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2021: Meeting the Moment With Shared Value

February 3, 2021

SVP CEO Sarah Downie shares her optimistic foresight for 2021; originally published by Probono Australia

I approach the task of sharing my predictions for 2021 with some trepidation. Whilst some may argue that the challenges of 2020 could have been foreseen, the degree to which they impacted society and the economy was inarguably historic. Fair to say the vast majority of us were caught off-guard. 

It’s also important to recognise that turning the page on our calendars won’t erase the year that’s been, nor should we want it to; at least not entirely (we learnt a lot). The reality is that many of our challenges remain; and globally, we’re still responding and recovering. The story untold however, is whether the crises of 2020 were solely point-in-time crises, or catalysts for long-term, systemic change.

With all this in mind, the following reflects my hopes as much as it does my predictions for the year ahead. 

Purpose helps to narrow the trust gap for business     

2020 was a(nother) hallmark year for purpose. Companies which had identified a broader role in society (beyond making money) before the pandemic responded swiftly, drawing on an established position of humanity. For many, purpose helped them to resist paralysis, providing a beacon for quick decision-making, and keeping them inspired and motivated. 

Notably, business has since emerged as the most trusted institution globally (at 61 per cent) – replacing government and overtaking not for profits for the first time, according to the 2021 Edelman Trust Barometer. It’s now the only institution that is seen as both competent and ethical. Companies still have a lot of work to do in regaining trust, but this signals progress. 

So, as citizens continue to demand and reward companies for fulfilling or establishing a wider purpose, we can reliably anticipate that business strategy will follow suit. And that meanwhile, the trust divide between companies taking all stakeholders into account, and those prioritising short-term profits, will deepen. 

Sustainability claims under the microscope     

As the purpose movement gains momentum – and “sustainability” becomes more mainstream – consumers, investors, asset managers and shareholders will all be on the lookout for evidence to help them distinguish genuine progress from PR puffery. 

Of course, this includes metrics. And, I should point out that this has long been a conundrum for the impact economy – for many, it’s felt like the missing link to cementing purpose-led business as business-as-usual.  

For the finance sector, this is because despite an increase in integrated reporting, ESG rankings or socially responsible screens, we’ve been struggling to find a way to demonstrate holistic success and sustainability – for society and business. For the most part, we’re still measuring the two separately, rather than recognising how one feeds the other.

Much like the recently-released Hybrid Metrics report, co-authored by Harvard Professor Mark Kramer and published by the Shared Value Initiative, I believe we’ll make significant headway in establishing more balanced and interconnected socio-economic reporting in 2021. 

Our strength is in our numbers, through collective impact      

Australia has set a global example in its COVID-19 response. But in solving some problems, we’ve reluctantly exacerbated others, from mental ill-health, to inequality and financial exclusion. And we know that no single actor can wholly or sustainably meet these challenges alone. 

Ultimately, to solve the issues of our time, deep collaboration and coordination between business, government, investors and not for profits is required. 

I believe this mindset shift, from silos to synergies, will become more routinised as we rally together to get back on our feet, and stay there. And as part of this, the all-too-common power imbalance for not for profits – given their reliance on external funding – will soften; as their expertise is acknowledged as critical to meaningfully addressing community issues. 

Investment sector comes to the party 

Just last week, in his annual letter to CEOs, BlackRock’s Larry Fink framed the climate transition as a “historic investment opportunity”, for the second time. He announced he was doubling down on his strategy to integrate climate risk into investing, by requiring companies to outline how they’ll achieve net zero targets, and how this will be reviewed and measured. Or, risk being dropped from BlackRock’s actively managed portfolios. 

With Fink as its figurehead, the sector is emerging as an important and powerful force to accelerate change at scale. Dan Roarty, chief investment officer of AllianceBernstein, SVP’s 2020 Investing in Shared Value Award winner, says: “We’ve always viewed economic and social issues as inseparable. And investing in companies creating shared value is a way for us to transform responsible investing into a story about synergies, not trade-offs.” 

Shared value steps into the spotlight 

Reflecting on the above, I am encouraged that much of this can be supported by shared value.

Shared value is a business strategy designed to address social issues. It uses the resources, skills and assets of business to create social impact whilst (and this bit is important) also generating improved performance (lower costs or increased profits) for the business itself. In doing so, it recognises the interconnectedness between community and economic prosperity, where one can’t thrive without the other (2020 made this point with utmost clarity).           

Needless to say, as we confront an uncharted convergence of social and environmental issues, and Australia’s first recession in nearly 30 years, the idea of combining our socio-economic aspirations is gaining traction. And a growing number of corporate leaders are realising that if they can find ways to make purpose profitable, they’ll get greater engagement and buy-in from their boards and shareholders, giving them more freedom to invest in social solutions. 

In this context, I believe (and yes, hope) that 2021 will accelerate shared value like never before.  

My overarching optimism is that the events of 2020 won’t be in vain. That they’ll fuel further waves of corporate innovation and prosperity, and bolt down business as a productive community partner. But no matter where we land when the time comes to flip the calendar again, I’m confident that by embracing tools like shared value, we’re heading in the right direction.