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Rethinking the Role of Business in Society

Rethinking the Role of Business in Society

Two case studies illustrate the power of considering Total Societal Impact.

April 12, 2019

BCG is helping clients rethink the role of business in society by advancing a new lens for strategy: total societal impact (TSI).

This lens comprises more than a single idea or metric; the basic premise is that “every company has positive and negative economic, social, and environmental effects on the world,” which can be measured collectively to evaluate an organization’s impact on society.

BCG’s flagship TSI report describes a company’s TSI as the sum total “impact of its products and services, its operations, and its corporate social responsibility initiatives. It also includes the result of explicit decisions the company makes to adjust its core business to create positive societal benefits.”

Within such a framework, nearly all aspects of a business are accounted for. Is my supply chain ethically sourced? Are my recruiting efforts inclusive and my policies compliant? Do my company’s products have the potential to improve lives? As the report makes clear, business leaders should be asking themselves these sorts of questions—not only to be a positive force for good, but also to thrive in the marketplace.

Quite unlike traditional corporate social responsibility models, TSI offers a holistic look into a company’s role in society, demonstrating why social impact is an integral, not separate, part of value creation. By understanding and maximizing their TSI, companies can actually improve their total shareholder return while also driving positive societal impact.

To illustrate this point, we need only consider the humble toilet.

Here, partner and managing director Emily Serazin shares her reflections on the joint commercial and social opportunity presented by the need to “make sanitation sustainable, safe, accessible, and affordable, while providing alternatives to septic tanks and sewerage systems.” She argues that companies able to do this have the potential to reap the financial benefits while saving millions of lives that might otherwise be lost because of poorly managed sanitation, which is responsible for more deaths annually than measles, malaria, and HIV combined.

BCG’s analysis of global sanitation suggests that tech disruption could be coming for this space, “a market estimated to be worth around $6 billion annually by 2030.”

That’s an impressive figure, particularly when joined by an equal measure of social impact. According to UNICEF, “61% of the world’s citizens—4.5 billion people—lack safely managed sanitation, and of these, 2.3 billion still do not have basic services.”

But even these numbers pale in comparison to measures of food waste.

BCG estimates that within the next decade, annual food loss and waste will hit 2.1 billion tons valued at $1.5 trillion, or put another way, “one-third of the total amount of food produced globally.” If it seems hard to conceptualize what that much waste looks like, just imagine the total mass of Manhattan—multiplied by 10.

In the face of nearly 900 million undernourished people around the globe, food waste bears massive social and economic costs.

Partner and managing director Esben Hegnsholt notes that by addressing key steps along the food value chain, we can curtail waste “by nearly $700 billion—creating major progress toward hitting the UN’s global target to cut food loss and waste in half by 2030.”

In both public sanitation and food loss, a number of governmental and non-governmental actors have significant roles to play, but corporations—because of their size and ability to scale and innovate—are uniquely positioned to solve these problems and in turn create enormous value for shareholders.

Of course, TSI can’t always be so easily measured, and “impact” can come in many forms, some of them difficult to quantify. The bottom line, as BCG’s research suggests, is that it’s no longer enough “for companies to pursue societal issues as a side activity. Instead, they must use their core business—and the scale advantages it offers—to create both positive societal impact and business benefits. The result can be a more reliable growth path, a reduced risk of negative, even cataclysmic, events, and, most likely, increased longevity.”

The power of these particular examples is the way they showcase the symbiotic relationship between purpose and profit. And just as importantly, they show the extraordinary work BCGers are carrying out to unlock the potential of those who advance our world today.

Rethinking the Role of Business in Society

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