Social Business Predicts Growth in 2016

Australia’s social business leaders are confident that the Federal Government’s focus on innovation will see advancements in the sector in 2016, writes journalist Ellie Cooper.

Leaders from CSR, shared value, impact investing and social enterprise peak organisations reported an increased level of interest and activity last year, and predicted that this trend would continue.

Managing Director of the Australian Centre for Corporate Social Responsibility (ACCSR), Dr Leeora Black, said that Prime Minister Malcolm Turnbull’s innovation agenda was a turning point for CSR in 2015.

“I think we all ended the year feeling a lot more optimistic about the future of CSR than we felt at the beginning of the year, in part due to the change of Prime Minister,” Dr Black said.

“His big theme is innovation, and that plays very well to the CSR and sustainability agenda.”

She said that ACCSR data showed that innovation was already naturally growing in the corporate social responsibility space.

“We’ve asked questions about the level of innovation in CSR in our annual review on the state of CSR, and we did find in 2015 that there was a much higher level of innovation than when we first measured in 2012,” she said.

“We’re seeing that companies are starting to innovate through incorporating more responsible attributes into products and services, and looking to not only meet emerging demand for responsible products and services, but to innovate in that area and create new products and services.”  

Along with greater innovation, Black predicted that the United Nations Sustainable Development Goals (SDGs), released late last year, would provide important benchmarking data in 2016.

“This will be the first year where we start to see organisations reporting on what they’re thinking about the SDGs and what actions they’re taking and what commitments they’re making towards the SDGs,” she said.

“I think it’s going to be a very important addition to the array of significant frameworks for CSR.”

She also said that the increasing focus on, and expectation of, responsible investment was likely to continue.

“The fossil fuel divestment movement will continue to expand and to gain prominence, and although the direct financial impact of the fossil fuel divestment movement so far has not been significant, there’s a lot of buzz around it, and we will see more and more investment mandates start to be reviewed,” she said.

“I think we will see a lot of changes in the responsible investing landscape, from consideration of divestment through to all these innovative approaches to impact investment, for example.

“Divestment will be the polar opposite in the investment field, the array of interests in the investment field will go from divestment through to impact investing.

“What we’ll basically see is investors wanting to put their money where their mouth is in increasingly robust ways.”  

The area of measurement was flagged as an ongoing challenge this year, although Black said this was nothing new.

“It’s been an emerging story for a number of years, everyone always says measuring impact and outcomes in CSR and community investment is important, but there’s been relatively little action on that front, just a handful of companies really pioneering some new approaches,” she said.

“I think we’ll see more innovation in this area, and more companies and Not for Profits starting to practice measurement more effectively.”

Aligned with measurement, she said that she expected an evolution in company reporting along with an increasing importance of the Global Reporting Initiative (GRI).

“I think we may hear some new, significant ideas coming out of GRI, which is starting to position itself as a standard setter, more than a provider of reporting frameworks, and a policy enabler,” she said.

“We may see more evolution in reporting this year and some significant progress in the area of company reporting.

“It’s a maturity curve, companies are climbing the maturity curve when they think about the nature of corporate reporting and what it should be doing in addition to compliance.”

Black also said that shared value would “continue to rise in prominence” – a sentiment shared by the Executive Director of the Shared Value Project, Helen Steel.

“We can safely say that shared value is not a fad, it’s definitely a business strategy that I think is here to stay for some time, if we reflect not only on the number of members we have, but the growth in interest among some of Australia’s leading ASX 100 companies,” Steel said.

“I think there’s quite a demonstration that this intersection between business and society is becoming more and more front and centre of how businesses are considering how they conduct themselves.

“It’s certainly long-term planning, and I think we’re seeing a change in businesses progressing towards longer-term thinking, and not just thinking of quarterly reporting and annual shareholder reports.”

Steel reported seeing a much clearer demonstration of shared value activity over the past year, with the understanding of the concept becoming more “black and white”.

She said that in 2016 she expects corporations to move beyond shared value planning and work towards execution.

“We’re continuing to watch with great interest organisations on their journey – once they've created a strategy how do they actually implement it,” she said.

“Companies have very much been in an aspirational phase, now we’re getting into the implementation.

“That will be the challenge for this year, but hopefully with creative thinking and some good tools we can overcome those.”

Steel said that the innovation focus had created a “very favourable” environment in Australia for corporations to implement shared value.

“Shared value is fundamentally about innovation, and a firm innovation strategy that’s being led by the Federal Government will only help bring interest and a spotlight onto shared value,” she said.  

“And DFAT [the Department of Foreign Affairs and Trade] is even furthering their commitment to shared value with their seed program that they’re continuing to develop.”

Steel said the success of shared value would be driven by partnerships, and she expected more would develop this year.

“They’re not just business to Not for Profit and government partnerships… there’s some really interesting business to business partnerships we’re seeing emerge as a result of shared value activity,” she said.

“And that’s where we’re going to see real opportunities and benefits when this idea of real partnerships can not just be explored but actually happen.”

Impact investing had a big year in 2015 with the inaugural summit, as well as the establishment of high-profile investment funds, including super-fund HESTA’s $30 million commitment.

CEO of Impact Investing Australia, Daniel Madhavan, said that the most significant development last year was the shift from the movement’s pioneers leading the way to other interest groups picking up the baton.

“The innovators [have been] the people in this space that have been going out, many of them for quite a while, five to 10 years, and have been committed to this space and plugging away and taking all the risk, trying something new, being the real trail blazers,” Madhavan said.

“There was a real shift last year where it tipped… I think we moved into the new group which is the ‘early adopters’ – the people who are not the first to this but are the first to recognise that this is something and they want to be part of it.

“And it’s a little bit more of a mainstream group and it’s a group that tend to have more mainstream resources. And it’s not everyone, it’s not the majority of people… hence the term early adopters.”

He said the primary challenge in 2016 was for impact investing to reach mainstream investors.

“There’s still a lot of work to do to move into the next stage, which is the ‘early majority’, for this to go really mainstream,” he said.

“I don’t know what the timeframe is, but I think 2016 is really going to be about how that early adopter group consolidates and how more of those early adopters enter into this space.”

Madhavan also said that collaboration between different interest groups needs to become a priority as the sector grows.

“The market at the moment has a number of different tribes, so to speak. You have institutional investors, you have trusts and foundations that are investors, you have individuals that are investors and then you have social enterprises that need capital,” he said.

“I think as the market grows the risk is that people split off into different tribes rather than rallying around, and building up the core of this market in Australia, which is a group of organisations and people that are actually all aligned but need to find ways to work together effectively.”

Again, innovation was predicted to be a key trend this year, with the country “abuzz” with the government’s agenda, provided it incorporates social business.

“And I think it’s a missed opportunity if we keep social innovation as a separate part, separate to or even as a subset of, that innovation agenda. They are one and the same thing, it really just depends what angle you’re looking at it from,” Madhavan said.

“We really need to make sure that what many people are working towards and the goals that they have, whether it be impact investment, social enterprise, social change, all of those things are part of how we drive this country forward and that's a bigger story.

“That innovation story is a much bigger story than fintech, or technology, it’s a whole range of things, and social innovation is a huge part of that story and inextricably linked and intertwined with that story.”

Social Traders Head of Market and Sector Development, Mark Daniels, also said that it was vital for the innovation agenda to encompass social entrepreneurship.

“As long as you’re prepared to embrace innovation outside of technology, I think that social innovation, social enterprise and innovative responses to problems is going to be on the agenda as well,” Daniels said.

“The words we’re hearing from the Federal Government are a statement of intent in a whole range of different fields, and we would hope that would include social enterprise.”

He said that in 2015 the social enterprise sector expanded and continued to gain more public attention through both the media and a groundswell of knowledge and information.

“I think consumers and buyers and people in the sector are getting a better understanding of social enterprise and the role it plays,” he said.

“We personally work with more and more social enterprises, we’re in NSW now, and we’re seeing others like SSE [School of Social Entrepreneurs] and The Difference Incubator – there’s a scaling of activity.

“We look at social enterprise in three contexts – one’s around capability, one’s around markets and one’s around finance – and all three of them moved in the right direction last year.

“There were more capability services offered, there was more engagement from buyers, and there was more discussion and money available for investment.”

Daniels predicted that this growth had not yet reached its peak and the trend would continue into 2016.

“We’re on an upswing, so I can’t see the [trend] dissipating. I think all three domains will probably grow. We’re not on top of the wave yet, there’s a way to go,” he said.

“In my area of Social Traders, which is procurement, the interest from government and corporates is only just starting to be unearthed, we’re a fraction of the way through that process.

“I know impact investment’s not going to turn away, I think it will become better defined and articulated, and understood, and what’s the best sort of investment for which sorts of social enterprises.”

He said the challenge of this year was to ensure that, despite the growing popularity of and interest in social enterprise, its fundamental supporters continue their role.  

“I think at the moment there’s an important role government and philanthropy are playing in the space and we can’t see that falling away, but that doesn’t mean they don’t need to be reminded of the important role that they play and the importance of investing in those three domains,” he said.

“It’s not just a whim, social enterprise, it’s something that’s got longevity and has been around and has proven itself.

“There hasn’t been a significant disinvestment in social enterprise, but we’d hate for people to say ‘it’s got lots of energy now, it doesn’t really need us any more’.

“It needs support more than it’s ever needed because it’s growing, and the opportunities are only just starting to be realised.”