How has the conversation around sustainability changed over the last few years?
Over the last few years, I have been watching with fascination how ‘big business’ and ‘big development’ have collided and converged. We can’t succeed without one another. Business and development communities are adopting an increasingly common language.
Capital is largely understood as material assets. But now businesses are expected to grapple with natural capital, human capital and social capital. And despite the broad sense being clear, we have not yet arrived at a common understanding of these concepts. We have yet to understand that they can help drive positive change.
Perhaps understandably, much of the debate around social capital appears to be heading down the path of quantifying and monetising it, with the view that this will resonate most deeply within the boardroom. This connects to social return on investment methodology, and mimics the approach that has been taken in the related area of natural capital, whereby dollar values have been associated with natural impacts like water usage and biodiversity.
Can Social impact be linked to financial value?
An approach that links social impact to financial value is not necessarily wrong. But I firmly believe that the drive to monetise social impacts should be seen as just one way of factoring social impact into business decisions.
That is mostly due to two reasons. Firstly, for any corporate leader who does make decisions purely in financial terms, “social dollars” still don’t impact the company P&L or the balance sheet directly and so are unlikely to significantly affect decision-making. But secondly, most decision makers in the real corporate world don’t just make-dollar centric decisions. They make decisions to manage risks. And — as much as some of them deny it — they make decisions for subjective and for emotional reasons.
Can social impact be linked to financial value?
An approach that links social impact to financial value is not necessarily wrong. But I firmly believe that the drive to monetise social impacts should be seen as just one way of factoring social impact into business decisions, for two reasons. Firstly, for any corporate leader who does make decisions purely in financial terms, “social dollars” still don’t impact the company P&L or the balance sheet directly and so are unlikely to significantly affect decision-making. But secondly, most decision makers in the real corporate world don’t just make dollar centric decisions. They make decisions to manage risks. And – much as some might deny it – they make decisions for subjective and for emotional reasons.
So the first set of tools in the decision making box are quantitative metrics. Quantification and monetisation of social impact is useful, but it is easy to get caught up in a quest for numerical and methodological perfection. This is the inherent risk of concepts like social capital and social return.
We are trying to learn from all the work that has been done on the quantification of social impact. But we are taking a pragmatic approach – testing a number of different methods to see what tells us the most, and what resonates the most.
The second tool in the box is risk analysis. A risk-based approach has become the hallmark of how many organisations with large and diverse global supply chains “manage” social impact. No organisation can afford to suffer the reputational damage that invariably occurs when something goes badly wrong within its supply chain.
Unsafe working environments, low wages, child labour, lack of community access to scarce water supplies… all these have become high-profile issues for big companies in recent years. The corporate response? Large, visible and especially branded companies have all implemented processes to understand and manage these and other similar risks. An audit industry has sprung up to support them. Many social and environmental issues have been identified and resolved. And many companies are now going further to understand and tackle the root causes of social issues in their supply chains.
But there is more to this than simply driving out the negatives. The real opportunities to increase social capital come from doing something positive as well; making decisions to help achieve positive outcomes that employees, customers, suppliers and communities actually want to see achieved.
Which brings me to the third tool in the box – qualitative insight into people. If we wish to understand the needs and desires of the sections of society our company touches, it means going out and talking to those people. We do this with our consumers when we devise and launch new products, so it shouldn’t be too much of a stretch to take the same approach when it comes to understanding and growing our social impact.
And this is not some woolly concept. It actually works. A perfect example is our ‘Better Barley Better Beer’ initiative in South Africa, which was founded upon engaging with local farmers to see how we could collectively come up with solutions that would secure the long-term supply of quality malting barley by ensuring growing barley was economically attractive for farmers, sustainable in the local context, and consistent with the farmers’ own vision of what sustainable farming should look like.
A local example is Neemrama where we have worked closely with the Confederation of Indian Industry (CII) to manage groundwater in the region. Together with the surrounding communities, we have explored and identified potential solutions to collectively help replenish underground aquifers through water recharge structures, and encourage more water efficient farming practices at the surrounding farms.
Does linking social impact to people result in better decision making?
As employees, most of us are naturally more committed to strategies that we believe can do good and deliver a social purpose, as well as helping the bottom line. No-one wants to feel apologetic about what they do or where they work. Using social impact to drive responsible decision-making therefore plays well among a company’s workforce.
When the local communities do well, so does our business and so do the economies and environment around us. When they prosper, so do we. Prosper: this is the philosophy behind SABMiller’s sustainable development ambition.
If we divorce the positive, human element from our decisions and focus only on the bottom line, there’s a genuine danger of unintended consequences, because we simply haven’t given ourselves the full picture.
So by all means think about social capital in financial terms, if that helps to move the argument forwards. But be warned: if we talk to decision makers only in terms of dollars, we remove from the equation the factor that I believe can hold greater sway — real impact on real people. And we risk choking off the potentially huge opportunity that human emotion can bring to the table, helping us to drive better, more socially responsible decision making that we can all feel good about.
In Conversation with Ms. Anna Swaithes, Director of Sustainable Development, SABMiller. (Conversation with Anna Swaithes)