Managing Director & Senior Partner; Global Leader, Social Impact Practice
Related Expertise: Social Impact, International Business, Corporate Finance and Strategy
In a world in turmoil, the private sector can make a positive impact in the fight against climate change and inequality, securing companies’ long-term advantage in the process.
This commentary is inspired by ideas and examples presented in Beyond Great: Nine Strategies for Thriving in an Era of Social Tension, Economic Nationalism, and Technological Revolution by Arindam Bhattacharya, Nikolaus Lang, and Jim Hemerling.
COVID-19 has thrown into complete disarray any meaningful progress in addressing the world’s largest societal problems. And we were making some good progress in areas such as food insecurity, access to education, and overall rates of poverty. But now, for example, the World Bank warns that the number of people living in extreme poverty—those existing on less than $1.90 per day—is set to rise to 150 million by 2021, the first increase in two decades.
When the pandemic struck, we were already facing a complex web of mounting societal and environmental challenges. And in a period of geopolitical uncertainty, the pressure on business to address these challenges and contribute to real solutions has steadily grown. Can business rise to the occasion?
In fact, the private sector not only has the ability to deliver a positive impact in the fight against climate change and inequality, but doing so has become a requirement for the longevity and increasing value of corporations. It is key to their ability to survive and thrive.
Contending with Three Forces to Deliver the Greatest Good
In Beyond Great, we learn that successful companies have to push beyond traditional standards of corporate greatness in order to sustainably succeed today—in an era dominated by three global forces that have been accelerated by COVID-19:
These three forces have scrambled the traditional playbook that winning businesses have relied on in recent decades, but they also serve up important opportunities for organizations armed with the right strategies to build advantage.
Number one among those strategies is the essential mindset shift from total shareholder return to total societal impact—that is, the complete benefit to society from a company’s products, services, operations, core capabilities, and activities. By embedding the notion of doing good into their operations, companies can have a positive impact on all stakeholders and deliver higher long-term shareholder returns.
Natura: A Positive Impact on Community, at Scale
One of the most complex challenges when it comes to funding social impact through the public sector is finding effective ways to deliver change at scale. But if a private-sector company has social impact baked into its purpose, it can broaden its societal reach as it grows and succeeds.
Brazilian cosmetics giant Natura is a perfect example. The company has a sales and distribution model of 1.8 million consultants, primarily women from low- and middle-income families, whose job is to sell the company’s products. Recognizing the importance of training in the development of its consultants, Natura provides them with extensive skills training in business and personal development.
Their work experience and training empower these consultants as entrepreneurs within their communities and as strong advocates of the company. They can pay for their children’s education and their families’ housing, gain access to health facilities, and, in some cases, find freedom from gender violence.
In addition to supporting efforts to build stronger communities, Natura has focused on sustainability since the 1980s. It works with thousands of small producers in the Amazon, collaborating on sustainability campaigns and protecting millions of acres of rainforest. And the company has been carbon neutral since 2007.
Natura, which in the last several years has acquired Avon, Aesop, and Body Shop, rewards its shareholders as well as its community, outperforming the likes of L’Oréal, Estée Lauder, and Shiseido. With core strategies focused on social and environmental problems, it has delivered social impact and big profits.
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Anglo American: CSR Is Not Enough
Stakeholders want evidence that companies care about the impact they have on society. Socially conscious investing has taken off, doubling in number of funds and value over the past three years. In addition, employees care about the effect their employer has on the world, while consumers increasingly expect transparency from companies and want to understand the purpose behind the brand.
In South Africa, local communities, environmentalists, governments, and investors in global mining company Anglo American were asking the company to go beyond the kind of corporate social responsibility (CSR) programs that are removed from corporate strategy. So it set about reinventing itself, defining a new corporate purpose that meant building into its mining program innovative social, technological, and sustainability approaches.
New technologies have allowed the company to reduce the impact of extracting natural resources. And by collaborating with governments, community leaders, schools, faith groups, businesses, NGOs, and academics, Anglo American is working to create new economic opportunities in addition to its core mining activities.
The company is also investing in education initiatives that not only upskill the workforce but educate young people in the skills that they’ll need in the future. The programs are still new, but efforts to benefit the broader community—environmentally and economically—can be an effective way to become more socially anchored and offer a win-win to leadership.
In a world in turmoil—driven by powerful global forces and made all the more uncertain as the pandemic continues—the private sector has a chance to step up and go beyond the traditional notion of great. With an agenda of total societal impact, leaders are preparing their companies for a future in which they can come out ahead—and everyone wins.