There is a growing expectation for businesses to engage in social endeavor. The profits are twofold, benefiting both the society in which we live and the organizations that read the map correctly and enjoy business growth. | Shirley Kantor
The article was originally published in Hebrew in Alternative magazine by PROFIMEX
Click here for the Hebrew version.
Discrimination and racism, food wastage, population aging, preparing for the fourth industrial revolution, huge quantities of polluting waste – will it be the business sector that helps in resolving the most acute social challenges globally and in Israel?
If, until a few years ago, the typical response would have been “No way!” it seems that today more people and organizations think that the role of private and public companies is undergoing change. They can and indeed should take an active part in shaping current and future social well-being. Doing so does not replace earning money – making a positive social impact does in fact go very well with profit-making.
In May 2018, Unilever announced that those of its brands defined as Sustainable Living Brands, creating beneficial social value (such as improving health and well-being, and increasing livelihoods) while reducing ecological impacts in the value chain, have grown 46% faster than its other brands, and are responsible for 70% of its turnover growth. This is the reason that Unilever is continuing to convert more and more of its brands to ‘sustainable living’.
The social purpose and business benefit it creates have not escaped the eyes of the investors. In January 2018, Larry Fink, Founder and CEO of Blackrock Investment Fund, caused something of a stir when he wrote to the CEOs of the companies in which Blackrock invests:
“The public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society”.
Fink’s approach has resounded strongly in the institutional investment market. A study recently conducted by public relations and communications company Edelman among 500 investment managers and portfolio managers in leading firms around the world, found that 98% of them think that public companies should provide an urgent response to social issues, such as cyber security, income inequality, diversity in the workplace, and immigration so as to ensure that the global business environment remains stable and healthy. At the same time, 89% of them reported that the companies where they work had changed their voting policy and their engagement priorities in order to pay more attention to ESG – environmental, social, and (corporate) governance risks.
These statements are well-founded. Already in 2016, GSIA – the Global Sustainable Investment Alliance – estimated that the global value of assets managed according to ESG principles amounted to approximately 22.9 trillion dollars.
Another Edelman study, EARNED BRAND 2017, reviewed 40,000 individuals in eight countries and found that the general public also places its trust in corporations. 53% think that brands can do more than government to solve social ills. These assumptions are expressed in purchasing decisions. The study also found that 57% of consumers today base their consumer decisions (preference or boycott) on the basis of the values exhibited by brands and the corporations behind them.
So, what can companies do to help provide a response to social and ecological needs, while also creating business value and strengthening the trust of their stakeholders, including: shareholders, employees, customers, suppliers and the society in which they operate?
They can act on three fronts, as defined by Prof. Michael E. Porter and Dr. Mark R. Kramer in their article Creating Shared Value, published in the Harvard Business Review in 2011: Reconceiving products and markets, redefining productivity in the value chain, and building supportive clusters in the surrounding community and in society at large.
Innovation and accessibility of products and services
Companies can develop new products and services that provide a response to social needs or to ecological challenges. Alternatively, they can adapt and improve the accessibility of existing products and services to the needs of population groups to which marketing attention has not yet been given.
Thus, for example, Gillette recently developed a razor to be used by care givers: people who shave others. The objective here is to cater to people who take care of elderly men who are unable to shave themselves – a growing group, given population aging.
In another example, Israeli food company, Strauss, developed new product categories tailored to people with sensitivities to nutrients such as gluten or lactose. To date, these people and children have only been able to enjoy a very limited range of products, since the consumption of unsuitable products can harm their health.
The banks in Israel have signed up to a joint initiative of the Banking Supervision Department, the Ministry of Social Affairs and Social Services and social associations to enable women who are victims of domestic economic violence to obtain financial services adapted to their needs, especially in instances where they are living in emergency shelters.
In contrast, social benefits sometimes arise in rejecting a product. CVS Pharmacy, the huge pharma chain in the United States, stopped selling tobacco products in its stores as part of the implementation of its commitment to help people look after their health. In the past, these products had generated two billion dollars in annual revenue for the chain. The parent company compensated for the loss in revenue through other health service channels. A Study conducted 3 years later, confirmed that the Company's Tobacco Removal Decision Reduced Cigarette Purchases Nationwide.
Innovation and sensitivity in the company’s value chain
Companies can create benefit for stakeholders by improving the well-being of the people who work all the way through their value chain, mainly by improving salaries and terms of employment, and promoting workplace diversity. In so doing, they enhance efficiency and advance innovation in production processes that could reduce environmental impacts.
For example, global ice cream brand Ben and Jerry’s makes sure to purchase five of its top raw materials from family farms and social cooperatives in developing countries. The purchases are part of a Fairtrade program to ensure better payment to farmers, healthcare and education for their children, and investment in developing sustainable farming for these farmers.
Another example is that of Nesher Israel Cement which, with a large financial investment (in partnership with the Veridis Group the Dan Region Association for sanitation and waste management), established a Plant that sorts mixed municipal waste and turns it into an alternative fuel (Refuse-Derived Fuel - RDF) for the cement industry. The plant handles half of the garbage produced in the Dan Metropolitan Area, which, without the Nesher plant, would have been buried in landfill. From Nesher’s viewpoint, the garbage becomes a source of energy that emits fewer greenhouse gases, thus adding value to society and contributing to the environment.
Promoting social change in the surrounding community
Companies can themselves initiate or join the efforts of others to resolve significant social challenges via collaboration with social and public organizations. At times they may collaborate with competing companies or even take a stand that is seemingly not in their best interest.
For example, since 2010, American communication company AT&T has been working to reduce the use of smartphones while driving. This is a problem directly related to use of the company’s product, and AT&T therefore considers itself obliged to help resolve it. AT&T’s efforts include massive awareness raising and education activities on the web, in local communities, in schools and among the company’s employees and other companies’ employees – even AT&T competitors. Those activities are a collaborative effort with NGOs.
In Israel, in 2013, Intel, the Trump Foundation (no connection with the US President) and the Rashi Foundation initiated the 2x5 campaign – an initiative to multiply the number of high school students graduating from the 5-unit track in mathematics, physics, chemistry and technology (STEM), with an emphasis on female students and those from periphery towns. This came about since the steep decline in the number of students sitting for the 5-unit matriculation exam projected a future decline in the number of engineers of both genders who would be suitable for recruitment into Intel and other technology companies.
About 100 organizations joined the initiative, including the Ministry of Education, technology companies and entities that engage in education. Together their action contributed to a rise of 80% in the number of 5-unit graduates of both genders. The gap between three and five units in high school can be translated into almost doubling of the salary as adult employees, so that the social benefit is both extremely significant and long-term.
Social activism of corporates and brands
In a reality of vibrant and lively discourse in social networks around values, rights and identities, the social activities of brands and corporations are increasingly linked to taking a position on controversial issues. The position taken must fully conform with the brand’s values, and one needs to take into account that it will provoke objection among some of the public.
For example, airbnb, whose central value is the ability to make its users feel as if they belong anywhere in the world, has built a comprehensive plan of action to eliminate discriminatory behavior, including a public campaign. This occurred after customer complaints built up about the discriminatory conduct of host members on the airbnb platform against the backdrop of nationality, skin color, sexual identity and more.
In Israel, financial newspaper Globes took an extraordinarily daring step, relative to the Israeli market when, in June 2018, it published a special supplement showcasing managers from the LGBT community. The supplement was intended to raise awareness and discussion on the topic in workplaces, and to create role models for people from the LGBT community. It is worth mentioning that within weeks of publication of the supplement, an LGBT protest broke out, to which many companies in Israel lent their support and, for the first time, publicly expressed support by calling for equal rights for the LGBT community.
These examples illustrate what can be done to create a beneficial impact on society and the environment, while winning the trust of stakeholders, gaining opportunity to innovate, save on costs, reach new market segments, and more. These actions should be conducted concurrently with a constant reduction in the negative effects of the company’s activity along its value chain. For example, Facebook, as a company, creates a highly-valuable social benefit, but its unwillingness to take responsibility and develop means to protect the privacy of the information in its possession has cost it a loss in trust among its key stakeholders, including investors, government officials, commercial customers and many private users.
A clear definition of guiding values and a social mission, transparency, authenticity and a willingness to invest efforts and resources over time are important keys (although not sufficient in themselves) for succeeding in beneficial social endeavor.
The more the activity is based on the core business, the value chain, and the managerial, commercial and operational routines of the company, the greater its chances of creating shared value for corporation and stakeholders alike.
Our investors, customers, and employees are letting us know that it is time to go down to the playing field and take an active part in shaping the society in which we live and conduct business – where we raise our children and grandchildren and want them to continue to grow and thrive.
Shirley Kantor is a Corporate Responsibility & Social Marketing Expert, working with leading brands and corporations, assisting them to find and leverage the relevant social aspects of their business – inside the company and outside, in the marketplace and in the community