Look up and stop teetering on the abyss

How to avoid the short-term wobble

“Keep your eyes on the prize” goes the instruction to trainee tightrope walkers.

 It’s an imperative designed to ensure any potential young Philippe Petits lift their heads and focus their concentration on their destination, rather than the abyss below. 

The parallel with the most recent advice for businesses is remarkably similar.

Overwhelmingly, many business leaders report their focus is irrevocably drawn downwards as they deliberate their next steps in order to meet stakeholders’ demands. Nearly nine in ten US business executives surveyed by McKinsey Global Institute[1] admit feeling pressure to deliver strong financial results in two years or less.

Logic dictates this approach is necessary because the wider distraction of looking out for the interests of society at large costs businesses money, hurting profits and upsetting stakeholders who are only interested in the bottom line.

Not so! There is increasing evidence that businesses who can profit from working in a balanced and sustainable way are those that maximise their chances of longevity.

In a recent white paper[2], UBS WM Chief Investment Office, explains why this new “business with impact” approach enables firms to work in ways where doing well for society (and putting numbers on how much good they do for the environment or for social conditions) goes hand-in-hand with making money – adding that helping the world at large can even pump up profits too, by opening up new commercial markets in less developed countries, for example.

Many private clients are increasingly looking for investments that support a more sustainable growth path. Businesses that invest in sustainable and impactful ways have an opportunity to speed up the creation of a more balanced economic model…and can even find fresh ways to make money for their stakeholders.

A great idea, but tough to implement? In this, the second of three articles, we will explore how firms can easily adopt this “business with impact” approach. 

Make an impact… and collaborate to test new strategies

It takes teamwork to adopt a “business with impact” approach. Partnering up within the business is the first step. A good example is the sustainability or charity department cooperating with the business departments that produce goods and services. The sustainability people know best how to measure positive social or environmental impact, while the production team are experts on how day-to-day business works. Together they can find ways to tweak how they work so that they generate more money and do well for society simultaneously.

Some firms won’t have the people or the money to adopt a “business with impact” approach alone. Here’s where external expertise can help, and where experimenting with new ideas makes sense.

Take the case of a private European clothing company. It wanted to make more money and improve social conditions for its workers at the same time. It worked with its foundation, a governmental development agency, and a consultancy firm to boost worker productivity and lift employee incomes simultaneously. A pilot program started, teaching workers and their managers across five countries in Asia about how to use resources more carefully, and how bosses could support their employees to build careers for themselves.

The project paid off in terms of driving better business results, and helping workers – average sewing efficiency rose 20% and average take-home pay climbed 15%. But the pilot wasn’t perfect and there were lessons to learn about how to improve the process and make it relevant across the whole business.

Firms should agree with their customers and investors on targets for making money, and doing well for society. They should consider small-scale trials of new policies first, and should collect lots of data. They need statistics on how much money they make their investors…and how much good they’re doing for society.

Businesses looking over these tests can then figure out how to include the best bits in their daily business. In this way, they stand a better chance of negotiating the short-term wobbles, that are bridged more confidently by long-term, more sustainable companies.

[1] McKinsey Global Institute (2017) Measuring the Economic Impact of Short Termism

[2] Business with Impact – from Corporate Social Responsibility to Corporate Societal Returns