Yarra Valley Water’s Chair, Sue O’Connor, is a senior business leader who has served with ASX Top10, global unlisted companies, and high profile statutory authorities. During more than 25 years as an executive leader – including 13 years as a senior executive at Telstra Corporation – she has helped ensure that regulated, customer facing, technology-dependent companies successfully pivot and transform to achieve their growth goals.
She is also a Director of Mercer Superannuation, State Trustees Victoria and ClimateWorks Australia, and an Advisory Council Member of the Monash Sustainable Development Institute.
What does shared value mean to you?
For me, shared value makes good business sense. Companies are not islands, they operate within communities, countries and the natural environment. To be successful in the long term they need to create value for all stakeholders: customers, employees, the community, the environment and shareholders. A focus solely on short term financial returns is not sustainable. This is what shared value is all about.
Working with organisations that rely heavily on the environment, I’m also keenly aware of the extent to which we rely on natural resources for our long-term financial sustainability. We need a healthy environment, as well as a happy, resilient, cohesive and prosperous community, to continue to experience business growth into the future. A fundamental understanding of shared value will help us get there.
What led you individually to the shared value concept? How did you come across it?
I’ve always believed that long term financial returns is an outcome of delivering value to all stakeholders. A colleague sent me the Porter and Kramer Harvard Review article in 2011. It provided concepts and frameworks to articulate the benefit for all business leaders of re-framing narrowly defined profit in terms of delivering shared value to the community. The concepts they discussed in that article have relevance to Yarra Valley Water across all the work we do.
All businesses operate in an ecosystem – it’s no longer possible to conduct core business effectively or efficiently without the buy-in of the society within which we work, and the cooperation and collaboration of government, other businesses and partners, and the consumers we serve.
What does shared value success look like at Yarra Valley Water and where are you at on the journey?
Water utilities were created to address public health concerns, and the Millennium drought provided a sobering reminder of the crucial role that water plays in the well-being of communities. We also operate in one of the sectors that are more directly impacted by climate change, with a drying climate heating up our cities and diminishing the reliability of traditional water supplies. And of course we also have the lead role in treating wastewater to ensure it has no impact on the environment. All of these aspects reinforce the inter-connectedness of our business to the planet and its people.
It’s fair to say that the organisation has taken tremendous ground in building a high-performance culture over the last decade, culminating in accreditation as an Aon Best Employer in 2017. The concept of shared value is a natural fit given the journey to date.
At Yarra Valley Water we’ve undertaken a fair bit of soul-searching about our impacts on society, and we have come a long way. We understand that shared value success is about integration of its principles into our core business – it is not peripheral to our strategy, but central to it. We know our impacts on the community, so we are well placed to mitigate negative impacts and lift our positive contribution. We also know that collaborations and partnerships are important to helping us deliver significantly greater benefit.
We’ve conducted research and reporting into the most cost-effective ways to deliver shared value to the community. This research supports an integrated approach to our business, improving our decision-making and giving us a holistic picture of the contribution we make.
We are currently exploring Integrated Profit and Loss (IP&L) accounting principles to examine the value we create beyond that captured by traditional accounting methods, which look at profit-and-loss as measured in dollar terms. The IP&L methodology enables us to determine the relative materiality of financial, natural, human, and social capital in all decisions, so we can make business decisions that will deliver the greatest overall value for all stakeholders.
This work has practical applications that are already well underway. The Thriving Communities Partnership (TCP), which started as a Yarra Valley Water-led project but now includes more than 150 partner organisations across government, community and business, works to ensure that everyone has access to the modern essential services they need to thrive in modern Australia. The businesses involved all recognise that addressing vulnerability in community means lower costs to serve customers and stronger businesses in the long term. The TCP demonstrates the power of partnership and is a great example of shared value in action.
Similarly, our waste-to-energy plant, ReWaste, addresses several societal needs in one go. It takes organic waste that would otherwise have been destined for landfill and turns it into clean energy. This process combats several issues – rising energy costs, climate change and the problem of waste, which by definition usually has no further use. Alongside all of this, ReWaste provides an additional stream of revenue for Yarra Valley Water through the collection of gate fees along with reduced energy costs which then puts downward pressure on our customer’s water bills. This is another example of the way Yarra Valley Water is integrating shared value into its core operations, for the benefit of society and our bottom line.
What is your role individually within Yarra Valley Water to support the company along its shared value journey?
As Chair of the company I am responsible, along with my colleagues on the Board, for identifying long-term risks and opportunities, monitoring the organisation’s strategic and policy direction, providing accountability and supporting management in driving positive outcomes. I see shared value not only as an end in itself, but also as a way of measuring our success in this work. Shared value works with broad horizons – it’s an invitation to challenge the way we work and what we focus on.
I also serve as a Director in the financial services sector. Over the past three years I’ve seen a rapid maturation in the thinking of investment managers and asset owners about how to mainstream and include concepts such shared value into their investment decisions. This is particularly important for people like the trustees of superannuation funds who invest on behalf of their members to enable memebers to have a comfortable retirement. My role here is to work with my fellow board Directors to think through our investment beliefs and ensure we are considering broader community impacts when making investment decisions.
How has practising shared value helped you individually in your role or career more generally?
For me, shared value is about using a broader frame of reference for assessing opportunity and risk, allowing us to test new business models and to innovate to address unmet needs in the community. Yarra Valley Water recently joined the Shared Value Project and we are looking forward to learning more through this community of practice. We understand that we can’t address systemic issues like widespread inequality or environmental degradation alone. On a personal or career level, it is incredibly satisfying to achieve results that will deliver broad and enduring benefit for generations to come.
What do you think are some pertinent issues in Australia that could be solved through creating shared value?
Recent research tells us that financial and social inequality are growing in Australia. Despite an estimated $500 billion being spent annually on health, welfare, education and housing, millions of us are still living in, or on the edge of, financial vulnerability or poverty. This affects our health and life expectancy, our social and economic participation, our financial resilience and the ability of our businesses to grow and prosper sustainably.
The opportunity we have is to address financial vulnerability a way that builds the strength, capability and resilience of the community in a financial sustainable way where value created is shared. This requires governments, regulators, the community and corporate sectors to work collaboratively with the community. This shared value collaborative approach challenges some of our existing operating models and traditional approach of operating independently. However, to successfully address complex societal problems requires new ways of operating. Shared value gives us that opportunity to tackle these problems in a new and exciting way.
We need to work towards inclusive growth, that restores trust in our institutions and invites public participation in decision making. Right up there with inequality is the need to adapt to a changing climate, for obvious reasons. The magnitude of such issues demands that we collaborate with other business organisations to find solutions – there is simply no other way to address them.