A new way of thinking about corporate purpose and climate risks
Businesses have an important role to play in transitioning our planet to a sustainable and green future, but the idea that businesses should care about the climate, even from a materiality perspective, let alone a moral or existential one, is still relatively new.
The dominant narrative around the purpose of the corporation to make money for shareholders took hold in the 1970s onwards and has led to excessively short time horizons around investment, planning and metrics of business success. Fast forward 50+ years and so much has changed that investors and other corporate actors are increasingly paying attention to measuring and disclosing climate-related risks. But requiring better measurement and disclosure does not go far enough in also fostering better practice.
Climate as an intersectional challenge and the role of philanthropy
Given that the climate breakdown is a systemic and intersectional challenge, every sector needs to work together effectively to create the necessary shifts in market and policy structures, as well as in mindsets and norms. In other words, we need a fundamentally different way of working. For that to happen, people within different institutions need to understand the issues, their roles, and how to work better with those outside of their bubble.
This is where philanthropy has a key role to play, by acting as a trusted bridge and convenor between sectors, and a catalyst for narrative shifts and systemic change. Over several months SIX conducted deep research for a private funder on how philanthropy can hold companies to account and help businesses to become a force for good. Below we offer some practical suggestions and questions for funders to consider.
What can philanthropy do to support business for good?
We’ve identified three overarching categories of interventions which we think would catalyse the most change given philanthropic support. These are: standards, accountability, and field building. Whilst these interventions were designed based on work in the South East Asia region, they are applicable in other geographies too.
Standards: Foundations can support locally appropriate standards to be implemented widely across the region. Where they exist at all, most countries are working with different frameworks with limited shared knowledge between them. We recommend that foundations work to localise and harmonise in the region, educate business leaders and staff on how to internalise in their operations and along their supply chain, and educate next-generation leaders on climate change and double materiality.
Accountability: Foundations can hold companies to account through legal, policy, reporting and disclosure levers. Whilst this can be challenging in politically unstable countries, we recommend that foundations protect and support grassroots groups and watchdogs; educate and engage legal professionals, e.g. judges and lawyers; advocate for legal reform; and fund data-gathering initiatives to influence companies and build public knowledge, increasing trust and transparency between businesses, public and governments, and develop evidence-based policies about business practices along the value chain.
Enabling environment: Foundations have a unique role because of their neutral position in an ecosystem with many actors and different roles. They can introduce and shape narratives around business for good, and build connections and credibility for others, particularly local funders to be working in this space too. We recommend that foundations partner with aligned philanthropic organisations by co-funding specific initiatives or pooling funds, particularly to support policy research, companies and new technologies focused on delivering positive climate solutions; host events and get to know the ecosystem; stimulate public dialogue on supply chain issues, build narratives on environmental issues and shift perceptions on the role of business in society.
Building an enabling environment for deep and lasting change globally
There are many actors in every ecosystem, each with different motivations, barriers, and resources, so it is necessary to understand each element and how they connect. This kind of work is where philanthropy can play an important role – creating an enabling environment for change in turn helps other levers to be effective.
But building the enabling environment does not just apply to the activities at a national or regional level – the field of philanthropy on a global stage needs to be better connected, too. The number of funders working in business for good is still relatively small, and there is a disparity between global and local funders who are operating in this space.
A relational approach is needed from funders and business leaders
Going forwards, a relational approach is needed to help relevant stakeholders – from policymakers to companies – to adopt new ideas and practices and help the right changes to stick and to spread. We wish to see more (and different types of) philanthropy actively contributing to business for good discussions, working better together, as well as with other types of actors on the issues, and challenging business-as-usual at every level. This means people within institutions, philanthropy or otherwise, must be open, outward-looking, and able to build trust between actors, work in partnership and connect the dots.
Questions for funders to consider in advancing business for good
To connect the dots and catalyse the greatest impact, funders will have to be reflective and critical as they continuously navigate choices about what they can do within specific, often fast-changing contexts. Below are six prompts to help funders navigate the possible pathways and trade-offs involved in advancing business for good:
- What roles do you want to play given your capacity and assets?
- How and where will you work with others to make the best use of your money and influence at local/national/regional levels?
- Where will your intervention be most valuable? Would you rather build on existing momentum or build a new field?
- How quickly do you wish to see results? Groundwork may surface new learning and ideas, but would you or your boards rather see more tangible results?
- How have you accounted for risks and unintended consequences?
- Whose voices can you amplify in these conversations?
These questions are only starting points and we look forward to fleshing them out further with funders who wish to embed critical thinking in their grantmaking strategies and other forms of support in the business for good space.
This article was written for, and originally published in Alliance Magazine.