Customers and employees increasingly expect companies to make a positive impact on the community as well as the bottom line. When they meet these two needs simultaneously, they hit on a winning business plan.
This plan comes to life through the concept of Shared Value.
Shared Value had its genesis in a 2011 Harvard business paper (“Creating Shared Value”) which argues that companies can increase profits by innovatively rethinking their products, markets and services to address societal issues and achieve economic success.
The paper’s co-author, leading US business scholar Mark Kramer, Managing Director of social impact advisory firm FSG, was in Melbourne recently to discuss how Australia could benefit from embracing the concept.
“Businesses are in a great position to change the world and do it in a way that strengthens their profitability,” Kramer told participants at the Shared Value Forum event hosted by National Australia Bank (NAB).
“When you measure the social impact and the financial return, you find ways to increase value back to both society and business. When you do it incidentally, you don’t get the full benefit.”
Sasha Courville, NAB’s Head of Social Innovation and a London School of Economics alumni set up the Fairtrade labelling system in Australia and New Zealand and champions Shared Value as a driver for sustainable social change. She says while there are important roles for government, philanthropy and civil society in tackling complex challenges, the most effective way to unlock value at scale is through the power of business.
“Shared Value is a broad concept,” Courville says of the competitive strategy she champions as a driver for sustainable social change.
Courville is working with colleagues across NAB to develop Shared Value opportunities across a range of sectors locally – including the burgeoning market for renewable energy flowing from the Paris climate change agreement.
NAB, which has been carbon neutral since 2010, is the leading arranger of clean energy finance in Australia. In 2014 it issued the nation’s first domestic green bond, raising $300 million earmarked for funding solar and wind renewable energy projects.
The Clean Energy Council’s annual report released in May shows the local clean energy sector is heading for a record year, generating thousands of jobs and well on track for the 2020 Renewable Energy Target.
The nation generated about 17,500 gigawatt hours of renewable energy for the year, which is more than halfway to the 2020 annual goal of 33,000, the report says.
Courville says “Investing with Impact”, with a social benefit and sustainable return, is a logical way for the bank to contribute.
NAB has provided $5.5 billion in loans to finance renewable energy projects so far, with the aim to further help the orderly transition to a low carbon economy and meet its Paris commitments. It is currently exploring a renewables debt fund initiative.
“This will directly and indirectly touch all in the economy. The appetite is growing, socially responsible investing and Impact Investing is growing and will continue to grow. Business showing the value they contribute to society will continue to grow.”
NAB’s goal is to provide $18 billion in environmental financing activities over the seven years to 2022.
Customers receiving financing include Tilt Renewables, which last year unveiled plans for its Australasian headquarters in Melbourne, creating up to 35 jobs and managing a $1.3 billion portfolio of wind generation assets, with a significant investment pipeline.
Other sectors open for Shared Value initiatives include diversity and inclusion education, health and social hardship to help solve challenges like STEM skill shortages, mental health challenges, diabetes or homelessness and housing affordability
This year NAB announced its first social bond to specifically promote workplace gender equality enabling institutions to invest in supporting Australian organisations that champion women and equality in a positive way.
In the Natural Value sphere, $5 million in debt finance from NAB has let The Nature Conservancy and partners help protect the Murray-Darling Basin for future generations and provide water security for farmers.
Courville says the hardest part of any innovation is getting it started and building a case for business and societal outcomes by “thinking outside the box”.
“Then people can see it is viable. You start to build it and you get buy in to create bigger cycles of innovation.
“We all have a role to play; current leaders need to pave the way so the next generation will be set up for success in using the power of business for social and environmental good. If we can deliver sustainable business returns, ensure great customer experience and create better outcomes for the community in which we all operate, why wouldn’t you do this?”
For more information on how business is playing a key role in solving societal problems, watch Mark Kramer’s video.