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Doing well by doing good - delivering Positive Impact through business-led systems

“Doing well by doing good.” Most of us have heard this term thrown around in the last few years. But how exactly can businesses execute a commercially viable strategy that ensures you’re doing both?

How to move from theory to practice
With the rise of concepts like Shared Value, Collective Impact, Circular Economy, and Sustainable Business, many companies are starting to accept that social responsibility is becoming a license for them to operate. Experts like Dr Robert S Kaplan and Mark Kramer have told us that integrating Positive Impact into the heart of your company’s strategy is vital to its success. We can’t deny how important it is for a company to embrace these concepts, but it’s in the actual execution of these strategies where people usually run into trouble.

Companies have more success implementing initiatives over which they have direct control – for example, reducing emissions, waste, and the use of materials throughout their operations. But business ecosystems include many actors and factors that are outside a company’s control. This complexity makes it significantly more difficult for companies to design and deliver initiatives that involve a diverse range of actors and take into account their needs; for example, the thousands of small-scale suppliers active in every market, or, education service providers mentoring the next generation of skilled citizens and employees.

So, how can businesses be expected to create and measure social value while staying focused on their commercial goals? One approach Palladium has pioneered is something we call business-led systems.

Business-led systems have huge potential to drive positive change
Business-led systems are a type of Positive Impact Partnership. These partnerships are collaborative efforts among different actors to solve an inefficient equilibrium in any given market. An example of an inefficient equilibrium is the challenge of the missing middle in many commodity supply chains. For example, smallholder farmers frequently live in extreme poverty and suffer from severe malnourishment, and food and beverage companies are unable to source agricultural raw materials locally. Another example of pervasive market failure is the difficulty companies and governments face when trying to distribute basic services to poor, remote customers. These scenarios present great opportunities for the creation of Positive Impact. By their very nature they offer untapped financial value, as well as a corresponding opportunity to deliver social impact at scale.

For business-led systems, companies have the chance to lead these partnerships and drive value creation across an ecosystem of suppliers, customers and services providers. Once a business has identified the inefficient equilibrium it would like to transform, a ‘Catalyst’ is required to identify and deliver economic and social value. This is the Business-Led Systems Approach, which takes 6 steps to Positive Impact.

1. Map and analyse the existing ecosystem and assess the total economic and social value created within it;

2. Identify opportunities for a company to increase their own commercial proposition while creating increased economic and social value across the ecosystem (e.g. transforming to an efficient, sustainable equilibrium);

3. Build linkages and relationships among key actors in the ecosystem and establish a common set of ground rules;

4. Obtain seed-funding for the initiative, often in the form of blended finance;

5. Develop a set of strategy maps and interconnected scorecards for actors across the ecosystem;

6. Sustain and monitor progress through a shared measurement and governance system.

This all sounds very linear, but of course the reality is incredibly complex. However, acting as a Catalyst, we are seeing the tremendous potential of Positive Impact Partnerships every single day. In working with Syngenta through their Good Growth Plan, we have identified areas for higher value creation in the Indonesian rice ecosystem that will simultaneously increase profits and sales for the company, while also improving farmers’ productivity and benefits to the community.

Juan Valero, Syngenta's Head of Policy and Sustainability, talked about creating new models for systemic value creation at Palladium's recent summit.

“Doing well by doing good” makes commercial sense
The key to successful business-led systems is to transform the nature of interactions between actors – whether multi-nationals, small-scale suppliers or community representatives – from fleeting and periodic to long-term and strategic. In so doing, we are able to identify opportunities to create additional value for all key actors in the partnership, and companies can actually improve their net social impact while also increasing the all-important bottom line. By strengthening the ecosystem itself, the company develops a differentiated, first-mover competitive advantage. Transforming an inefficient equilibrium is an investment in a sustainable market that you helped build.

The potential of Positive Impact Partnerships is vast, and a compelling opportunity for businesses to take a leading role in human growth and development. We continue to relish our role as catalyst, bringing over 50 years of experience to bear to tackle some of the world’s largest Positive Impact opportunities.

This week we’ll be profiling industry leaders at the 2017 Palladium Positive Impact Summit who discussed their experiences in executing these strategies, and will showcase an interview with Juan Gonzalez-Valero from Syngenta who is successfully implementing the Business-Led Systems approach.

Please contact thoughtleadership@thepalladiumgroup.com with any questions.