4 min read
In the midst of this watershed COVID-19 pandemic, companies recognise the reputational risks in ignoring the plight of vulnerable groups such as the minorities and gig workers. Lacking insurance coverage and job security, some 38% of the global workforce or 1.25 billion workers in the affected industries have experienced or are facing imminent job losses, putting renewed pressure on governments and the social services in addressing emerging needs.
In response, companies are re-orienting their responsibility to all their stakeholders- especially the community and partners- as they realise their responses could define how they are being remembered in this time of crisis. PepsiCo, Nestle and Unilever donated hundreds of millions of dollars’ worth of their food and sanitation products to areas of need while Google sponsored information services to front-liner organisations and HP is providing technology support for students and communities. Unilever and Google went a step further by providing capital support to small and medium size enterprises in their supply chains to cope with cash flow problems. The most celebrated news came through when competing pharmaceutical companies Sanofi and Glaxo Smith and Kline did the unimaginable by collaborating to develop a vaccine faster.
Unusual times beseech unusual responses but will corporates sustain this spirit in a post-COVID world? At a time when companies are still at their drawing boards, it is time to reconsider the business-as-unusual practices that have been spearheaded by corporate sustainability models. These approaches represent alternative social-inspired ways to enhance corporate impact.
Also known as an industrial foundation, this foundation type is a self-governing, non-profit institution that owns business companies. It is common in Northern Europe, in particular Denmark where one in four of the 100 largest corporations are controlled by this structure. Germany and Sweden each register the existence of 1000 shareholder foundations. This model is different from the corporate foundation models that we are used to in Asia in which management control of the foundation’s social cause and its budget is held by the business company that owns it.
While seen to be antithesis to the profit-seeking nature of businesses, Denmark’s experience shows that shareholding foundations can be equally profitable and growth-oriented when compared with companies with dispersed and family ownership. In addition, it enjoys the advantage of a longer-term horizon in business development while pursuing the social cause of the foundation because such a structure bars the owners from selling their businesses or relocating to another country. However, oversight and regulation also need to be in place to ensure that this entity is not misused to merely evade taxes on the company.
Tata Trusts is an example of a shareholding foundation in Asia with a strong social investment presence. Collectively, the foundation owns 66% of Tata Sons, the main holding company of the business conglomerate in India. From being a mere grant provider to charities, the trusts have, since 2014 started strategic collaborations with government, research institutions, and fellow foundations to develop affordable and accessible cancer care facilities, tackle malnutrition, and bridge skills gap in youth healthcare staff, amongst others.
Corporate Impact Accelerators
To stay ahead, corporations need to foster innovation by devising a mechanism where they can work with creative, agile teams and push the boundaries in addressing unmet social needs.
Danone was a first-mover in this field when it was venturing into an emerging market in Bangladesh. It collaborated with Grameen, a trusted local microfinance institution to form Grameen Danone Food Limited in 2005, selling yogurt to the locals to enable children in rural areas to fulfil 30% of their nutritional needs. This collaboration catalysed the impossible when it packed enough vitamin A, zinc and iodine into an 80g cup of yogurt without spoiling its taste. Its collaborative work with an NGO had also helped it to discover a less reactive iron, which it is now increasingly used for other food products. This is just one example of how accelerating impact has helped Danone create corporate value in the process.
To date, Danone has invested in five social businesses focused on addressing malnutrition in Bangladesh, China, France and Senegal as well as five other projects dealing with water access.
In a recent interview with Bloomberg, Unilever CEO Alan Jope acknowledges the recessionary environment in a post-COVID world and the company’s resolve in ensuring that cash-deprived consumers – including those at the base of the pyramid – are able to acquire good quality products at the lower end of the pricing spectrum. This strategy has been successful in helping Unilever achieve growth in markets such as Myanmar and Indonesia where low-cost portions of detergents and flavour enhancers have gained a following amongst low-income customers.
Unilever has also been going a step further. In realising the harmful effect that its single-use sachet products cumulatively have on the environment, it has set up a pilot recycling plastic plant in Indonesia to achieve social and environmental goals while ensuring the long-term sustainability of the company.
These models represent a corporate philosophy that pursues strategic alignment between profit and purpose- two considerations that could feature equally significantly in a post-COVID world. Are you one of these corporates? We would love to hear from you. Be at the forefront of this paradigm shift towards balancing profit and purpose by participating in deep-dives at the AVPN annual conference.