The Business Impact Challenge attracted corporates from all sectors, and we quickly realised that corporates are approaching social investment for a wide range of reasons. Some companies purely wanted to “do good”; others wanted to use an investing approach to help them find “the next big business idea.”
So we decided to take a step back and understand how and why corporates aspire to create social change. Working with Oliver Wyman, we looked at more than 125 different companies which together managed more than 550 programs with some degree of intentional social impact.
Using publicly available information, we combed through companies’ annual reports, CSR reports, and websites to catalogue their active social projects. Lacking systemic comparable data, we drew directional (not definitive) conclusions from our research.
Corporates provide everything from grants to employee volunteering to investment in order to create social change. Looking across all of these social programmes, Oliver Wyman’s research suggested that:
- The “corporate conscience” appears to be the primary driver of general corporate impact initiatives (including grant making, volunteering, etc.)
- When it comes to social investing, corporates appear to be more motivated by the prospects of finding new growth opportunities or scaling innovative business models; at times they also use social investment tools as a response to external stakeholder pressure
- Corporates’ interests tend to cluster around a few social issues within education and health; these may point to a way forward for potential investment themes where business models exist
We explore each of these findings in further detail below.
The “corporate conscience”
Public, employee, and investor expectations have driven a general increase in social impact initiatives at corporates. For instance, giving by large global companies grew by more than 15% from 2010 to 2013. At the same time, stakeholders are considering the conduct of firms: a recent study suggested from Net Impact found that 45% of respondents would take a 15% pay cut for a job that has high environmental or social impact.
Amidst this context, companies are increasingly feeling compelled to have a clear set of social impact activities. Whether they are managed by the ‘Corporate Social Responsibility’ teams or the business units themselves, many large companies feel the need to have a portfolio of activities that reinforce a strong public image.
We labelled the fact that corporates are compelled to appease their stakeholders to maintain a license to operate as the “corporate conscience”. And despite dramatic differences across industries, the corporate conscience appears to drives a vast majority of social impact activity.
However, some important divergences from this general trend include a few industry-level nuances:
- Government pressures and stipulations are influential for both energy and financial services companies (e.g. international environmental agreements, support for small businesses)
- In the construction sector, social impact activity has been used in upgrading or improving commercial operations (e.g. training local workers, provision of raw materials as part-compensation)
- Professional services firms frequently use large scale volunteering programmes to develop their talent
- Technology and telecoms companies are notable for incorporating social work into innovation and diversification
The social investor’s motivations
The corporate conscience is a less dominant driver for social investing. The subset of companies that undertake social investment programmes appear to be motivated more by the business benefits rather than the need to appease stakeholders.
Social ventures and investment funds command relatively commercial resources, and they must be justified on more commercial terms than general social impact programmes. For example, an intrapreneur within a global financial institution says, “We need a viable business case for the bank to accept our work.”
For those corporates engaged in social investment, there is significantly greater alignment with the investment thesis and commercial priorities and/or the potential to innovate. “Corporates are interested in social impact venture capital as a route to developing new technologies and business models” says Andrew Gaule of Global Corporate Venturing.
Oliver Wyman’s cataloguing of investment programs of FTSE 125 companies confirms the key difference in the motivations among the corporates that undertake social investment.
The social issues that motivate corporates
Corporate social impact work also appears to be centred on a particular set of social issues. Looking across all social impact programmes at FTSE corporates (not just investing), Oliver Wyman’s research suggests that corporate interests cluster around a few key issues: education, health, and sustainability.
Contrary to our expectations, these social issues are dominant across all industries - there are very few variations by sector. The fact that corporates are keen on affecting change in a few key areas may also point to the most promising areas for corporate social investment models.
Examples of programmes for the ‘well-served’ social challenges include the following:
Conclusion
Corporate social investment will not take off solely by activating their social conscience. Rather, linking social investment outcomes to each company’s specific strategic aims will drive new investing.
Our research suggests that corporates are often compelled to do social impact work to meet stakeholder expectations, but the leap into social investing requires a very different logic:
- Social outcomes will have to be strategic outcomes
- Investments require robust business models
- Tackling the social issue often must drive value-added innovation, talent development, or satisfy government pressures
If corporate social investment looks anything like the broader set of corporate social impact programs today, they will cluster around education, health, and sustainability – and are less likely to cover traditional charitable sector issues such as criminal justice or inequality. The key challenge will be to find feasible business models that reinforce and justify serious attention and investment from corporates to drive social change.