How to Make A Business Case for Social Impact

All the trends are showing (as you will read later in this article) that positive social and environmental impact is good for business. Yet, many board members and senior management often confuse sustainability with CSR and charity-giving, this makes it very challenging to convince them, that this is the way of the future. It took close to 6 years to convert the EPF (Malaysian National Retirement Fund) from a ‘traditional’ members’ fund to being an Asian retirement fund sustainability leader. The challenges are too many to list out. 

But if you want to get buy-ins and turn skeptics into activists for the cause of sustainability. There is a formula to it or a ‘script’. You do this right, it is going to be a downhill journey (with fewer bumps).

To make a convincing presentation, you first need to make sure to have all the data and facts relevant to your sector, industry and business. Your arguments will not hold water by relying purely on ethics (because it’s the right thing to do) . They may agree that it is the right thing to do but it is not enough to win support.

Simply because each organisation has very clear mandates, most of which are profit-motivated (for EPF, the fund’s mandate is to safeguard and grow its members’ retirement savings).

The following steps can help prepare your sustainability ‘script’. A script that not just convinces that it is the right thing but it is something that must be done in order to thrive.  

1.   Support ‘FACTS OF LIFE’ (FOL) with Data

These are events and happenings that will affect everyone e.g. there are 24 hours in a day, everyone needs oxygen to breathe and climate change will impact you. These facts should be irrefutable and supported by solid research and studies and form the basis of your ‘story. Some good starting points would cover:

  • Planet e.g. 8 million tons of plastics are discarded yearly, $1tn worth of food wasted annually and 3 planet earths are needed by 2050 to sustain growing consumption demands;
  • People e.g. global population as at 2020 is 7.8bn up by 2.6% since 2010 with the demographic ratio of 18(Gen X):22(Gen Y):24(Gen Z). The estimated global GDP per capita is $11k up 19.7% from 2010 but with wider gap between the have and have-nots where the top 1% owns 44% of total wealth and 3.3bn people live below $5.50 a day;
  • Environment and Climate Impact e.g. >95% of climate change is directly caused by human activities where burning of fossil fuels accounts for 44% of CO2 emissions globally. Some predicted results are sea level rise of 15 inches by 2100 and there being less than 10% rainforests left by 2030;
  • Customer Demographics and Sociographics e.g. Gen Zs (born from 1996 to mid 20s) choose brands that have integrity and values relevant to their future survival where 80% will not associate themselves with brands involved in scandals, 73% are willing to pay more for sustainability, 80% trusts peer recommendations over established brands and 60% choose brands based on values. For Millennials (born between 1980 to 1995), 68% wants to make positive difference to the world and 81% wants brands that have genuine purpose and declare their corporate citizenship publicly;
  • Employees and Talent e.g. studies have shown that highly motivated employees return 43% more revenue with 12% higher productivity, takes five fewer sick leave a year and are 87% less likely to leave. Understanding what motivates Millennials (work must have purpose, technologically connected and values flexibility and personal time) are critical as they will make up 75% of the workforce by 2025. 88% find their work more fulfilling when it makes positive social and environmental impact and 75% would take a pay cut to work for a socially responsible company; 
  • Technology e.g. the combined business of Apple, FB, Google, Amazon and Microsoft ($7.1t with 8.1b users)  is equivalent to the combined GDP of Italy, Switzerland, Netherlands, Sweden, Australia, Canada and New Zealand (with only 2% of world population). Southeast Asia also hosts 3 decacorns worth around$100b with its internet economy to be worth $300b by 2025. For Malaysia, 3m technology workers will be needed by 2030 but there’s only 270k available today.

HOW THE ‘FACTS OF LIFE’ WILL IMPACT YOUR BUSINESS

Once you have established the FOLs, you now need to guide your audience to the ‘so what’ i.e. what risks and opportunities are there for your organisation to maneuver in the world having the FOLs. Some key areas you could use are:

Customers

This is the lifeblood of any business and you ignore your customers’ demands at your peril. The basic principle is to transform loyal customers (normally driven by a ‘reward’ given e.g. lower price or PWP) to committed customers (who feel their purpose aligns with yours and are part of a common cause). For the EPF, 52% of its member base are Gen Y and younger and they could potentially feel the fund is irrelevant to them as retirement is a lifetime away and mandatory savings is an unnecessary ‘tax’ to their monthly cash flow. EPF can gain strong commitment by promising to put their money into ESG compliant investments (which actually gives superior returns in the long run) and the FOL confirms that alignment of interests. The EPF publicly committed in February 2021 to have an ESG compliant portfolio by 2030 and be carbon neutral by 2050.

Operational Impact

A simple study projected that by 2050, 2 EPF branches in Selangor (Kuala Selangor and Klang) will be underwater with the one in Shah Alam being next to the beach. At another company I am in, we were alarmed to note that a whole island with very important assets would be submerged within the same time frame. With this forewarning, proper planning can now be done to either protect these assets or relocate operations. Opportunities abound also if you have good sustainability practices e.g. reduce costs. As an example, green manufacturing could save costs by having simple and minimal packaging, eliminating harmful waste by-products which would reduce disposal and containment fees and avoid potential fines and penalties, and recycling water which will reduce the amount (and costs) of freshwater needed.

Transition and Compliance

More and more countries are implementing tougher sustainability regulations on both companies operating in their jurisdictions as well as the supply chains. Non-compliance will result in sanctions or termination of businesses. In the latest Malaysian Code of Corporate Governance, Practice and Guidance 4 dedicates several paragraphs on sustainability alone. Companies must prepare early, to avoid a sudden huge bill to meet these requirements. As an example, 10 biggest power utilities players in Europe booked total impairment of €129bn from 2010-2015 to meet new green standards. This caused over €200bn market cap losses, where 7 out of 10 companies lost on average 65% of their share price during the period.

Weaponisation of ESG

This is also now being utilized by interest groups and some NGOs to launch effective campaigns against companies (and even nations) that do not meet their agendas. Recent local examples can be seen with the trade sanctions being imposed on companies in the medical glove and palm oil sectors.

Championing the right thing to do

This is really not rocket science, but you need to understand the priorities. You must not just tell them that what you are proposing served them. But you must show them with data, and deliver your messages that appeal to their priorities. This is the first step to make sure you get the standing ovation that you deserve for championing the right thing to do.

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