the question facing business leaders now is how to build and maintain the momentum.
Sustainability has caught the attention of employees and customers, while initiatives like the Shared Value Project are providing a new and exciting approach to corporate social responsibility.
The challenge then becomes turning the groundswell into a movement that survives financial cycles and generational attitudes. Judging by contemporary attitudes in the workplace, the signs are good.
Speaking at a recent Shared Value Forum in Melbourne, Telstra’s chief sustainability officer Tim O’Leary says people already see a strong positive relationship between the social and economic forces.
“Most of us seek to find meaning and dignity in our labour”, O’Leary says. “We look for an accord of values in our employment relationship. Where such an accord is alive and real throughout a company, we see another source of competitive advantage.”
Telstra has remained a signatory to the United Nations Global Compact since 2011 and contributed $217 million to social and community initiatives in 2014. Sign up for our monthly newsletter, Sustainability Matters.