By going beyond ‘giving back’ and embedding societal imperatives into core strategy, businesses hold the potential to be the greatest force for social progress while also becoming more competitive and profitable, argues leading international thinker on strategies for social impact, Mark Kramer.
“How can I be a more successful company by making my clients and the world a better place?”
This question was posed by Kramer at the inaugural Discovery Retirement Summit held virtually on Monday 25 January 2022. The Summit had an exclusive line-up of global industry leaders sharing insights to help financial advisers better navigate the complexities and reimagine the future of retirement.
The answer is a strategy for social impact that goes beyond the more traditional concepts of corporate philanthropy, which is a “way of giving back and fulfilling a sense of obligation to the community,” and corporate responsibility, which is often embodied in the idea of not doing harm and is manifested in scorecards for Environmental, Social and Corporate Governance (ESG).
“The third way business can engage with society is around this idea of creating shared value and what we mean here is finding business opportunities in helping to solve social problems while meeting new opportunities for profit,” says Kramer.
“It’s really linked to the idea of competitive strategy, and how companies can differentiate themselves in a meaningful way by having positive social impact”.
Kramer is co-author, alongside the globally renowned business academic Michael Porter, of a series of seminal articles published in the Harvard Business Review, which introduced and popularised the concept of shared value. These include Strategy and Society: The Link Between Competitive Advantage and Corporate Responsibility and Creating Shared Value.
He is also co-founder, alongside Porter, of the consulting firm FSG and a senior fellow at Harvard’s Kennedy School of Government.
“When we talk about business and society, we so often talk about the friction or the tension between them … that if you’re making money, you’re hurting society and if you’re trying to help society, you can’t be making money,” says Kramer.
“But that’s not really how the world operates. In fact, the more you look at it, the more you realise that society and corporations are deeply interdependent. You can’t have a successful company in a failing society … at the same time, business has a really important role to play in helping to solve social problems.”
How shared value can make a difference in a society
While corporate philanthropy and corporate social responsibility remain essential to fostering harmony between business and society, shared value seeks to embed this harmony in a manner that works to unlock benefits for both.
Rather than being about ‘giving away a piece of the pie,’ generated through corporate profit, it’s “about doing business in a different way, that actually expands the opportunities for business and creates a larger set of resources for everybody to benefit.”
When this occurs, “companies can actually be the most powerful players for social progress, more powerful in some ways than government and more powerful in some ways than non-profit NGOs,” argues Kramer.
How Discovery uses shared value to encourage healthy behaviours
Discovery’s shared-value model, for example, was first developed in the space of life insurance. It recognised that by inspiring clients to be healthier, not only would it be more profitable owing to reduced health-related claims, but it would achieve a clear good to for its clients, and ultimately society.
These profits, in turn, could be shared with clients in the form of short-term incentives that work to further motivate the behaviours that lead to better health, and therefore greater profitability.
Today, “this is true in a range of different products because Discovery began to focus on the wellbeing of their customers,” as a strategy for competitive advantage, differentiation and, ultimately, profitability, says Kramer.
“They started out with health insurance, and then life insurance. But they realised if you have a longer life expectancy, you also need the resources and the savings to be able to support yourself for longer.”
“And, of course, only about 6% of people in South Africa actually have adequate retirement savings to live comfortably after retirement. This is a huge social problem.”
“So, Discovery said why don’t we can use the same idea of creating shared value of using incentives to lead people to engage in healthier behaviour and apply that to retirement savings.
The results, cited by Kramer, are compelling.
Clients have a greater awareness of their health and life expectancy and benefit from over R13 billion rands of investments made by Discovery to supplement their savings as a reward for good savings behaviour. As a result, clients have a 43% lower lapse rate, 32% longer savings term, and 16% lower retirement income withdrawals. Ultimately, after 10 years, they have 50% more savings still in their investment portfolio.