Finding a sustainable balance between people, planet, and profit, the so-called triple bottom line, is no longer optional, but smart business strategy. Note: this is the first article in our series on responsible business (see here for the second).
Kin + Carta has seen first hand from our clients that, when properly and successfully implemented, the delivery of positive-impact products and services can be an enabler that drives wider business growth. Unilever, for example, in recent years has seen 70% of its growth from brands that are directly aligned with socially responsible goals, such as Sunlight, a water-saving dishwasher liquid.
To move from talking to action, companies need to rally their teams and leadership around two or three key benefits. We suggest focusing on those which are most pertinent to your current business situation.
Responsible business is becoming fundamental to profitability and talent-attraction
Six primary benefits available, when companies move from talking to action
1. Attract & motivate the best talent
Case study: Aetna Healthcare raised eyebrows in 2005 when they led the industry in raising the minimum wage for all employees, while also reducing their out-of-pocket healthcare costs and providing other company-wide incentives. They discovered earlier than most that investing in employees through better pay, benefits, and culture led to more profitable outcomes through retaining a healthier, more incentivised workforce and attracting the best talent.
2. Build loyal customer bases
Case study: Almost 60% of consumers consider ethical product features when purchasing. And this is only going to increase with the growing awareness of the corporate impact on the planet and society.
3. Prosper through strong corporate governance
Case study: Paul Gompers of the Harvard Business School found that companies with stronger shareholder rights enjoyed higher values, profits, and sales growth, alongside lower capital expenditures.
4. Mitigate risk
Case study: Typically one-third of corporate profits are at risk from state intervention. However, this can be as high as 60% where government subsidies (among other forms of intervention) are prevalent e.g. automotive industry.
5. Drive growth through business model innovation
Case study: For Bridges Fund Management and their portfolio company World of Books, investing in sustainable logistics meant they not only reduced their carbon footprint but drove growth through reducing overheads and achieving more efficient operations:
“As an example of our value-add initiatives: at World of Books we have invested in a new sustainable storage warehouse, and upgraded the van fleet to more fuel-efficient vehicles. Both of these measures enabled us to reduce the carbon footprint of the business while also significantly reducing operating costs.”
Stefanie Kneer, Bridges Fund Management, Head of Impact
6. Attract investment & increase exit opportunities
Case study: Financial Services are under increasing pressure to incorporate ESG (environment, social, governance) factors into their investment and ownership decisions. The UK Government recently announced that from 2023, all publicly listed UK companies with a premium listing will be required to “comply or explain” with the TCFD’s requirements.
While becoming a signatory of the UN-supported PRI (Principles of Responsible Investment) is becoming a requirement for investors as non-signatory status is a clear sign to the community that you are not responsible enough.
Originally ESG was about mitigating risk. We’re now at a point where ESG as a risk mitigation exercise is a standard hygiene factor. By moving beyond this, companies are able to unlock additional value by looking at ESG from an opportunity perspective. Industry and societal expectations are pushing the agenda beyond policies and procedures. Companies should be able to now demonstrate real world impacts of these policies and procedures.
Aga Siemiginowska Head of Sustainability at Oakley Capital
Conclusion
Now, more than ever, doing the right thing matters. That’s why we have been speaking to a range of internal and external stakeholders to better understand how we can build better business models, products, and services with a socially responsible lens. To discover three design initiatives that businesses can use to build resilience into their business model, and impact the triple bottom line, see part two of this series.