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Is Development a Good Business Strategy? Lessons from Montreal

By - Sep 22 2016

McGill

After receiving their certificates, course participants line up for a group photo.

They say companies can do “well” by doing “good,” that they can generate greater financial returns by investing in the social and environmental wellbeing of the communities in which they operate. But how can companies, governments, NGOs, and other organizations benefit from the growing overlap between business and development? And what factors must they consider as they navigate this transformed development landscape, in which partnership is essential to thrive?

We addressed these questions through the “Real Development, a Good Business Strategy? Closing the Gap” executive education program in Montreal this summer. Developed in partnership by McGill University’s Institute for the Study of International Development, the Inter-American Development Bank, and Google, the program allowed for an in-depth exploration of this new context in which companies must engage in development to stay relevant while traditional development actors must partner with corporates to continue making true impact. Unique in its 360-degree blend of theory, practice, and coverage of development and business topics alike, today we will give you a taste of the themes discussed in Montreal by condensing our learning into four key lessons.

 

Lesson One: The private sector’s role in development is constantly evolving, trending toward a strategic approach that integrates development into  how corporations operate.

Traditionally defined by the three pillars of social equity, environmental protection, and economic growth, that the health of business is important to development is not news. However, the thinking on how business should interact with society has and continues to evolve. On Day 1 of our program, McGill University Professor Paola Perez-Aleman broke this down into four phases, beginning with an exclusive focus on profit (Phase I). Followed by the rise of corporate philanthropy (Phase II), things really get interesting in Phase III with the emergence of Corporate Social Responsibility (CSR). Driven by a focus on compliance, corporate citizenship, and improved business standards, CSR seems leaps and bounds ahead of its predecessors, encompassing a more inclusive view of the corporate role than had been seen before. Yet Phase IV is eclipsing CSR, giving way to business models that address societal challenges through strategies integrating development into their core business.

 

Lesson Two: Millennials and information are driving even more change.

Clearly, this evolution proves that the development and business landscapes have been in flux for some time. But according to Verena Gruber, Assistant Professor at HEC Montreal, this transformation is far from over. The Empowered Consumers I discussed in a previous post increasingly expect that companies engage in development, with a 2015 Globe Scan survey revealing that 65 percent of respondents feel “a sense of responsibility to purchase products that are good for the environment and society.” This sense of responsibility, according to Dr. Gruber, can be attributed to two primary drivers—the rise of purpose-driven Millennials and growing access to information. Combine Dr. Gruber’s drivers with the incoming Fourth Industrial Revolution, and it becomes clear that this sentiment is here to stay.

 

Lesson Three: Strong companies are adapting to this new normal, and those who haven’t should.

Companies are inherently flexible, adaptive, and forward-looking entities. An acute awareness of market trends is critical to their survival, and their capacity for innovation a byproduct of this need to stay competitive. In Montreal, these qualities were brought to life by our corporate participants. Justin Perrettson, Senior Advisor on Sustainability and Public Affairs at Novozymes A/S, gave the example of his own workplace. Driven by a focus on sustainability leadership and business purpose, Novozyme’s “Ecosystem Focus” is a model for companies looking to more inclusive business models to drive both impact and growth.

Similarly, Olga Reyes of The Coca-Cola Company boiled the benefits of this down to a few priorities, citing supply, marketing, reputation, partners, and learning as factors that motivated her company to engage in development in years past. With The Coca-Cola Company and Novozymes A/S examples of how successful companies are embracing this new normal, numbers from the 2015 Nielsen Corporate Sustainability Report suggest those who haven’t should. With global sales of consumer goods from sustainable brands growing more than 4 percent in the past year (compared with less than 1 percent), it’s clear that bands who aren’t on the development bandwagon should get on board—fast.

 

Lesson Four: Companies must share their sustainability story with a focus on RESULTS.

Selling investments in sustainability to shareholders requires companies to sell results, while selling the transaction costs of partnering with corporates requires development actors to sell the value add of these collaborations. This demands a two-part solution: storytelling and impact evaluation.  On Day 5 of our journey Diego Ruiz, PepsiCo’s Vice President of Global Public Policy and Government Affairs, talked us through the value of storytelling. Highlighting PepsiCo’s messaging around Performance with Purpose, it’s clear that communicating is critical to informing diverse stakeholders of PepsiCo’s greater strategic vision. Moreover, it contributes to PepsiCo’s corporate legacy as a trailblazer in development, inspiring other actors to engage in societal issues and positioning PepsiCo as a role model as the nexus between business and development continues to grow. But these messages are much more powerful when backed by results, by clear indicators of the causal relationship between joint projects and positive outcomes. While evaluating impact can be costly, the return on communicating results pays off.

 

To see these four lessons manifest, look no further than Google. A pioneer in the social innovation space that has long tapped into its core competencies to generate social impact, Google stands as the prime model for companies looking to engage in development. Generating impact through such avenues as Google Green, Google for Nonprofits, and Google.org, this innovation giant’s growing involvement in societal issues is proof enough that this new trend is here to stay. And as the source of some of the best ideas of our time, we think it’s safe to say that following Google’s lead in this space will pay in dividends—of the social, environmental, and financial kind.

 

This post originally appeared in “Development Finance.” 

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