Doing good is good business

Posted by Opinion desk on 14 Aug, 2012 / Features

By Shauneen Procter, Partner at Idea Engineers

Corporate social investment is a passé construct. Gone are the days when hand-outs or special social programmes to make business look good suffice. The latest business research shows that although being a sustainable, ethical business is more complex, it is the path to better returns.

With almost half of South Africans living below the poverty line which means they survive on R500 a month or less, and unemployment rates amongst youth in excess of 50%, businesses can no longer afford to be passive observers of economic revitalisation. Business sustainability now means protecting and nurturing long term markets. Industry can no longer afford to stand aloof from the environment it operates in.

The South African context is a compelling reason for businesses to get involved with society, but captains of industry have for so long been focused on shareholder benefit and the recession has driven such austerity that a natural reaction to “let’s do good” is “what is in it for my company?”

A recent study by Harvard Business School and London Business School yields surprisingly promising results. A research paper called “The Impact of a Corporate Culture of Sustainability on Corporate Behaviour and Performance” indicates companies that have voluntarily embraced sustainability “significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.”

In the study Robert G. Eccles, Ioannis Ioannou, and George Serafeim looked at 90 ‘high sustainability’ and 90 ‘low sustainability’ organisations. The former group had taken aboard a significant number of environmental and social policies since the early to mid-1990s. The latter had not.

“We document that sustainable firms are fundamentally different from their traditional counterparts with respect to their governance structure, the extent of stakeholder engagement, the extent of long-term orientation in corporate communications and investor base, and the measurement and disclosure of nonfinancial information and metrics,” the research states. “This is an important finding because it suggests that the adoption of these policies reflects a substantive part of corporate culture rather than purely greenwashing and cheap talk.”

The good news is that the study shows that companies can adopt environmentally and socially responsible policies without sacrificing shareholder wealth, and in fact the opposite is true. Sustainable firms generate significantly higher profits and shareholder returns, suggesting that developing a corporate culture of sustainability may be a source of long-term competitive advantage.

The authors found ‘high sustainability’ businesses had a more engaged workforce, a more loyal and satisfied customer base, better relationships with stakeholders, greater transparency, a more collaborative community, and a better ability to innovate.

Basically the research shows that doing good is good for business, and when reading the research an axiomatic truth is that companies that care enough to change the world for the better, sweat the other details too. This is likely to be the ‘secret sauce’ to persistent superior performance in the very long term.

Knowing that doing good is good for business is the easy part. The hard part is doing good that’s both meaningful and sustainable, and doing that which makes a real long-term difference.

Idea Engineers chosen social partner is the Maharishi Institute, a non-profit organisation assisting youth from historically disadvantaged backgrounds access tertiary education. It is part of the Community Individual Development Association family that has educated more than 5,500 young South Africans over the last 10-years, who are earning R250 million in combined annual salaries, and will earn over R9 billion over the course of their 40-year working careers. Its work improves not only the lives of students, but also of their families, their communities, and ultimately, all South Africans. Maharishi Institute proves that our youth can become highly productive assets in society, rather than being put on social welfare grants and unsustainable support programmes.

The Maharishi Institute model is unique in that every graduate comes to the market place with years of work experience gained within the Institute while studying through their partner institutions. This parallel work study model, critically also provides income to the student families, in sharp contrast to families becoming indebted or having their savings drained to educate children.

We see this organisation in the context of similar revolutionary thinkers and institutions around the world, who are leading similar processes of social transformation in their countries. Another example is New York-born architect Alfredo Brillembourg, who is making a material impact in Latin American slums with his youth centres. He believes in investing in the youth through his architecture, which creates urban spaces that create room for youth to learn and converse with their world.

Such partnerships deliver good business value – they help us to nurture employees, customers and the markets of tomorrow. By creating opportunities for the disenfranchised, they help bring stability and growth to societies where the simmering frustrations from inequality and poverty threaten to explode into civil upheaval and radical economic policies.

Fostering the well-being of future markets is cardinal to both political and economic sustainability. The post-rainbow South Africa is plagued by an extraction rather than an investment psyche, fostering scarcity rather than abundance. It simply makes business sense to stem this tide, and the mantel falls to business.

We can’t depend on the politicians to address the deepening crisis in South Africa on their own because they have failed to deliver up until now. Businesses need to drive the investment to sustain and grow their future markets. Business need to take the lead in stemming unemployment. Businesses need to engineer a sustainable hope-filled future and lead socio-economic change. More than any other sector of society, they have the skills and resources to deliver the change that the country so desperately needs, and deserves. Let’s find the tipping point…the future will follow.

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