Connected success - the future of the socially valued organisation hr

Connected Success: The Future of the Socially Valued Organisation

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Context

This document summarises the findings from a foresight programme that identified the nature of future social needs and considered how organisations could address these.

Undertaken via a combination of desk research, one-on-one interviews, discussion forums and major workshops held on three continents, this programme explored multiple perspectives with experts and informed people from over 100 different organisations.

The insights were gained as part of a wider project for Barclays Bank plc. which has been building on its current Citizenship platform and looking ahead to shifts and options for change to prepare for the world in 2020.

This summary is being shared directly with those who participated in the discussions as a record of the dialogue. In addition, it is also being made available to interested parties for continued discussion and feedback.

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Approach

The approach taken for this project was based on that adopted for the global Future Agenda programme – the world’s largest open foresight project to date.

• Starting with informed perspectives gleaned from research and initial interviews, a range of assumptions and hypotheses were developed and discussed within the core team.

• A series of group discussions were then used to test thinking and gain new perspectives from experts across a number of areas – from academics, philosophers and ethnographers and leaders of social enterprises to economists and businesses.

• Revised perspectives were then taken into three major workshops in Johannesburg, London and New York where a wider group of informed people from multiple organisations challenged and built upon each others’ views to provide a richer, deeper view of the future of the socially valued organisation.

This document is a synthesis of what we heard and learned from these discussions.

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Society today faces challenges that will become more intense over the coming years. The need for change is broadly acknowledged and we are now entering a period of transition that will involve making hard choices requiring strong leadership and collaboration.

To achieve lasting inclusive growth, many now believe that business and society should align around a wider agenda, adopting a broader definition of success, in order to achieve a better balance between short and long term gain.

There are uncertainties concerning this, such as who will lead and how, but there is also a general consensus that commercial organisations have the potential to take a lead in establishing a future that benefits wider society. To achieve this, tough decisions need to be made, a number of which may well lead to significant change in the systems within which many currently operate.

Summary

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The Global Context 1. Uncertainties and Scenarios

The World Today 2. Progress, Transitions and Transformation

The World Tomorrow 3. Key Challenges and New Approaches

Socially Valued Organisations 4. Context and Emerging Characteristics

The Socially Valued Organisation in 2020 5. Being Part of the Change

Implications for Organisations 6. Ten Questions

Appendix sources and resources 32 Characteristics of Socially Valued OrganisationsSources and Resources

This synthesis is comprised of six topics

Contents

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The Global ContextUncertainties and Scenarios1

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As organisations look to the future, dealing with uncertainty is a common challenge. As you look beyond short-term trends into events 5 to 10 years out, issues become increasingly less certain. Many experts seeking to prioritise one future over another talk about possibility and probability and often differentiate the plausible from the possible.

While some may wish to predict the future, most recognise that this is almost impossible and that, at best, we can only anticipate what may happen. As such, academics and business organisations have explored different approaches that seek to provide plausible stories about alternative futures based on what we see today and how trends and uncertainties may combine over coming years to shape tomorrow.

Initiated in the 1950s by the RAND Corporation and developed during the 1970s by the likes of Shell and GE, scenario thinking has gained significant credibility as a mechanism for helping to challenge our assumptions and inform our decisions. Many companies see that scenarios provide a significant benefit in extending corporate perspectives and so adopt this approach as a core element in their strategy processes. Scenarios provide a way of exploring uncertainties that enables us to consider the implications for ourselves and the organisations we work for.

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Dealing with an uncertain futureIn making sense of future uncertainties, scenarios are a well-regarded way to help us to explore the potential implications of different futures and so enable us to make better decisions

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In order to make sense of how the world is changing, it is important to explore a range of different uncertainties so that we can map a credible spectrum of alternative views. The Future Agenda programme and additional research undertaken by the project team identified a number of major insights which are clearly visible and which can be considered as drivers of future macro change. Two key uncertainties stand out as being highly relevant to how society will grow and prosper in the future.

• Firstly, there is uncertainty around the definition of growth. Questions are being asked around whether we should continue to focus on a narrow definition of growth measured mainly in terms of short-term economics in the belief that this will deliver success in the longer term or should we define growth in broader terms and aim to achieve a more even balance between economic, societal and environmental needs.

• Secondly, as organisations seek to address a number of significant challenges, there is uncertainty around the associated goal setting. Can global agreement on setting shared targets be achieved or will diffusion of power lead to a fragmentation of rules and targets and lack of alignment on priorities?

Exploring these two uncertainties helps us to build alternative views of the future.

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Looking ahead many see two key uncertaintiesAs organisations explore emerging drivers of global change and consider how they can be addressed, fundamental questions are being raised about the nature of future growth and how macro goals will be set and agreed

Narrow Broad

How goals are set

Global Collaboration Fragmented and Local

Definition of growth

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Using the two uncertainties, the definition of growth and goal setting, as the axes we have developed a matrix with four possible combinations. We can use this to build scenarios that describe each possible future and to explore the implications for business and other stakeholders.

• In the top left quadrant we see a world in which there is global collaboration around goal setting but growth is measured largely as short-term economic impact,

• In the top right quadrant we see a world with global collaboration around goal setting and a broader and longer-term view of growth,

• In the bottom left quadrant we see a world with fragmented goal setting, with little alignment on priorities that individually seek short-term economic growth, and

• In the bottom right quadrant we see a world with different bodies taking individual views on goals but all seeking to take a broader and longer-term view of growth.

Collectively these four alternative views enable us to map a broad landscape of possible futures within which the actual future most likely lies. While we cannot choose one as all are plausible, we can prepare ourselves for the future by considering how each of these will impact us and how well prepared we are to deliver success in each.

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Alternative views of the futureAn associated scenarios framework explores the key uncertainties about the future of the global economy – how goals are set and how growth is defined. It provides four alternative views of the future

Global Collaboration

How

Goa

ls A

re S

et

BroadNarrow Definition of Growth

Fragmented and Local

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Considering the implications of addressing emerging challenges, the four different scenarios can be described as:

Global Elites

• A world dominated by powerful elites who seek to protect the status quo and to continue to achieve economic growth for themselves

New Multilateralism

• A world of global alignment and collaboration focused on long-term, global goals and the need to achieve sustainable inclusive growth

National Self Interest

• A world of diffused power with localized self-interest the priority. A focus on economic growth and national resource security delays the addressing of global societal stresses.

Networked Scale

• An interconnected world where change is pursued through collective action and is focused on addressing the local impact of societal and environmental stresses

In each of these four alternative futures, the objective of addressing societal challenges is the same but the approaches taken by organisations will shift to adapt to the prevailing conditions. While some may choose one of these futures as their preferred course, they also need to be prepared to deliver success in the other worlds described by these scenarios.

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2020 global scenariosThese scenarios provide four equally plausible but different contexts within which organisations may have to operate in order to help to successfully address the challenges that society faces and deliver value to society


How

Goa

ls A

re S

et


Global Elites

National Self Interest

New Multilateralism

Networked Scale


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The World TodayProgress, Transitions and Transformation2

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Globally, on average, we have never been so healthy, wealthy and educated. Although there have been long-term improvements in these and other areas, it is over the past few decades that progress has really started to build momentum. This has happened partly because advances in technology, public health and governance have all aligned, and partly because there has been shared understanding of what the big issues are and how to address them.

As the IMF has highlighted, the 13 years since the Millennium have seen the fastest reduction in poverty in human history: there are half a billion fewer people living below an international poverty line of $1.25 a day. In addition, child death rates have fallen by more than 30%, with about three million more childrens’ lives saved each year compared to 2000. Deaths from malaria have fallen by one quarter in the same period.

According to the WHO, the global average life expectancy is now over 70, up 10 years since 1970. Equally, since 1990, clean water has been provided to 2bn more people, the number of children educated to secondary level has risen from 210m to 485m and average fertility rates have been brought down from 3.3 to 2.5 births per woman. While there are some regions doing better than others, overall the world is making progress.

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We have already made significant progress on some big challenges In response to the UN Millennium Development Goals, millions have been raised out of poverty, child death rates have fallen steadily and the devastating impact of diseases such as malaria have been reduced

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Although we have achieved much, there is still a long way to go to make the world a place of equal opportunity. For example, according to the UN:

• Life expectancy in Sub Saharan Africa is currently 55 years compared to 75 years in China and 79 years in the United States.

• 11 per-cent of the world’s population still lacks access to safe water and around 2.5bn still lack access to basic sanitation.

• An estimated 865 million women around the world are being held back and face discrimination at birth, on the school bench and in the boardroom.

• Globally, 17% children under the age of 5 are underweight, 7% are overweight and 25% are stunted.

• 123 million youth (aged between 15 and 24) still lack basic reading skills and only 2 out of 130 countries have achieved gender parity at primary level education.

Looking forward; by 2020, for the first time ever, there will be more people aged over 65 than children under five, by 2030, almost half of the world’s population will live in regions of high water stress or shortage and one third of the world’s urban population will live in unplanned slums, ghettos and townships.

While we have made evident progress in recent years, with more people on the planet consuming more resources we are stressing many systems beyond their natural capacity for replenishment.

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However there is still much to be done Many agree that with rising populations and increasing resource constraints, we face growing societal and environmental challenges that are putting increasing pressure on the world as a whole

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At the same time, the global centre of gravity and the locus of control of economic influence are both moving. Some of these changes, such as the general shift of wealth to Asia, are seen by some as a natural rebalancing to align with long-term trends, however the manner in which wealth, both globally and within regions, is being created and distributed is causing increased concern. For example:

• In 2013, for the first time, less than 50% of all economic activity came from advanced economies.

• While Asia’s share of world output has grown from 7.6% to 26% since 1980, over the same period Africa’s share has barely moved.

• Total African National Debt is now $261bn and yet just 5 US companies collectively hold over $350bn in cash

• 8% of people have 50% of the world’s income with the richest 85 people in the world owning the same as the bottom half of the total global population.

• The GINI-coefficient, the measure of inequality in society, continues to rise almost everywhere with the gap between the rich and the poor increasing.

• The average income ratio between the richest and poorest 10% in OECD Countries is 9:1 and in the US the figure is 14:1.

• Globally, with around 73m unemployed, the youth unemployment rate is 12.6% but in many regions including much of North Africa and the Middle East it is as high as 30% and in Greece and Spain it is well over 50%.

• By 2020, the world needs another 600m new jobs just to keep employment rates at current levels. 100m of these are required in Africa alone.

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Today the global economy is also changing and under stress The centres of economic power are shifting to cities, global corporations and Asia. Add in the fallout from the financial crisis in the West and we see rising inequality in most regions – the rich / poor gap is increasing

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In a recent lecture on the future of the global economy, Christine Lagarde, Managing Director of the IMF, highlighted that the world is currently experiencing two megatrends – an increasingly integrated and interconnected world and a diffusion of power leading to greater fragmentation of decision making. Together these create an apparent paradox - the tendency for the world to grow further apart, even as it draws closer together.

Interconnected

• We are in a world moving from the industrial age to the hyper-connected digital age with globally integrated supply chains.• Financial links between countries have grown sharply and, in the two decades before the 2008 crisis, international bank lending, as a share of world GDP, rose by 250%. • 3 billion people are now connected to each other on the Internet and over three million emails are sent every second. • There are almost as many mobile devices as people on the planet with the fastest growing rates of mobile penetration being in Africa and Asia.• 12 multinational corporations now sit among the world’s top 100 economic bodies in terms of economic size.• 31 cities are on that list of the top 100. By 2030, about 60 per-cent of the world’s population will live in cities.

Fragmented

• There are now nearly 200 countries in the world compared to 65 at the start of the First World War.• Fifty years ago, the emerging markets and developing economies accounted for about a quarter of world GDP. Today, it is half, and rising rapidly - very likely to two-thirds within the next decade.• In just 20 years, the number of non-government organisations associated with the United Nations rose from 700 to nearly 4000.• There is a shift of global power from west to east and, to a lesser extent, from north to south.

With this paradox between interconnected and fragmentation there is also an increased blurring of responsibility between governments, business and civil society.

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We face a paradox of interconnection and fragmentationWe live in a world that is more interconnected than ever before but is also becoming increasingly fragmented leading to a need for greater collaboration and leadership across different parts of society

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The World TomorrowKey Challenges and New Approaches3

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Globally many see the world facing three big challenges that will require us to make difficult choices, involve us in making difficult trade-offs and need new levels of leadership and collaboration if they are to be addressed:

Increased Environmental Stresses

• In an increasingly resource constrained world, organisations recognise the planetary stresses and seek to better adapt to the implications of climate change: Protecting the wider ecosystem becomes a priority.

Increased Societal Stresses

• Continued urbanisation and rising migration highlight the widening gap between rich and poor in many communities, while ageing populations and rising youth unemployment add extra demographic pressures.

A Changing Business Environment

• A more connected, networked economy, the needs of new middle class consumers and regulatory shifts combine with the impact of personal and country debt to blur the boundaries of organisations and society

At the same time, and cutting across all three of these areas, in many regions there is a decrease in trust in the traditional institutions of leadership – religion, the state and large business. Many, and especially the young, are disillusioned with today’s political and business leaders and are looking for new networks to trust and set a more positive direction for the future.

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Future ChallengesLooking forward to 2020, many agree that society will be facing a number of issues that can be summarised by three areas of probable systemic stress for the environment, for society and for business

A Changing BusinessEnvironment

Increased EnvironmentalStresses

Increased SocietalStresses

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Although some of the targets have not yet been fully met, there is widespread recognition of the success of the original UN Millennium Development Goals in helping to align actions for progress for international development around 8 key topics. Moving forward, as the scale of new challenges becomes apparent, many are discussing not only what the new development goals should be for post-2015 but also the level of change required.

While extensive consultation is underway on what global goals should be added around such issues as energy, employment, governance and long-term finance, many are also focusing on the shifts needed to transform the way to deliver change.

Specific areas of focus include:

• Removing the economic, racial or regional barriers that hold people back,

• Ending inequality of opportunity so that all have a fair chance of progress,

• Bringing together social, economic and environmental issues in a coherent, effective, and sustainable way, and

• Inspiring a new generation to believe that a better world is within its reach, and to act accordingly.

These goals and shifts are building on previous successes and seeking to be bolder, bigger and still more challenging for the next decade.

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Addressing these challenges will require significant change As acceptance of the scale of the challenges we face builds, there is growing global recognition of the need for a collective, transformational shift to achieve any real progress: for many, business as usual is not an option

Proposed UN Post 2015 Development Goals

ILLUSTRATIVE GOALS AND TARGETS

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Although there are many issues for companies on the horizon, a good number are happy with the status quo and many benefit from it. And yet, around the world, there are increasingly vocal groups and individuals calling for a change in how large companies operate. Several organisations are already taking steps to address this.

Different approaches to more appropriate corporate governance and more aligned behaviours are being suggested, debated and even piloted around the world. Notable amongst these are:

• Clarifying the legal obligation for companies to maximize shareholder value,

• Adopting the principles of B-Corp to aid a return to focusing on stakeholders,

• Developing and applying the philosophy of creating shared value,

• Stopping quarterly reporting as a means of reducing short-term focus and

• The end of universal banking to decouple investment banks from retail institutions.

Led by CEO’s of major multi-national companies including Apple, Nestlé and Unilever, two key strands - that the purpose of an organisation should be about more than just short-term financial gains and the adoption of a longer-term focus - are gradually gaining traction across a broadening community.

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More people are questioning the role of global organisationsAs a result people are openly asking about the balance between ‘value’ and ‘values’ alongside the role and purpose of some of the larger organisations in creating value for society

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If we are to collectively address some of the systemic shocks on the horizon and fundamentally change many of the paradigms that are now been challenged, far greater and deeper levels of collaboration that have been previously experienced will need to occur. Previously corporate partnerships have largely been one-to-one arrangements between two parties or, at best, multi-organisation collaborations within an industrial sector. However, issues such as adapting to climate change, or “weird weather”; managing the balance of supply and demand to avoid both physical and economic water stress; developing lower cost healthcare protocols that don’t bankrupt social systems; and managing the balance of power and influence in an increasingly multi-polar world will all require massive cross-sector and cross-border cooperation.

Some see the need for companies, governments and wider society to align around the key priorities. They need to pool their resources, better leverage available capital and focus more on common forms of intellectual property that accelerate rather than constrain knowledge sharing. Certainly for many, the whole notion of large-scale collaboration with shared mutual interests at the fore is providing the opportunity for a radical step-change to occur. Moreover, in order to motivate and stimulate the change that is needed, few doubt the requirement for leaders to emerge who are able to set clear visions and associated goals and communicate effectively with a broad community.

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Transformation requires new forms of collaborationTransforming the global economy will require more effective collaboration between government, business and civil society in ways appropriate for the 21st century – sharing resources, capital and intellectual property

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Underpinning significant change and shifting behaviours are both closely aligned to what we seek to measure. Many argue that tackling some of the world’s big challenges cannot be achieved successfully without a corresponding modification in the standards by which organisations assess and track performance and, hence, by which they report results to the outside world. As such, the principle of a wider set of measures to analyse business impact is being explored.

Most significant in this area is the concept of integrated reporting. Led by the IIRC, this is a process that results in a periodic integrated report by an organisation about value creation over time. This is a concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, has led to the creation of value in the short, medium and long term.

Over 100 global organisations are now part of the IIRC Integrated Reporting Pilot Programme and seeking to bring together environmental, social and financial reporting in a coherent body. Others are exploring the notion of a multi-capitals model that takes an even wider view, adding human and natural capital to the mix.

One current challenge is in agreeing upon the right non-financial measures that work across sectors so that progress of one organisation can be compared with peers inside and outside its industry. With momentum now building, many are confident that a new blueprint and frame of reference can be adopted shortly.

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Future growth will demand a new frame of referenceTo support inclusive growth and taking a longer term view, new business reporting standards may well accelerate the adoption of a wider set of measures of impact and value across all business sectors

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Socially Valued Organisations Context and Emerging Issues4

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Looking back, there are several examples of organisations that have successfully addressed social issues whilst remaining commercially competitive. How they did this varied, but most focused their efforts on benefiting the communities within which they exist. Some notable UK based exemplars include:

• Wedgwood: As well as being a talented potter and prominent slavery abolitionist, Josiah Wedgwood took a keen interest in improving roads, canals, schools and living conditions, even building a village, Etruria, for his workers in 1769.

• Cadburys: Cadbury was first established in Birmingham in 1824 selling tea, coffee and drinking chocolate. Starting in 1893 the founder’s nephew, George Cadbury, developed the Bourneville estate, a model village that would ‘alleviate the evils of modern more cramped living conditions’.

• Port Sunlight: Another model village was built in 1888 by Lever Brothers to accommodate workers for its soap factory near Liverpool. William Lever personally supervised planning as 800 houses were built to house a population of 3,500.

As Adam Smith put it back in 1776: “No society can be flourishing and happy of which the far greater part of members are poor and miserable.”

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Organisations helping to tackle societal issues is nothing newIn the past large organisations have successfully addressed societal challenges by understanding how they can best influence the wider community while still maintaining commercial success

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Over recent years several sectors seem to have lost connection with society. The financial crisis highlighted fault lines in how the financial economy operates and the risk to the real economy when societal needs and the behaviour of organisations become disconnected.

In August 2013 Mark Carney, Governor of the Bank of England, underlined the problem:

“I think finance can absolutely play a socially useful and an economically useful function but what it needs in order to do so, the focus has to be, of the financier, the people working in the banking system, has to be on the real economy, what it does for businesses making investment, what ultimately it means for jobs in the economy. And it’s the loss of that focus, it’s finance that becomes disconnected from the economy, from society, finance that only talks to itself and deals with each other, that becomes socially useless.”

In a recent lecture, Christine Lagarde of the IMF described the need for a financial system for the 21st century with “a financial structure in which industry takes co-responsibility for the integrity of the system as a whole, where culture is taken as seriously as capital, and where the ethos is to serve rather than rule the real economy.”

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Some organisations have become disconnected from the success of societyIn recent years the success of several companies and sectors has become disconnected from the success of society. These companies have made gains which are financially independent from the progress of society

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While systemic issues with the banking industry are very much centre-stage, other sectors and specific companies are also seen as exploiting society without benefiting it. With the fallout from the 1989 Exxon Valdez spill still a thorn in the side of the energy sector, the response to the 2010 Deepwater Horizon oil spill in the Gulf of Mexico further emphasized a popular view that oil companies make healthy profits for their shareholders when everything’s going well but it is governments, tax payers and local communities who pay the price as soon as something goes wrong.

In the pharmaceutical sector several companies such as GSK, Novo Nordisk and Novartis are making significant progress but many see others as profiteering: With an annual R&D spend of a $135 billion, many believe the industry’s output of 25 to 35 new drugs per year to be a poor return. Moreover, given that of the 12 new cancer drugs approved in 2012, 11 cost the healthcare system more than $100,000 a year per patient, leading industry commentators are questioning whether the sector has become skewed to disproportionally reward ‘sickcare’ over healthcare. When society has pushed back, as is the case over high-priced HIV drugs in Africa, the sector has shown that there are alternative models that can be adopted.

The WHO sees the harmful use of alcohol to be a global problem that compromises both individual and social development. Alcohol is the world’s third largest risk factor for disease burden; it is the leading risk factor in the Western Pacific and the Americas and the second largest in Europe. In the US, alcohol is the most common drug used among adults. It results in 2.5m deaths each year and 9% of all deaths in the 15 to 19 age group. While the alcoholic drinks sector has revenues of over $1 trillion, the cost of the damage being done to society is far greater. It causes harm far beyond the physical and psychological health of the drinker. Alcohol is associated with many serious social and developmental issues, including violence, child neglect and abuse, and absenteeism in the workplace.

It is clear why in some sectors the ‘privatisation of profit and socialisation of risk’ phrase is being used and hence why many see the need for change.

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Business systems need to adapt and changeToday, the business world largely optimizes economic growth, transfers some of the costs of doing business to society and allows for inequitable sharing of benefit: there is a ‘privatisation of profit and socialisation of risk’

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In many sectors, there is a growing group of commercial organisations that are seen as having high social value today. These include:

• Bharti Airtel: The Indian mobile operator has brought affordable mobile telephony to more than twenty countries and, at home, is supporting improving female education.

• BBC: Although the first to be critical of its own performance, the education, news and entertainment organisation is globally recognised for its impartial stance on pivotal issues.

• John Lewis Partnership: The employee-owned UK retailer is widely regarded for its equitable partnership-based ownership structure and seen as a blueprint for “industrial democracy”.

• LEGO: The world’s second largest toy company has grown not by trying to be the biggest but the best and believes that it has the responsibility to invent the future of play.

• Narayana Health: This Indian company has pioneered affordable, high-quality healthcare and delivers leading edge cardiac surgery at a fraction of the cost of other providers.

• Novo Nordisk: This pharmaceutical company has led the way in helping improve education and wider policy to fight diabetes – the disease that is its main area of focus.

• Patagonia: The Californian outdoor clothing company is a leading example of responsible action with high levels of waste recycling, low energy and water use.

• Tata: As well as applying community philanthropy principles applied across the conglomerate, Tata has invested heavily in building new hospitals and schools across India

• Toms: With every pair of shoes brought this US manufacturer provides free shoes to children in need ‘one for one’ – 10 million pairs to date.

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Being successful and being socially valued However, there are several organisations taking a lead back to a moral ‘true north’ that are seen globally as not only doing the right thing but also doing it at scale – and are perceived to be both socially valued and socially valuable

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Looking across numerous companies, there appear to be three core elements that provide the foundations that socially valued organisations are built upon: doing the right thing, doing it well and being judged by society:

• Doing the right thing – Ensuring that activities are strategically aligned with the needs of the societies within a company operates

• Doing it well – Executing consistently in terms of long-term vision and short term decisions for the benefit of all its stakeholders

• Being judged by society – Recognising that society is the arbiter of whether an organisation is creating or destroying value

Two examples of multinational companies that have been attracting much attention in delivering in this context are Unilever and Nestlé:

The Unilever Sustainable Living Plan sets out to decouple the company’s growth from its environmental impact, while at the same time increasing its positive social impact. It has three big goals to achieve by 2020 – to improve health and well-being, reduce environmental impact, source 100% of its agricultural raw materials sustainably and enhance the livelihoods of people across the value chain.

As notably profiled by Harvard Business School’s Michael Porter, Nestlé is one of the leading lights in ‘shared value’. It’s Creating Shared Value programme is based on the premise that it can create value for shareholders by doing business in ways that specifically help address global and local issues in the areas of nutrition, water and rural development. The company believes that it can do business in ways that both deliver long-term shareholder value and benefit society.

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Three foundations of the socially valued organisation From the research and multiple discussions with different groups around the world, three core foundations have emerged as key for organisations wishing to become socially valued

Doing theright thing

SociallyValued

Doing the right thing

well

Beingjudged by

society

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Ensuring that activities are aligned with the needs of the societies in which a company operates is no easy task. However, the reason why a company chooses to pursue social responsibility is arguably an essential part of the equation for long-term success and impact.

A central tenet of those who advocate for shareholder capitalism is that profit should be the primary business goal: a firm’s sole obligation is to generate returns for its shareholders. Under this logic, the only reason to pursue a social goal is the belief that there will be a positive financial return associated with that activity.

This is a critical job for leaders: to establish clarity about purpose, values, and the business model. Purpose is about articulating what it is you are trying to build. Values define how you will pursue that purpose. The business model spells out how the organisation will remain financially viable, delivering sufficient short-term returns to investors while establishing a platform for long-term success.

From the research and subsequent discussions that formed the core of this project, 32 different characteristics of a socially valued organisation emerged. These cover a wide range of issues and are each detailed in the appendix of this document.

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Doing the right thing From these discussions, we can see a number of important characteristics of socially valued organisations. These can be grouped into two areas - beliefs and behaviours

Beliefs in doing the right thing Behaviours in doing the right thing well

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The idea that societal progress should be inclusive is not new but it is arguably only as recently as 1987 that the need to balance short and long term progress was made so explicit. The publication by the Brundtland Commission report ‘Our Common Future’ defined sustainable development as: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”

As the ideas put forward by the Brundtland Commission have developed, moving from being the concern of international institutions and government to being on the business agenda, it has become clear that commercial organisations have a key role to play in contributing to societal success by consistently meeting their obligations to stakeholders and also helping to create opportunities that enable society to:

• Meet both short-term and long-term needs

• Build capacity and resilience to risks and shocks

• Achieve inclusive societal progress today and tomorrow that benefits all

• Ensure that progress is not at the expense of future generations

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Doing the right thing well In terms of execution, there are four main attributes that help organisations have clarity of purpose, a long term focus, the ability to make consistent decisions and build capacity

Ensure progress is not at the

expense of future

generations

Build capacity and resilience to risks and shocks

Meet both short term and long

term needs

Achieve inclusive societal progress that benefits all

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The success of organisations in helping society progress is not judged by the organisations but by society that often applies a different set of criteria to those used by organisations. Whether organisations are creating or destroying value is no longer judged purely in terms of economic profit and loss but in areas which are harder to quantify such as concepts of trust, wellbeing, social and human capital.

Different stakeholders see things differently and so, going forward, commercial organisations will have to ensure that they consider the needs of a wider range of stakeholders in the societies within which they operate. This clearly makes things hard for organisations whose focus is mainly on the bottom-line.

As has been shown again recently in the fashion industry’s response to the 2012 factory collapse in Bangladesh, society is the arbiter of whether an organisation is creating or destroying value. Judgment is based on perceptions influenced by a wide range of issues and so how the sector as a whole, as well as leading companies within it, chooses to act will be under scrutiny. In the same way as the soft-drinks sector cannot walk away from obesity and the financial sector cannot ignore inequality, the fashion industry has to deal with safety and labour law in its suppliers’ facilities just as much as cheap clothes and anorexia.

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Being judged by society Ultimately, no matter how much an organisation can plan and act to deliver benefi t, the arbiter of what is valued is down to society itself – the external world judges who is valued most

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The most significant issues discussed in the different workshops were mapped and those that resonated in two or more regions then highlighted:

Authentic Organisations: Companies are open about their beliefs and perspectives and transparent on the financial and wider impact of their activities. As society appreciates true transparency, it sees organisations as being authentic.

Connected Success: Organisations connect their own success with social progress. They only perform activities that are consistent with delivering societal success. They redeploy and / or reconfigure their assets to be valuable to society.

Delivering on Dreams: Organisations focus more on helping individuals and communities achieve their aspirations by employing more flexible business models that allow local adaptation of principles to suit the ambition.

Enlightened Leaders: Organisations have leaders who recognise the impact of their decisions and behaviours on the future success of the societies in which they are a part of and that they serve.

Know Their Purpose: Organisations clearly understand why they exist, what they do beyond the pure financial and appreciate their wider role and purpose in society. It guides all that they do.

Multi-capitals: Organisations recognise that they create more than just economic value. They increasingly measure and openly report on their activities and associated impacts using an accepted multiple capitals approach.

Total Transparency: The winning organisations of 2020 embrace an approach of complete transparency. As data is made open and shared via multiple social platforms, the best companies are those that are ultra-transparent.

Viable Business Models: Organisations move beyond philanthropy or CSR initiatives to operate viable, long-term business models that solve or address social problems whilst also achieving their own financial and other objectives.

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The emerging view from around the worldIn discussions, different emphasis was placed on varied characteristics as different societies expect different things for the future. Of these, eight appear to have global relevance - being seen as key in multiple regions

Know Their PurposeMulti-capitals

Enlightened LeadersViable Business Models

Total TransparencyAuthentic Organisations

Connected Success

Delivering on Dreams

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The Socially Valued Organisation in 2020 Being Part of The Change5

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Under each of the three big challenges, discussions identified a number of issues that the world, and regions within it, are facing. Some of these are global, and others specific to one continent:

Increased Societal Stresses:

• Imbalanced Population Growth• Shifting Demographics• Growing Urbanisation• Rich Poor Gap• Rectifying a Failing Educational Model• Overcoming Dysfunctional Governance• Access to Skilled Roles• Intensified Cultural Identity• Urban Youth Bulge• New Youth Ambitions• Escalating Healthcare Spend• Muslim Europe• Transitions in Morality• Crowd Power

• New ‘Political’ Leaders• Latino Influence• Girl Power• Data Privacy• Replacement of Low-end Jobs• Political Polarisation• Dilution of Traditional Centres of Power• US Educational Access• Technology Fuelled Societal Change• (Re)structuring Long-term US Prosperity

Increased Environmental Stresses:

• Key Resource Constraints• Extreme Weather Migration

Changing Business Environment:

• Asian Wealth Shift• Ubiquitous Data Access• New Growth Markets • Cities Not Countries • Stronger Leadership • Increased Trade and Integration • Company Purpose • Alternative Currencies• Reallocation of Capital • Erosion of Institutional Trust

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Be part of the solutionExperts at our workshops felt that socially valued organisations will be seen to be actively contributing to societal success by addressing elements of the three big challenges and helping society navigate through the uncertainties

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The notion of companies and business generally being ‘a part of society and not apart from it’ is something which many have reiterated since the phrase was highlighted by Unilever’s Niall Fitzgerald and Mandy Cormack in a Conference Board / Harvard University / International Business Leaders report in 2010:

“…if society is to continue to accept the granting of substantial rewards for successful business leadership, it is entitled to expect complete leadership – an approach that combines optimum returns for shareholders with responsibility for social and environmental performance. Company leaders are not only leaders of business but leaders within society. We are a part of society not apart from it.”

In the coming years, those organisations that are most valued by society will be seen to be working together with multiple agencies to lead change. They will share a clear view of what success means to them and to wider society and to be actively addressing big challenges and helping society navigate through the uncertainties.

As organisations look at what they must do and what they could do, the answers emphasised fall into four areas:

• How they should operate,

• What they believe,

• How they behave, and

• How they measure success.

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Business has to be a part of society - and not apart from itMany agree that, as some already do today, in the future successful organisations will not only know how they should operate, what they should believe and how to behave but will also be clear on measuring impact

How they operate How they believeWhat they believe

How they measure sucess

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Returning to the scenarios framework outlined earlier, we can see how the varied issues fit in with the four alternative views of the future. Although the scenarios are global this does not mean that all parts of the world will display the same characteristics at the same time. Understanding how things currently operate and watching for signals of change will enable organisations to adapt to shifting societal needs and expectations and create new opportunities along the way.

In a world of Global Elites, socially valued organisations will need to be respected leaders in their area of expertise. Respect will be earned by demonstrating the value of what they do to the global elite and to wider parts of society

In a world of National Self Interest, socially valued organisations will need to be a valued partner to national regulatory bodies and to government. This position will be won by proving how they create value that furthers national interest both at home and overseas.

In a world of New Multiculturalism, socially valued organisations will need to be trusted partners to leaders across different sectors and in different parts of the world. Showing how they can contribute to addressing the big challenges in a way that is inclusive, equitable and outcome-focused is how trust will be deserved.

In a world of Networked Scale, socially valued organisations will need to be trusted advisors to many different people who may represent cities, communities and enterprises of different sizes. Here, trust will be based not just on the quality of advice but also on the value that the organisation brings to the networks.

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Socially valued organisations in each scenarioGiven future uncertainty, socially valued organisations have to be able to apply themselves in the most relevant way in the different scenarios and so ensure that their beliefs and behaviours align with the zeitgeist


How

Goa

ls A

re S

et


Global Elites – Respected LeaderEnlightened leaders that can cooperate to drive systemic change by taking a stance based on a clear point of view, supported by viable business models that demonstrate

the benefits of change. By earning the right to participate in discussions through consistent delivery of societal value they are able to influence others to contribute to societal success and so drive change they believe in.

National Self Interest – Valued PartnerLeaders who recognise the impact of decisions on the future success of the societies of which they are a part and their responsibility to fill the societal gaps left by government and to speak out on issues that matter.

Whilst global companies are able to use their scale to help achieve national objectives whilst keeping in mind the

bigger picture, all recognise the need to create more than economic value and to protect and enhance the local

environment and to contribute to global goals.

New Multiculturalism – Trusted PartnerOrganisations that are open, transparent and actively seek

to collaborate and partner with different stakeholders in order to contribute to agreed global objectives through

practical local actions. They are consistent and balanced in their decision making, are clear on how they connect their success to social progress and redeploy and reconfigure

their assets to where they can best add value.

Networked Scale – Trusted AdvisorOrganisations that act consistently to create shared value

through long-term collaborations and partnership. By having a track record of delivering tangible societal benefit

they earn the trust and the right to align and connect others and so achieve systemic change. Working at the local level to help individuals and communities achieve

their aspirations and realise their potential they often create most societal value by helping others to do the right thing.


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1. Organisations to be accountable to stakeholders, not just shareholders

Achieving this is seen to involve a number of elements including changes in regulatory enforcement alongside a clarification of some of the legal requirements for companies in terms of maximising shareholder value. In the many regions where maximising shareholder value is not actually a legal requirement, but instead a popular misconception, explanation is also required.

2. Success to be measured across a broader set of measures

The adoption of the multi capitals approach, assessing net creation of capital is seen as a pivotal action and one that is supported and supports much of the work already underway around integrated reporting. In addition, a review of director accountabilities in line with these is a necessity.

3. Success to be measured over a longer time horizon

Moving away from the short-term focus on financial performance is clearly being advocated by many and, as a means of starting the shift ending, or de-emphasising, quarterly reporting is one tangible step. However as the ‘currencies’ for non-financial capitals are agreed and adopted, several bodies see that businesses may overcome the ‘time value of money’.

4. Business to bear full cost of externalities and risks

Some people see that society should decide what business should pay for and what is provided by society. When the system works well it is clear where responsibilities lie: business accepts the costs and risks of doing business and benefits from the value that it creates, and society enjoys the benefits that business provides and accepts some of the costs of the downside. In societies that are functioning well it should be clear what is and is not acceptable for business to do.

In conclusion, from comments and feedback received to date, informed people from companies, academia, NGOs, charities and government recognise that change is needed not just within organisations but also at a systemic level. Evidently the banking sector is highlighted as being particularly worthy of change, but it is not alone.

Four key shifts need to happen:

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Many conclude that change is needed at a systemic levelIndividual organisations can only do so much - achieving global success will require resetting of several business environments including the purpose of a business, how success is measured and how the financial economy operates

Four key shifts need to happen at scale across all sectors for real systemic change:

Success to be measured across a broader set of measures

Organisations to be accountable to stakeholders, not just shareholders

Success to be measured over a longer time horizon

Business to bear the full cost of externalities and risks

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1. Identifying and responding to

challenges2. Meeting societal

expectations

3. Culture and engagement

4. Society-focused capabilities

5. Influence and Obligation

6. Collaboration and Leadership

7. Decision-making

8. Delivery

9. Reporting and measurement

10. Reputation management

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Implications for Organisations Ten Questions6

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How well are the challenges identified made real across our organisation?

Are the challenges linked to specific organisational issues we face and can respond to?

How well do we challenge ourselves to look across new time-frames, to understand how changes outside our control will impact our

sector and to plan for an uncertain future?

How well do we track signals and signs of change?

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Q1. Identifying and Responding to ChallengesDo we actively seek to understand the big challenges that are facing society?

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How well do we discern when it is best to lead, collaborate or follow on select socially valued topics?

What processes do we employ to retain core focus, yet be agile enough to respond to shifts of what is socially valued at a given point in time?

How well do we influence our sector with regards to having a socially valued approach?

How does our response to being socially valued meet the needs of diverse perspectives from a number of stakeholders and locations?

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Q2. Meeting Societal ExpectationsHow well do we understand the implications of what future society will expect of us?

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How well do we involve staff in determining our societal focus and response?

What practices do we use to help staff develop a broader societal perspective?

To what extent do we expect customers to have an influence over what we do for society?

How well do we involve stakeholders in determining our societal focus and response?

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Q3. Culture and EngagementHow is our strategy led by the needs of society and the communities we serve?

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How well do we identify the need for new or additional capabilities?

How well do we listen out for the needs of society?

In what ways do we embed a culture of empathy towards stakeholder views on societal needs?

In what ways do we demonstrate a capacity to learn and deploy new skills?

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Q4. Society-focused CapabilitiesHow do we best use our existing capabilities to create new sources of societal value?

8180

How well are we able to adapt our business to a changing regulatory environment?

Do our actions reflect the regulatory changes that we would like to see?

Are we doing enough to address society’s needs, given the relative size and influence of our organisation?

Do we benchmark against society’s most valued organisations, or just within our sector?

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Q5. Influence and ObligationAre we sufficiently influential in shaping our regulatory and operating environment?

8382

How well are we respected for our ability to work with other organisations to tackle significant issues?

Do we prioritise a focus on societal needs in the partnerships that we form?

Does our organisation work in partnership with the communities in which it operates?

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Q6. Collaboration and LeadershipDoes our organisation know where it will lead or collaborate and where it will not?

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Is our decision-making structure one that integrates external perspectives?

What do we have in place as our reference point that ensures our decisions taken are in a consistent, coherent fashion?

How do we respond to society when we get it wrong?

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Q7. Decision-makingHow well do our decision-making processes embrace societal needs?

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Are all of our actions and communications consistent, aligned and coherent?

How do we ensure that each customer experience reinforces our focus on societal needs?

Are we humble in our efforts to serve society?

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Q8. DeliveryDoes our focus on societal needs sufficiently guide our actions?

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What will we choose to report to stakeholders beyond legal requirements, and why?

How well do we utilise and report on multiple forms of capital - monetary, physical, human, relational, natural and organisational?

How well do we incorporate a long-term view within short-term reporting cycles?

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Q9. Reporting and MeasurementWhat will stakeholders want us to report on in 2020?

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In what ways do we build an active, two-way dialogue with stakeholders?

How do we balance retaining control of our brand versus it being steered by consumers?

Are we prepared to change the way we act to be in tune with societal needs?

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Q10. Reputation ManagementHow will we safeguard our reputation in the future?

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Appendix The 32 Characteristics of Socially Valued Organisations

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Aligned InitiativesOrganisations align their plans with collective world / regional initiatives. They contribute to macro goals either directly or by ensuring that resources are allocated to where they can make the most difference.

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Authentic Organisations Companies are open on their beliefs and perspectives and transparent on the financial and wider impact of their activities. As society appreciates true transparency, it sees organsiations as being authentic.

9796

Bridging the GapOrganisations recognise that they have a responsibility to fill the gaps left by government as the lines of accountability blur between commercial activity, civil society and the state.

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Closing the Wealth Organisations seek to close the wealth gap, aiming for equality of opportunity, fostering entrepreneurial characteristics and re-imagining the public/private partnership so that growth benefits everyone.

9998

Consistent Decision MakingOrganisations adopt balanced decision-making processes that drive consistent behaviours – using an appropriate set of measurement criteria, metrics and long-term horizons.

99

Consistent IntegrityOrganisations behave consistently, with integrity and with honesty in all that they do – with clear alignment between their strategic objectives, behaviours, culture, systems and incentives.

101100

Connected SuccessOrganisations connect their own success with social progress. They only perform activities that are consistent with delivering societal success. They redeploy and / or reconfigure their assets to be valuable to society.

101

Deep Moral ReachSocially valued organisations utilise their authority to help stakeholders to do the right thing and recognise the need and obligation to show them how others are better off by doing so.

103102

Delivering on DreamsOrganisations focus more on helping individuals and communities achieve their aspirations by employing more flexible business models that allow local adaptation of principles to suit the ambition.

103

Demonstrate HumanityOrganisations live by desired human traits and treat others as they wish to be treated themselves, provide time and space to pursue innovation, display a visible conscience and apologise when things go wrong

105104

Driving Systemic ChangeIn order to shift the status quo, organisations increasingly refrain from token individual actions and seek to enable bolder, bigger, collaborative actions that can drive change across a whole sector or system.

105

Ecosystem EnhancementOrganisations take a broader view of their impact and responsibility and take conscious, consistent, smart decisions that enhance quality of life and help to provide a cleaner, healthier environment.

107106

Embracing DiversityOrganisations exhibit more visible understanding that being open and welcoming to a breadth of thought, perspective and behaviour can enable more progress to be made more quickly.

107

Enlightened LeadersEnlightened LeadersOrganisations have leaders who recognise the impact of their decisions and behaviours on the future success of the societies in which they are a part of and that they serve.

109108

Future FocusedOrganisations reflect a desire to care for the next generation, actively questioning the value of capital, implying a return to notions of tradition, of passing on, of a legacy that’s about more than money.

109

Having a Point of ViewOrganisations increasingly take a public stance on matters that impact the public good. They are bold and consistent in what they think and say and are open and proud to share their perspective.

111110

Individual ImpactOrganisations help to increase the capacity of society to harness and cultivate the power and influence of the individual, encouraging an equality of opportunity for all but promoting personal impact.

111

Know Their PurposeOrganisations clearly understand why they exist, what they do beyond the pure financial and appreciate their wider role and purpose in society. It guides all that they do.

113112

Legacy of HelpingOrganisations are no longer selected for contracts based solely on financial and capability criteria: Clear long-term partnerships and a track record of providing tangible societal benefit are given equal importance.

113

Multiple CapitalsOrganisations recognise that they create more than just economic value. They increasingly measure and openly report on their activities and associated impacts using an accepted multiple capitals approach.

FinancialCapital

HumanCapital

BuiltCapital

SocialCapital

NaturalCapital

115114

Multi-Local Global organisations have activities at a super-local level, recognising the mutual dependency of company competitiveness and the health of the communities. They build relevant capacity through local control.

115

Networked TrustOrganisations become increasingly non-hierarchical and non-bureaucratic, embracing the wider trust across a network and the ability to place the individual at the core of a community.

117116

Organisational Restlessness Organisations proactively review issues and opportunities with regard to society’s needs and their ability to impact these. Attitudes shift to be reflective, agile, proactive and willing to take risks in line with values.

117

Partnering and CollaborationOrganisations know when to lead, when to collaborate and when to support: They can perform each role successfully so as to help society to progress and recognise growing importance of this competency.

119118

Realising PotentialValued companies and institutions go out of their way to ensure, equip and enable colleagues, individuals and communities to thrive and so fulfill their dreams and aspirations.

119

Reciprocity Organisations demonstrate new forms of reciprocity suggesting ways of bypassing or improving upon the dominant consumer model that means more than shareholder value.

121120

Relentless FocusLeading organisations choose a single area of long-term focus for activities that enhance society and stick to this to achieve significantly greater social and business value from their investments.

121

Scale for GoodLarge organisations increasingly use their scale to pursue positive social and environmental good. They influence wider business practices, shift systemic behaviours and seek to change long-standing paradigms.

123122

Shared ValueOrganisations create shared value for society by addressing its needs and challenges without actively disadvantaging anyone. They aim for shared, growth – the re-distribution of capital for the benefit of society at large.

123

Stakeholder-driven IdentityStakeholder perspectives increasingly define the brand identity and the identity of an organisation is, in turn, reflected in individual customer and employee views of how society sees the organisation.

125124

Total TransparencyThe winning organisations of 2020 embrace an approach of complete transparency. As data is made open and shared via multiple social platforms, the best companies are those that are ultra-transparent.

125

Viable Business Models Organisations move beyond philanthropy or CSR initiatives to operate viable, long-term business models that solve or address social problems whilst also achieving their own financial and other objectives.

127126

Sources and Resources

B Corpshttp://www.bcorporation.net

BBC - Davos: 22 facts people should knowhttp://www.bbc.co.uk/news/world-europe-25836087

Christine Lagarde: A New Multilateralism for the 21st Centuryhttps://www.imf.org/external/np/speeches/2014/020314.htm

Brundtland Commission ‘Our Common Future’http://conspect.nl/pdf/Our_Common_Future-Brundtland_Report_1987.pdf

Future Agenda – The World in 2020http://www.futureagenda.org

IIRC Integrated Reportinghttp://www.theiirc.org

IMF warns on threat of income inequalityhttp://www.ft.com/cms/s/0/b3462520-805b-11e3-853f-00144feab7de.html

Jospeh Stiglitz - Freefall: America, Free Markets, and the Sinking of the World Economyhttp://www.amazon.com/Freefall-America-Markets-Sinking-Economy/dp/0393338959

Mark Carney Interview - August 2013 BBC Radio 4http://www.bbc.co.uk/programmes/p01dvgk8

Michael Porter – Creating Shared Valuehttp://hbr.org/2011/01/the-big-idea-creating-shared-value/ar/1

Niall Fitzgerald and Mandy Cormack – The Role of Business in Societyhttp://www.hks.harvard.edu/m-rcbg/CSRI/publications/report_12_CGI%20Role%20of%20Business%20in%20Society%20Report%20FINAL%2010-03-06.pdf

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OECD: Divided We Stand: Why Inequality Keeps Risinghttp://www.oecd.org/social/soc/dividedwestandwhyinequalitykeepsrising.htm

Oxfam - Working for the Few: Political capture and economic inequalityhttp://www.oxfam.org/en/policy/working-for-the-few-economic-inequality

Post 2015 Development Agendahttp://www.post2015hlp.org

Shell Scenarioshttp://www.shell.com/global/future-energy/scenarios.html

Unilever Sustainable Living Planhttp://www.unilever.co.uk/sustainable-living/uslp/

UN Millennium Development Goalshttp://www.un.org/millenniumgoals/

UN Population Datahttp://data.un.org/Default.aspx

WHO – Data and Statisticshttp://www.who.int/research/en/

WHO view on Alcoholhttp://www.who.int/topics/alcohol_drinking/en/

Future Agenda 84 Brook Street London W1K 5EH +44 203 0088 141 www.futureagenda.org @futureagenda [email protected]

The world’s leading open foresight program

The world’s leading open foresight program

Future Agenda84 Brook StreetLondonW1K 5EH+44 203 0088 [email protected]@futureagenda.org