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Drugs. The legal kind. Designed and tested to help patients get better. But there are always potential unintended side effects. […]
Drugs. The legal kind. Designed and tested to help patients get better. But there are always potential unintended side effects. Even a pack of humble ibuprofen comes with various warnings. Understanding the benefits and harms of taking medicine helps doctors and patients make better decisions. How does that translate into business?
Your business’s impact on wider society can be beneficial, but there may be side effects. Reducing these downsides may seem like an unnecessary headache for leaders who are already juggling the endless complexity of running a successful business. But there are good reasons why understanding your social impact may benefit your bottom line.
A business case for an investment decision typically compares anticipated benefits to the organisation with the expected financial costs, and includes a few risks to consider too. To use Rumsfeldian terminology, these components are the “known knowns”. But might the project also have broader side effects that could be anticipated and mitigated if more research was done (“known unknowns”)?
Let’s consider a large accountancy firm which is planning to switch to a home working model. There is all that money saved in rent and utilities, compared with the relatively small cost associated with setting up employees to work from home. There might be some teething troubles, but on the surface it makes sense financially. However, there are some known unknowns lurking which might influence the decision if only they could be identified and quantified.
For example, will the social cohesion of the teams within the firm be damaged when colleagues cannot spend time together in person? How will young recruits build up their professional networks and learn from mentors? Will working from home mean people are less able to disconnect from work at the end of the day? What will be the long-term impact on employee mental health and retention rates? What will be the impact on the cleaners and building operations staff who will lose their jobs? How will local businesses around the soon-to-be-closed office be affected, and what impact will this have on the firm’s reputation and the local economy?
Undoubtedly the answer is “it depends” and it will vary between stakeholders. But the broader point is the investment decision has a social impact that is relevant, can be measured, and may affect the decision. This may not change the core investment choice, but it could lead to a solution that reflects some of these wider considerations. This, in turn, may deliver more benefit to the organisation. For example, building a culture in which young talent is nurtured could reduce staff attrition rates and foster a collaborative culture. Similarly, having good relations with the local community can make members more supportive (housing developers often find community engagement can make or break an application).
Innovation means change. Change can bring new opportunities, higher quality products and services, and significant cost savings. But change also worries people. It can bring uncertainty. And it has a wider social impact on employees, customers, suppliers, and the public.
The UK government is pushing to formalise this thinking. It is currently assessing whether to adopt Sustainability Disclosure Standards (UK SDS), which may require organisations to report on non-financial (e.g. social) impacts of their operations.. Furthermore, stakeholders such as customers, investors, staff and the wider public are also increasingly interested in understanding how firms are managing their social impact. In fact, some investors will now only lend if the beneficiary can demonstrate a sustainability strategy and plan, including social sustainability as well as the more established environmental sustainability.
In the future, getting a healthy balance between innovation and ethical considerations will become more important than it is now. Change does have side effects. The good news is these do not need to be a problem. In fact, the current trend towards social value represents an opportunity, not a threat. There are established and credible ways to identify, measure and improve social value in your organisation, and to communicate this powerful message to your stakeholders. When it is done right social value can translate into brand value. That is the kind of side effect everyone can be happy with.
If you want to talk about how to measure and improve social value in your organisation, or if you want to ensure the good work you’re already doing is translated into brand value, send me a message.
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[Note: Written by a human not by Chat.]