NAMHLA SABA: How creating shared value can propel a sustainable social impact

Businesses in SA are recognising the need to support their stakeholders’ social value while constantly creating business value. Businesses are also quickly realising that unaddressed social risk can rapidly escalate into material business and financial risks.

The ratings agencies have identified SA as one of the sovereigns whose credit rating is affected by its negative outlook of social risk, making the need to address societal issues more pressing.  Environmental risk is rated moderate due to the effort put into the governance and financing of climate initiatives.

In a bid to tackle societal and environmental challenges an increasing number of businesses in SA have committed to contributing towards the realisation of the 2030 sustainable development goals (SDGs), thus addressing societal challenges.

Contributing to the SDGs can take different forms, such as unlocking investment capital for impact projects, developing social impact products and solutions, and decreasing the negative impact or increasing the positive impact of investments on societal challenges.

Meeting the SDGs requires financing, intent and strategic execution towards sustainable impact. We have seen over decades that funding alone does not drive impactful and sustainable social impact.

Corporate SA traditionally delegates its role in social development to its corporate social responsibility (CSR) divisions. In most instances CSR is a function separate from core business. Billions of rand are spent annually on inequality-alleviation activities. Though numerous CSR divisions create a wealth of social value, minimal examples have moved the poverty needle as their impact and effectiveness is constrained by resource limitation and lack of co-ordination.

Having identified the limitations of the “separate function” CSR approach, Harvard’s Michael Porter and Mark Kramer introduced the concept and framework of “shared value”. They argue that companies can move beyond CSR and gain a competitive advantage by including social considerations in their core business strategies. Companies have untapped potential in solving societal issues, and shared value is a strong, viable alternative to tapping into that potential.

Stakeholder buy-in

Porter notes that when businesses act as businesses and not as charitable donors, they can improve profitability while also improving critical societal wellbeing measures. However, the main question is how does business effectively effect this change? How does business effectively continue creating business value and profit maximisation while addressing societal needs sustainably?

Creating shared-value products and solutions will not work optimally if the relevant stakeholders do not have buy-in. Most core businesses are primarily set up to make a profit, and social considerations have not materially been a point of consideration. It will be naive to think business will create shared-value products simply because it is the right thing to do. That has never been the nature of the beast. Shared value creation should thus be undertaken and driven by core business, with incentives to staff to make it work.

Corporates need to understand the concept of shared value and how it can work with and for their business and divisional objectives. They need to find the right societal challenge or problem to address that best suits or works in tandem with their current products or service offering.

The importance of identifying the societal issue that links to the business’s products is to enable the business to identify value chain linkages with the social issue quickly, establish low-hanging fruit for short-term immediate execution while working on a long-term strategy for reconceiving, redesigning or introducing new products and solutions. Solving societal issues through the core business model allows the business to serve a previously untapped market, as social needs remain the most unserved market.

Critical partner

The concept of creating social impact shared-value products and solutions requires dual skills, namely, business and social development. Effective social impact shared-value solutions require an in-depth understanding of the “problem” a product or solution is designed towards alleviating.

Corporates have business skill, but they subvert the significance of incorporating social development skills and experience in the design and development of their products and solutions. Shared value has created a platform for the social sector’s role to evolve and expand in helping business create profit maximisation and social value.

The social sector is becoming a critical partner in creating relevant social impact shared-value initiatives for core business strategy. This is mainly attributable to the social sector’s assets, such as relationships, expertise, knowledge and resources corporates don’t have but need in their products and solutions design process. For example, the social sector can help improve and redesign some of businesses products offering to align with the desired social change, better understand the underserved, unbanked, unhoused and poorly educated to position the corporate as an essential partner to their clients such as the government.

There is ample room for SA businesses in different sectors to proactively embark on shared-value products. Shared-value initiatives are not only supposed to assist in poverty alleviation, business can also benefit from creating a competitive advantage.

Building strong partnerships with organisations that know the grassroots socioeconomic factors and hence markets, will be vital in developing or redesigning relevant products for propelling sustainable social impact.

• Saba, a chartered accountant, is an independent social impact consultant.