Social Innovation: a business imperative and opportunity
Lars Rebien Sørensen, CEO of Novo Nordisk, Denmark was rated number one for the second consecutive year by the 2016 Harvard Business Review (HBR), aimed at evaluating long term performance of the top 100 performing CEOs in the world. It is important to note that the 2015 HBR ranking marked the first time weighted social and environmental performance was 20% of the overall score, emphasizing the significance of Environment, Social, and Governance (ESG). In an interview to HBR Sørensen said, “everything we do has to be grounded in an assessment of not only the financial implications but whether it aligns with our values and brings us closer to realizing our purpose as a company.”
A growing trend towards sustainability can be assessed by the fact that share of sustainable assets within all professionally managed assets grew globally from 21.5% in 2012 to 30.2% in 2014. These indicators are a reflection of our global world. Despite technical advancements, the growing income disparity, lack of trust in corporations, environmental issues, and other social issues over the last couple of decades are nudging businesses to take into consideration these issues for their own sustainability, employee satisfaction, branding and competitiveness.
Why is Corporate Social Innovation (CSI) important for businesses?
It is becoming increasingly important for corporations to shift from social responsibility to social innovation. This requires a change in corporate behavior – instead of investing their money into social projects, exclusive of their business strategy and interest, CSI’s central idea is designing business models and strategies to solve social issues in the interest of long-term competitiveness and balancing it with profitability and impact on the bottom line. This is why the business or product ‘purpose’ and its articulation can have a significant impact on the company and its relationship with investors and customers.
The key driving forces for businesses to move towards social innovation are customer trust, new performance indicators and investors, new products, and markets and finally, attracting talent, especially the millennials.
While trust in a brand has always been an important factor in customer loyalty and retention, the positive social and environmental impact of products purchased by customers is becoming a significant aspect of branding. Indeed, corporations operate in a world where the majority non-elite customers are the least trusting though the most influential in purchase decisions relative to the small group of elite consumers, as observed by Michelle Hutton, Global Chair, Consumer Practice, Edelman Trust. This has significant implications for marketers with a larger section of the consumers expecting more responsibility from corporates in return for their patronage. Not surprisingly, the 2016 Edelman Trust Barometer finds that 80% of the people (up from 74% in 2015) surveyed believe that a company can take specific actions that both increase profits and improve economic and social conditions in the community where it operates. Millennials, expected to have more purchasing power than previous generations are known to weigh the integrity of a business model against their own set of values. A 2015 report from Elite Daily's survey of 1,300 Millennials in the US states that 75% said that it is either fairly or very important that a company gives back to society instead of just making a profit. Some examples of CEOs who have taken initiatives in this direction are Paul Polman of Unilever on the environment and Cyrus Mistry of Tata on education.
Impact investors and new performance indicators
As mentioned above, corporations and CEOs are being evaluated based on their contribution to social and environmental solutions. The recently announced UN Sustainable Development Goals(SDG) urges businesses, governments, and non-governmental organizations (NGOs) to collaborate at a level never seen before for the global world to come together for innovative solutions to the most challenging issues. There is no doubt this will further impact performance indicators and more emphasis on ‘purpose’ of the business. Another emerging trend is impact investing, expected to play a transformative role in the social sector just like venture capital funded innovation in the private sector, as argued by Sir Ronald Cohen in a 2013 Harvard Business Review article titled “Social Impact Investing Will Be The New Venture Capital”. World Economic Forum estimates that the impact investing industry could grow to US$500 billion in assets by 2020 from around US$50 billion in assets back in 2007 when the definition of impact investing first emerged.
New products and markets
Billions of consumers in emerging economies like India and Brazil represent a growth opportunity for both local and global companies. However, there remains a challenge in making this growth inclusive and sustainable and addressing issues like health and education. Long term investment in business development and new markets can give an early advantage and insight into needs, opportunities and preferences that can lead to innovative products that are unique to the needs of this segment which may require more frugal and sustainable innovation. China, India, and Brazil now have a larger GDP than their developed market counterparts including the US and Europe, thus emerging as new consumers, as Steve Davis, CEO of PATH, an international non-profit organization and leader in global health innovation asserted, speaking on social innovation at the World Economic Forum in Davos earlier this year, “It makes big and small corporations alike wonder: ‘How do I engage with the lower middle-income class?’”
Attracting and retaining younger workforce
Six in ten millennials in the Global Shapers Annual Survey 2015 indicated that an opportunity to “make a difference in society, my city, or my country” is the top factor they look for in a job. This generation will be difficult to retain in jobs unless employee satisfaction is high which comes with pride in their work and its impact on society. According to Deloitte Millennial 2016 survey, two third of the respondents expected to change jobs by 2020. A sense of purpose of the business can inspire them to be part of the long-term journey and consequently be a long term happy employee.
How can Innovation Lab help?
While some businesses are already investing in social innovation, how can others steer towards this path? This is where Innovation Lab’s Social Innovation products can help.
Speaking events/keynotes: The what, why and how What is social innovation, why is it important for businesses and how can it be implemented?
3-5 day workshop: For stakeholders and cross-functional management teams offering tools, case studies, and guidelines to facilitate social innovation to be part of business development and corporate culture along with key takeaways and coming up with ideas for innovation.
Business consultation beyond the workshop: A tailor-made concept catalog of suggested actions to take and ideas to implement that are specific to the client. Exactly HOW can you make use of CSI and which initiatives will be most beneficial. The catalog is produced as a read worthy magazine and comes with suggestions for implementation at each concept.