Last week AVPN held their 8th Annual Conference, this time entirely virtually, and Alliance asked our readers in a poll for the session you’d like to hear most about. The winner was ‘Strategically leveraging corporate resources for social impact’ – take a look at our conference report below.
This session was hosted by Steven Serneels, CEO & board member of EVPA. He spoke to Bruno Roche, the chief economist at Mars; Jae-Ho Choi, general manager of the corporate responsibility team at Hyundai Motor Company and Anurag Hans, VP, Base-of-Pyramid innovation, market acceleration & operations at Essilor International.
These speakers were brought together to think about the shifts taking place within social impact, and indeed how to increase this within their business practices and core values. They sought to demonstrate to the audience some of the ways in which social impact strategies can create business value as well as social, and how to overcome the challenges within this process. The nature of our present moment also brought this all into focus through the lens of COVID-19.
‘Last week, I was glancing through some papers and I came across a number… 85 per cent of all philanthropic money that was pledged to COVID-19 came from private companies. It was over one billion dollars. This is astonishing,’ began Serneels. He continued that ‘if by 2030 we want to deliver the SDGs, we need at least two to three billion dollars. This is on top of what’s already pledged by classic philanthropic players, by governments, and so on. So we come to the realisation that corporates should be, have to be and will be an essential player in creating a sustainable world.’
From this starting point, it leads to a bigger question of what the role they should play actually is, and how we can leverage the strategic resources of these corporations to create social impact. Serneels claimed that there is a shift in the spectrum of organisations; classic non-profits are feeling financial pressure and are transforming into social enterprises – impact-only into impact first. Similarly, on the other end of the spectrum, for-profits are feeling social pressure, shifting into ‘inclusive business’, or ‘finance first’ organisations, seen through the developments of corporate giving, CSR departments and corporate volunteering. ‘There are so many social and environmental issues at stake, that businesses have realised they should co-build a sustainable environment in order to try it themselves.’
Roche was first to speak, and he acknowledged that six months ago this conversation would have been very different. Through COVID-19, ‘we have essentially seen a number of dogmatic changes in the way we live, work, interact and shop; how business operates, and the impact of this crisis on a number of issues… Surprisingly, what is keeping us alive is not investment bankers and those who are overpaid, but doctors, nurses, delivery people, teachers and farmers. It also wasn’t investment bankers who rescued the system, but central governments.’
Roche sees this crisis as both a duty and an opportunity for business leaders, investors, management schools and policy makers. Corporations, Roche explained, need to reposition in ways that reflect the changing needs of society and the planet, rather than on the ‘shifting sands of unfulfilled promises.’
‘Business and entrepreneurship existed before capitalism, and will probably exist after capitalism, and therefore capitalism is a very short parenthesis in the history of business and entrepreneurship.’ Roche believes that within the last thirty years, capitalism has started a process of deterioration and is losing efficiency, and has instead become a source of value disruption.
Roche posits instead the Economics of Mutuality, changing business performance at its root in order to meet the world’s needs:
- Purpose as strategy
- Ecosystem mapping and orchestration
- Non-financial performance metrics (social, human and natural capital)
- Mutual profit
- Expanding leadership
Roche believes that if finance created the problem we find ourselves in, then finance should solve it. With a new mode of profit structure, we can decide what the right level of profit should be.
Serneels asked to what extent business leadership is ready to embrace this innovation. Roche responded that leadership is all about understanding times and seasons; when to change and how to change. Clearly, value extraction for the few is not working. Particularly with regard to the COVID-19 crisis, ‘the model is not only morally questionable because it’s mostly value extraction, but it is also not efficient… Investors need to realise that there is a better model of value creation.’
The other two speakers brought knowledge as to how they mobilised capital, knowledge and core business capabilities to create relevant social businesses.
Hans was next to speak. Ten years ago, Essilor ascertained that one third of the world’s population has blurred vision which could be corrected through spectacles, and 90 per cent of these live in the developing world. Essilor calculated that this is $272 billion lost every year in productivity. Tackling this issue, then, has two meanings for this corporation: that it is their responsibility, as the largest private sector player in this space, and that this is a business opportunity – which Essilor strongly believes is ‘the only way to drive sustainable change’.
Hans stated that Essilor’s strategy is to increase awareness and access, through removing bottlenecks and building scalable and sustainable solutions. They aim to work through:
- Research and advocacy – making the case for the prioritisation of vision care
- Strategic giving – funding and outreach programs
- Inclusive business – for-profit sustainable models that empower local communities
Essilor has since created 15,000 microbusinesses worldwide, and has different steps and methods through setting up foundations and setting up a first-of-its-kind development impact bond to train primary care vision providers, and engage with global funders and impact investors to create a model that solves development issues through entrepreneurship. Ultimately, Essilor is looking to establish new modes of partnerships going forward, in order to tackle health, gender equity, the livelihoods and economic circumstances of all involved.
Serneels responded that Essilor is part of an ecosystem ‘almost in itself’, and asked what advice Hans would give to those who would also like to explore such an overall ecosystem. Was it planned over time, or did it grow?
Hans answered that whilst the above is all part of a well-thought-out strategy, it has evolved like all private sector corporations do – recognising the hold-ups, and then identifying the solutions. The biggest obstacle that Hans has observed that ‘silo mentality… plagues the sector If we can develop mutual trust, it should be able to come down.’
Last to speak was Choi, who spoke to the audience as to how corporate resources are transforming social impact in South Korea. Historically, there has been ‘giving’ – what Choi explains as donations and social welfare organisations. Input turns into output. However, now he looks to ‘moving’ – strategic investment and collaboration, social enterprises and social purpose organisations. Input turns into impact. ‘Philanthropy donations aren’t sustainable anymore.’
Choi explained that one of the biggest issues in South Korea currently is education inequality. The existing alternative to colleges is what are known as Community Children’s Centres (CCC) for low-income families, of which there are currently around 5,000 across the country. Whilst they have local government support, there is a limited budget and restricted educational resources, and the overall effect has led to stigmatisation and low self-esteem among its students.
From this context, Hyundai formed a strategic alliance with the start-up JUMP to become H-JUMP School, an education volunteer platform which sends college children to a CCC as a teacher for one year, whilst also providing scholarships and high-quality mentoring. Over the last six years, there have been 860 student teachers, impacting 3,000 children from 120 CCC’s. ‘The cumulative reduction of low-income families’ private education expense is more than $120 million.’ Hyundai invested $3 million, and has created 6 times more in social value.
Alongside ‘remarkable’ growth in academic achievement and emotional development, according to Choi this partnership has been seen as the most successful education social venture in Korea. Through this, Hyundai has seen its brand increase as a preference for the millennial generation, and they want to use this CSR project to explore new markets in Southeast Asia.
Serneels asked what it was about this project that was critical to its success. Could any grassroots organisation have been successful, or did it require the role of a corporation to aid it? Choi responded that Hyundai’s experience in engaging networks and its corporate resources were crucial to scale this initiative successfully into a much larger and wide-reaching project.
It was then time for audience questions. The first asked, post-COVID-19, what the compelling reason will be to ensure that social impact remains a core aspect of a corporation’s strategy. Hans responded that ‘we all know that in tough times, CSR investments are the first to be shrunk. But if past efforts have gone into creating sustainable infrastructure, or to empower communities to find solutions, they tend to stay on.’ Roche answered that ‘the world works through crisis – people don’t tend to change easily.’ If businesses go back to the way they were before this crisis, Roche believes it will be a missed opportunity, ‘as it was in 2008. …History will tell us that companies who have embraced now, and mobilised their resources and managed their non-financial capital in the same way as their financial, they will be more resilient.’ Leadership, Roche reasoned, is about tough choices.
The second question was around the need to be inclusive – how can corporate foundations, investments and enterprises complement each other? Choi posited that complex social problems are difficult to solve only through governments and NGOs. In referencing the pandemic, Choi explained that Korea’s success in handling this came from the participation of all society, as well as government, demonstrating that corporations could quickly work together, and without barriers.
Hans agreed that partnerships are key. ‘Whatever progress we’ve made has been because we’ve had more than 300 solid partners across governments, the third sector and private sector. That’s the only way any development can be solved sustainably.’
In his concluding statement, Roche reminded the audience that partnerships, and building relationships, are critical to embrace the challenge ahead. ‘Equally as important is the kind of relationship you build – you can have an abusive relationship, or a dominant one.’ Reciprocity is needed, and building a business model based on this. ‘Value creation is a fundamental shift from value extraction. That is the beauty ahead of us.’
Hans agreed. ‘The time is right to build trust, collaboration and the mutual respect of the different capabilities that each sector can bring.’ To create sustainable solutions, businesses must move away from purely philanthropic donations and rather invest with the full range of corporate resources into driving social impact through core business activities.
Amy McGoldrick is the Marketing, Advertising & Events Manager at Alliance magazine.