As Africa grapples with a plethora of social, economic and environmental challenges, there is a substantial opportunity for large corporates to introspect and determine whether they are still staying true to their core purposes.
For some time, much of the corporate world globally seemed focused mainly on satisfying the expectations of shareholders, while other important stakeholders were given less emphasis. In other words, many big companies lost sight of their true purpose, and have forgotten that many entrepreneurs start companies in response to unmet needs in society. Successful entrepreneurs meet these needs and make a profit. Social impact and shareholder returns can go together.
Take, for instance, the spectacular growth of South Africa’s affordable private-education groups in recent years as the public schooling system contended with a dearth of resources. In Kenya, Standard Bank-funded M-Kopa, a business taking electricity to far-flung areas through innovative renewable energy, off-grid, pay-as-you-go funding model.
In each case, the commercial opportunity centred around unmet social, economic and environmental needs.
Fortunately, there has been a growing realisation in recent years amongst big businesses that profit-making and social purpose cannot be separated. By constantly finding ways to contribute positively to the societies, economies and environments in which they operate – while at the same time delivering shareholder returns – companies ensure their own long-term sustainability.
According to a 2018 report by Axioma, a US-based provider of risk and portfolio analytics services, companies with better environmental, social and governance standards typically deliver better financial results than their peers.
Corporates are refocusing on their reasons for being.
In that regard, the global banking industry took a huge step forward in September, when more than 100 banking CEOs from five continents signed up to the UN Principles for Responsible Banking at the annual UN General Assembly in New York.
The Principles were designed to help banks align their business strategies with society’s goals – as expressed in the UN’s Sustainable Development Goals and the Paris Climate Agreement. They require banks to embed social, environmental and economic considerations in their processes, practices and decision-making.
All signatory banks, Standard Bank Group included, are required to conduct impact analyses to identify their biggest potential positive and negative contributions. They must then identify business opportunities to increase positive and decrease negative impacts. Importantly, transparency forms a key element of the Principles – all banks will have to report their progress to the public.
Africa’s private sector could follow suit. Developmental challenges – and the continent has many – represent commercial opportunities that purpose-driven companies can address while securing their own financial sustainability.
Doing business the right way makes sense but will also ensure companies are future-proofing themselves, helping to build a world where they remain relevant and profitable.