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Wednesday, 19 March 2014 00:00 - - {{hitsCtrl.values.hits}}
I’ve seen some very creative and interactive online annual reports from companies such as AirBnB, Charity:Water and MailChimp. But today’s article is not about annual reports. It’s about what’s in them.
Born this way?
‘Social impact’ is the fundamental property that defines social innovation. But that very concept seems to be the least understood and mostly abused by for-profits as well as not-for-profits.
Lady Gaga was in the news last week, but this time not for her outrageous costumes. Her charitable foundation ‘Born this way,’ which works against ‘bullying,’ reported net assets of $ 2.1 million in 2012 but donated a mere $ 5,000 as grants. The most worrying part is that there are some hefty overheads on strategic consultancy, legal fees and event management. The foundation in question defended saying that the “impact” they create is through direct engagement of young people.
The situation is not very different with a lot of companies. The CSR spend and good stories on annual reports are the least effective measurements of real ‘social impact’.
I meet a lot of CEOs and CSR/sustainability heads in Sri Lanka. I often hear most of them saying that they don’t like to “talk” about the good work they do. While it may be driven from a deep-rooted cultural trait of not bragging about one’s own merit, I feel that it’s also because a lot of them are not confident about their actual ‘social impact’. You can’t blame them, because social impact can be a complicated construct. And you can’t measure what you don’t know.
There are many companies in Sri Lanka that carry out community development projects, especially around their factories. The rationale is usually improving the lives of the people around their factories, who in turn are employed in the factory.
The Manager of SAID Business School of the University of Oxford asked me: “What’s better, doing a community project or increasing the salary of your employees?” That’s an interesting question, and I would like to pass it on to you. Which of the two will mostly improve the lives of the families?
Blood in the mobile
In my first article I wrote about the unfathomable social destruction caused by the manufacturers of laptops and mobile phones along their supply chain. We are all aware of the consequences caused by unregulated gem mining in Ratnapura where entire localities are left uninhabitable. Contamination of spring water leading to rivers caused by the uncontrolled usage of chemical fertilisers in tea estates is now a stark reality.
"Social innovation is not about small, incremental changes. It’s too late for that. It’s about disruptive, ‘system-wide’ changes. Therefore the need for collaboration along the supply chain with your suppliers and buyers, collaboration with your competitors, and even with seemingly irrelevant organisations are key success factors for social innovation"
After being responsible for a massive trail of negative social impact, trying to marginally balance that with CSR, sustainability or corporate philanthropy is meaningless. Companies in Sri Lanka now have the opportunity to innovate in their business models and supply chains.
It is time to accept that innovation is not about churning out new varieties of biscuits, flavours of drinks, types of shampoos or mind-boggling mobile or internet packages every 24 hours. Global giants like Coca-Cola and Pepsi are currently under huge public pressure to reduce the absurd sugar content in their drinks, which is a major contributor to obesity and health complications.
Real business transformation
Nike is a classic example of how large-scale manufacturing supply chains can make social impact for betterment. The Nike scandal that erupted in the ’90s with the public realisation of the mass child labour, underpaid female workers, unethical business practices and harsh working environments in their supply chain, led to a global consumer protest against the brand and its products.
In 1998 their earnings dropped by a staggering 69%. Their excuse: “We are not responsible for the status of our suppliers” was not working. Nike had to take real action. After more than a decade of extensive work, Nike and its global competitors have transformed their business model and established reasonable industry standards and monitoring mechanisms to tackle the problem.
But that does not mean the problem is solved. Child labour, gender-based discrimination in workplaces and sweatshops continue to grow around the world. We saw the horrific fire that killed hundreds of workers in Bangladesh in 2012 and just a year later the collapse of another garment factory in Dhaka, leading to a global outcry against poor working conditions. Employees of Foxxcon, known as ‘iPhone sweatshops’ in Taiwan, recently rioted against the unreasonable pressure on production against the mounting demand.
Sell more. Solve more.
SMEs to large conglomerates and MNCs to global brands have a definite role to play in solving social issues, especially because they directly or indirectly are responsible for creating social issues in the first place. I would like to make an appeal to the top consumer brands in Sri Lanka to make a step change in your business models. While selling more and more of your product, be more and more ‘actionable’ in lowering or preventing the social issues they create.
An interesting realisation occurred during one of my visits to the rural areas in North Western and North Central Provinces. Although there is scientific evidence that water from the lakes (surface water) is safer than well water (in tackling the agriculture-based kidney disease), the villagers are not willing to drink from the lakes. When asked why, they said that the lakes are being polluted from human activities such as bathing and washing clothes.
I went to see if it’s true and what I saw was shocking. I could count at least 10 brands of soap and shampoo covers, sachets and bottles lying in the water and along the shore. The very brands that are constantly preaching about hygiene have created a far worse problem at the end of their supply chain. Now apply this to forests, rivers, beaches and roads, etc.
We can ask the traditional question, “Who is responsible?” and we’ll get the traditional answers, “People who use them, companies who make them or both.” Instead, let’s ask a different question: “How can we innovate our product so that they don’t cause any negative social impact?” Social innovation lies in the answers to that question.
The social awakening
Social innovation is not about small, incremental changes. It’s too late for that. It’s about disruptive, ‘system-wide’ changes. Therefore the need for collaboration along the supply chain with your suppliers and buyers, collaboration with your competitors, and even with seemingly irrelevant organisations are key success factors for social innovation.
We as a society need to ascend to a state of realisation of the severity of the problems around us. We are right now experiencing a generational power shift. The millennials are taking over the power positions in the corporate sector, while the economic heroes of yesteryear (with all due respect) are gradually retiring.
The corporate leaders of 2020 and beyond are in the making. This generation has an unprecedented task to solve the issues their fathers and grandfathers have left behind. In this context, the media and advertising agencies have a huge role to play in fuelling the current ‘social awakening’. It is high time for the new CEOs to move beyond the ailing mad max marketing, and embrace new-age social marketing principles. Marketing and advertising should create ‘social capital,’ not social cockfighting.
Counting what matters
I frequently get the question, “So how can we measure social impact?” Instead of counting the number of students reached, how can we measure how better educated they are? Instead of counting the number of water facilities equipped, how can we measure the improvement in people’s health? How can we measure those soft, long-term returns?
Measuring social impact is a fast growing field. With the rise of social enterprises and social impact investment, measuring Social Return on Investment (SROI) has become a hotbed for innovation. There are different models, tools and techniques such as social accounting and integrated reporting that evaluates net value creation of a company.
Technology is a major enabler in social impact measurement especially with big data, instant feedback, simulation, etc. But I think more than worrying about which tools to use, it is the principle that we need to focus on.
For example, a company needs to identify the core social mission, and spend adequate time and resources in understanding the problem deeply, fully and from multiple perspectives (and by that I don’t mean costly strategic consulting). This usually gives us the criteria and metrics that we need to monitor and evaluate.
Companies need to be open and transparent about their findings. This gives them critical analysis of their understanding and helps them to adjust any misconceptions. Designing a solution to the problem needs to be done in collaboration especially with the target audiences. An expert solution is usually short-lived and does not solve the real issue.
Designing and implementation needs to be done in rapid iterations so that monitoring and evaluation can be done quickly, rather than as fully-formed big solutions at once. If the results are positive, the solution needs to be scaled up exponentially for any meaningful and significant social impact.
Business performance in the year 2020 and beyond will be measured on the principles of social impact. Are you ready?
(The writer can be reached via [email protected]. Share your views: #beyond2020. The views expressed in this article are solely those of the author.)
