Between the 2017 Paradise Papers scandal, the globally contested multi-billion merger between a large pharmaceutical and an agrochemical company, incidents of day-to-day disrespect of employees, protests over excessive pay and a leading car company’s fraudulent emission scandal, the air surrounding global corporations feels somewhat heavy. For the 17th consecutive year, the Edelman Trust Barometer recently surveyed tens of thousands of people across dozens of countries. They found that less than half of the surveyed respondents’ trust in businesses and CEO credibility was at an all time low, with figures declining in all 28 countries surveyed.
This feels like a call from global citizens to the business community. Business leaders can no longer focus solely on their company’s’ financial performance and gain. They need to engage externally with the people they employ. 75% of people surveyed agreed that “a company can take specific actions that both increase profits and improve the economic and social conditions in the community where it operates.”
Philip Mirvis, from the Lewis Institute recognises that in this context, businesses face three key challenges:
- Shareholder demand for growth
- Employee desire for meaning from work and rising public expectations that they address social, economic
- Environmental challenges
By investing in new innovation sources and methods, including new business practice, partnerships with social entrepreneurs and employee “intrapreneurs,” they are generating new products, unlocking markets, and engaging in creative philanthropy, all of which address social challenges while supporting business reputation and growth.
Thankfully, a number of multinational corporations, recognised global brands, are investing their time and resources to shift their business practice from top-down to bottom-up, involving their key stakeholders along the way as much as possible. This strategy shift, towards a more sustainable environmental and inclusive social business practices, is what we refer to as corporate social innovation. The Lewis Institute defines it as “a unique set of corporate assets in collaboration with other sectors and firms to co-create breakthrough solutions to complex economic, social and environmental issues that bear on the sustainability of both business and society.” This practice has built on what people have been referring to corporate social responsibility (CSR) for the past 20 years in ways which embed impact directly into corporate strategies and activities. The below table from a recent report from The Conference Board, The New Business of Business, clearly details this evolution.
What Makes Corporate Social Innovation Different?
Traditional CSR
- Philanthropic Intent
- Money, Manpower
- Employee Volunteerism
- Contracted Service Providers
- Social and Eco-Services
- Social Good
Corporate Social Innovation
- Strategic Intent
- R&D, Corporate Assets
- Employee Development
- NGO/Government Partners
- Social and Eco-Innovations
- Sustainable Social Change
Mark Pftizer, Managing Director of FSG Consulting, highlighted in an 2013 issue of Harvard Business Review that many businesses recognise the importance of gaining insight into the needs they seek to address, but some go deeper in order to understand the underlying social conditions and how best to change them. They conduct extensive research to develop a comprehensive view of the problem, the people affected and their numbers, the barriers to progress, the options for driving change, and the parties that can help. Such knowledge provides the basis for anticipating resource requirements, developing the business case, and identifying the necessary execution capabilities inside and outside the company.
It is therefore worth highlighting examples of businesses who have been innovative, building on their core strength to contribute to societal progress. These examples have been grouped in relation to the areas of business which they most heavily rely on:
- Governance
- Strategic Partnerships
- Employee Engagement
- Product Innovation
- Community Engagement
This is an non-exhaustive list, that hopefully sparks a dialogue on the role of businesses in society.
1. Governance – Sustainability needs to come from within
When corporations decide to move from CSR activities to investing strategically in its people or processes in order to be more socially or environmentally minded, they need to have the full support of senior executives and shareholders to take effect. These shifts represent large investments which will increase the business’s sustainability in terms of finance and community. Only through strong leadership paired with a set of measurable goals will the desired business transformation take place.
Natura, a Brazilian cosmetic company, exemplifies a business that puts its purpose into a value proposition for customers. The company’s mission “bem estar bem” (well-being/being well) guides product innovations that focus on preserving biodiversity and traditional knowledge and culture in Amazonia. Its Ekos products are sustainably sourced and biodegradable, and Natura has established agreements with each of its 2,500 small suppliers to guard against “biopiracy”— the unethical commercialisation of the region’s genetic and cultural heritage.
Unilever’s CEO Paul Polman initiated the firm’s Sustainable Living plan – a 10-year commitment to double the size of the business while reducing its absolute environmental impact. “In a volatile world of growing social inequality, rising population, development challenges and climate change, the need for businesses to adapt is clear, as are the benefits and opportunities. This calls for a transformational approach across the whole value chain if we are to continue to grow.” In 2016, ‘Sustainable Living’ brands – Dove, Lifebuoy, Ben & Jerry’s and Comfort – are reported to have become increasingly important to the company’s business, with these brands growing more than 50% faster than the rest of the business and accounting for 60% of growth in 2016.
Puma was one of the first companies to establish an Environment P&L in 2011. This new framework is meant to help them identify and manage the cost to nature of doing business, while simultaneously sharpening focus in pursuit of new and sustainable business opportunities. Their majority shareholder Kering further developed the methodology and expanded the EP&L to the entire Kering Group. Since then, they published the methodology as an open-source tool in 2016, and have launched an EP&L mobile app.
BNP Paribas Group announced in October 2017 a new global financing policy with regard to the exploration, production and transport of non-conventional hydrocarbons. Accordingly, they will no longer do business with companies whose principal business activity is the exploration, production, distribution, marketing or trading of oil and gas from shale and/or oil from tar sands. This is part of a commitment to bring its financing and investment activities in line with the International Energy Agency (IEA) scenario, which aims to keep global warming below 2°C by the end of the century.
M&S‘s Plan A launched in 2013 and is the company’s most recent attempt to become a socially and environmentally minded business. As an integral part of the rebirth of M&S, there was an emphasis on cutting waste, saving energy, trading fairly and animal welfare. Marc Bollans, their CEO told The Guardian that Plan A had already provided additional strength and trust in their business and brands while helping them improve and protect the provenance of their sourcing.
2. Strategic Partnerships: Scaling innovation through collaboration
Innovation comes from unlikely connections. Most businesses underestimate the diversity of the communities, organisations and people they impact within their ecosystem. This is an untapped source of innovation. In order to build innovative and sustainable businesses, one can easily understand the necessity to collaborate with its different parts. Designing, manufacturing, delivering and scaling with the most relevant organisations and people rather than at them.
SC Johnson, the world’s leading maker of insect control products, partnered with USAID and the Borlaug Institute of Texas A&M to work with Rwandan farmers and their communities to sustainably farm the plants that supply a key ingredient, pyrethrum. To develop and market antimalarial products in a culturally compatible format, SC Johnson’s innovation team learned firsthand from rural communities that they wanted affordable and multifunctional protection products. Accordingly, SC Johnson developed a bundle of insect control products, ranging from repellents to home cleaning sprays, in refillable formats. They marketed these products through clubs of seven or more homemakers, who also participated in group coaching sessions around home and family-care best practices.
P&G’s open innovation platform, Connect + Develop, is a prime example of scaling through innovation. It has linked the company with German ingredients-maker Symrise (to develop a natural honey cough drop with Vicks) and with U.S. technology partner Ecolabs (to create a refillable anti-static dryer block for its Bounce laundry products brand). Through the platform, P&G also collaborated with Brazilian packaging supplier Braskem to turn sustainably harvested sugarcane into a high-density, 100 percent recyclable, polyethylene plastic used in Pantene shampoos. Beyond business to business collaborations, the company has partnered with universities, government agencies and NGOs. For example, the Safe Drinking Water Alliance helps bring P&G’s water purification system to those in need.
IKEA looks to increase impact first through its value-chain optimisation. Their starting point to create long-lasting change with suppliers is investing in them and their workers. The average length of relationships they hold with suppliers is 11 years. They worked with UNICEF Save The Children to manage problems of child labour in India and through their support, developed a code of conduct and a monitoring system which ensured that all suppliers would operate accordingly thereafter.
GE has undertaken, as part of its Healthymagination programme, the development of affordable products that address severe health issues, which has also involved alliances with social enterprises. One problem GE decided to tackle was India’s high infant mortality, which is due in part to the lack of incubators for premature infants. GE’s R&D engineers spent months reinventing their incubator and dramatically reducing its cost but calculated that GE would still have to charge $2,000 for the product — far too much for Indian hospitals and clinics. GE then learned of Embrace, a social enterprise that had created a $200 incubator that could keep a baby warm for up to six hours by combining a sleeping bag with pads that could be heated in water. GE partnered with Embrace to distribute the product in India.
3. Employee Engagement: Unlocking human potential
Once social innovation has been embraced at a governance level, businesses will need to engage employees to have a new strategy turn into reality. Might it be through intrapreneurship initiatives or community driven volunteering schemes, changing mindsets within the organisation is key to align employees with the strategic shifts towards long-term sustainability planned by executives. This new set of organisational goals, the resources and incentives that each employee has in his or her hands to act on them, will need to be clearly conveyed in order for all of the business’s human potential to be unlocked.
IBM established the IBM Corporate Service Corps, a skills-based volunteerism initiative that also influences its talent and professional development strategies. It deploys 500 young leaders a year on team assignments in more than 30 countries in the developing world. Employees engage in two months of training while working full time, spend one month on the ground in a team tackling a social issue, and then mentor the next group for two months. Stanley Litlow told the Havard Business Review that it was more than a philanthropic gesture. He sees it as a talent development system. As he put it, “If participation in these programs increases our retention rate, recruits top talent, and builds skills in our workforce, then it’s addressing the critical issue of competitiveness.”
Ferrovial, a Spanish multinational that operates urban and services infrastructure, has sought to engage employees worldwide through an innovation contest. The program, titled “zuritanken” invites staff to offer solutions to challenges in the company’s strategic business areas. The winning idea at the inaugural innovation contest was a walkway that harnesses kinetic energy generated by footsteps and converts it into electricity. The product, Floor Power, is now installed at Heathrow Airport, which Ferrovial manages.
Burt’s Bees has his own equivalent, the Greater Good initiative. The successful programme empowers employees through trainings in actionable environmental stewardship, social outreach, natural wellness, and leadership. The programme supports a company-wide goal to achieve 100% employee engagement in sustainability by 2020.
Barclays Social Innovation Facility is an internal accelerator for the multinational banking company to develop commercial finance solutions to social and environmental challenges. Launched with a £25 million financial commitment in 2012, the Barclays Accelerator provides a physical site and co-working environment for innovative employees and companies. Employees within Barclays develop their ideas in a three-day intrapreneur lab, then receive three months of internal mentoring before pitching their innovations to senior executives. Projects launched include a credit card aimed at millennials that “rounds up” the charge at bank expense and donates the added funds to social purposes, loans with reduced credit charges for consumers who otherwise wouldn’t qualify for such rates, and a suite of impact investing products.
Clif Bar has embedded sustainability in its employees’ benefits package, including incentives for actions such as making eco-friendly home improvements and purchasing a fuel-efficient car. Employees are rewarded for such positive behavior and recognised at year-end.
Accenture Development Partnerships (ADP) has undertaken more than 600 projects in 55 countries where its professionals, at 50 percent salary reduction, partner for up to six months with NGOs to bring business solutions to humanitarian problems. For example, ADP worked with NGO consortium NetHope to launch and staff the first global IT help desk for international NGOs.
4. Product Innovation: From social issue to business opportunity
Peter Drucker, consultant and author, whose writings contributed to the philosophical and practical foundations of the modern business corporation once said “every single social and global issue of our day is a business opportunity in disguise”. There are numerous examples of highly successful start-ups, now global companies, which have done just that. However competing business priorities, especially pressures on short term profit by shareholders, often lead to a shorter term vision, potentially losing on profit-making, community-improving product and service innovations.
Danone’s Nutriplanet group, drawing on nutritional, socioeconomic, and cultural data has analysed the habits and health issues of populations in 52 countries to inform product development. After studying the diets of Brazil’s youth, for example, Danone reformulated a bestselling cheese by reducing sugar and adding vitamins. In Bangladesh, children eat 600,000 servings a week of Danone’s Shokti-Doi, a targeted nutrient-rich yogurt. R&D also extends into packaging. In Senegal, Danone developed a carton composed of local grain and a little milk that can be stored at room temperature.
Vodafone obtained a grant from the British government’s Department for International Development to cover initial research and development for a new service aiming to give people in less developed countries access to financial services. The venture, M-Pesa, was kept separate from other Vodafone businesses, spent two years on in-market experiments. Once M-Pesa had demonstrated its commercial viability, local units of an established business financed its scale-up. Today M-Pesa is managed by Vodafone’s national subsidiaries and is one of the company’s most important offerings: It accounted for 18% of the revenue of Safaricom, Vodafone’s Kenyan subsidiary. The experience encouraged Vodafone to link up with philanthropies and government agencies to experiment in other areas, such as agricultural information services and applications to remotely monitor and manage home energy consumption.
IBM’s Watson for Oncology is a cognitive computing system trained by physicians at Memorial Sloan Kettering. It is able to take a patient’s medical records, extract pertinent information about their health, and come up with a personalised treatment plan. Watson can also suggest which treatments should not be pursued and provides relevant studies to back up its proposals. All in all, it is meant to help clinicians navigate each patient’s case with the help of the latest available research.
Interface, the world’s leading carpet tile manufacturer, has recently brought to life innovations include using plastics and polymers rather than petroleum-based materials for carpet backing. This enables carpets to be recycled and produce less waste. The company has also used biomimicry in design to produce carpet tiles with natural leaf patterns that can be laid out in any order, with no time or materials wasted lining the tiles up and matching seams. The tiles are also taped together, rather than glued down, avoiding use of toxic chemicals.
5. Community Engagement: Giving back to people you sell to
At the 2013 TEDGlobal conference, Harvard Business School professor Michael Porter made the case that businesses can help tackle community problems, as organisations and institutions dealing with them don’t have nearly enough resources to finance the necessary change. The model in place to deal with social issues, including NGOs and philanthropies, is well-meaning but often scales with difficulty. Issues such as healthcare, access to water or education and climate change would be much better addressed with a deeper collaboration between businesses, NGOs and governments.
Microsoft, McDonalds, Walmart, Caterpillar pledged resources and joined the New Employment Opportunities Program (NEO) for youth, an initiative launched in 2012 by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank Group. NEO offers job training and placement services to improve the employability of poor youth and thereby the quality of the workforce throughout Latin America and the Caribbean. The member companies, some of the largest employers in the region, are contributing money and helping to shape the training curriculum and other employment services. The partnership is paying off; NEO is on track to reach 1 million youth through effective job-training programs by 2020.
Coca-Cola Brazil spent six months making the case for its Coletivo initiative, launched in 2009. The business plan called for working with local NGOs to create programmes to train young people for two months in retailing, business development, and entrepreneurship, and then pairing them with local retailers to tackle specific improvement projects. Coca-Cola anticipated that incremental sales from stronger retail channels and brand recognition in the targeted communities would far outweigh the investments needed to achieve a measurable change in youth skills and employability in the retail sector.
Intel developed Education Transformation, an open toolkit to transform education. Grounded in research, the Intel Education Transformation Policy Tool for learning and teaching includes all aspects of the process, from providing leadership and policy development to adopting curriculum and choosing technology, while maintaining sustainable programme funding and constantly evaluating programme success. They provide insights, best practices, and practical strategies to advance school’s vision of education transformation.
FrieslandCampina, a Dutch dairy cooperative with markets worldwide receives milk supplies from over 19,000-member dairy farms in Western Europe and from thousands of smallholder farms in Asia, Africa, and Eastern Europe. With local partners, the company has organised the farmers into networks or cooperatives and provided training, consultation, and tools to improve milk hygiene, stock breeding and feed, and water use. Dutch dairy farmers also share their dairy knowledge and expertise with smallholder suppliers.
Conclusions
These are just a few of the numerous examples indicating that large corporations are starting to embed sustainable social and environmental business practices in their long-term strategy. The line between CSR and corporate social innovation remains thin. It is only with the perspective of time that one can judge whether a new socially driven corporate initiative is a strategic shift as opposed to a branding exercise. But as both consumers and employees increasingly request more transparency and responsibility from businesses and brands they engage with, we can only hope that initiatives such as the ones listed in this article become common practice.
Corporations have the power and responsibility to lead the way and create large scale consumer behavior change while drastically improving manufacturing standards. The influence of brands and the messages they communicate to people, can drive them to take part in solving the challenges surrounding them. Similarly on the production side, pressures from corporations have in numerous cases shifted the way factories are built and operate, from employee welfare to environment protection.
As Matthew Harrington, Global Chief Operating Officer of Edelman stated, nimble business leaders will recognise that in this new world they cannot operate with a top-down approach. Rather, a flatter, more participatory model is needed, one that isn’t just “for the people” but “with the people.” The best companies are already listening to and strategically acting on insights from their employees, customers, and other stakeholders.
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