Creating Shared Value: Optimising Community Investments
In today’s world, companies are increasingly understanding that they have a responsibility to their local communities and to society as a whole. For socially responsible businesses, this means using their resources and influence to shape the lives of citizens for the better. But it also means creating a fit between core business objectives and their external environment, thereby establishing a social licence to operate.
In Africa, companies engaged in major projects such as mining, power, roads and pipelines, recognise that a social licence to operate is often as critical to their success, or sometimes even a part of, a legal licence to operate. It is among these projects that community investment programmes are most commonly found. The majority of these companies are international rather than home-grown African businesses.
While engaging in community investment can help mitigate against opposition to a project or a company’s operations, it is also the right and smart thing to do – and this does not just apply to international companies and major infrastructure projects, but also to home-grown businesses – those “born and bred” in Africa.
African companies have the advantage of understanding the lay of the land – they know the context, the culture, and the people better than international companies. By proactively aligning their business objectives with the needs and aspirations of local communities, they can develop appropriate social investment strategies and support community investment programmes that create shared value for the business, for communities and for society at large. This goes beyond the ad hoc philanthropic approach applied by many companies on the continent. It calls for a deliberate business strategy that at its core understands that thriving communities are good for business and that businesses have a role to play in addressing some of the most pressing poverty needs where they operate. One way to do this is to align business and social investment objectives with the United Nation’s Sustainable Development Goals (SDGs). By being intentional about benefit sharing with communities, African companies will help themselves stay one step ahead in the competitive world of business.
Benefit sharing programmes can include capacity and skills development programmes, revenue sharing schemes, livelihood enhancement programmes, enterprise development, social infrastructure, environmental initiatives, and so on. For example, Enterprise Group, a financial services company in Ghana, is investing in a financial literacy programme for young people, their teachers and their parents. In doing so, Enterprise Group is improving young peoples’ financial planning capabilities whilst simultaneously building their future customer base – it is a pragmatic approach to their long-term success.
African Governments are also grappling with ways to ensure that investors contribute to the wider social economic development of local communities. The South Africa Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is a case in point. In the procurement requirements, companies must demonstrate how they will create socio-economic value for local communities. As of March 2019, R860million and R276 million had been spent on socio-economic development and Enterprise Development in REIPPPP host communities respectively. For example, the developers of Jeffreys Bay Wind Farm invested ZAR2 million in a ‘Renewable Energy Scholarship Fund’ to support aspiring engineer students to acquire the skills and knowledge demanded by the renewable energy sector.
With a myriad of developmental challenges still facing Africa, and with aid-spending once again being thrown into the limelight – for example, the implications of the recent announcement to merge the UK’s Department for International Development (DfID) with the Foreign Office – now is the time for African companies to step up and be a part of the solution. How will they choose to respond?
About the author: Jennifer Boca is currently Head of Environmental, Social and Governance (ESG) for Lekela Power, a pan-African renewable energy company and she has over 15 years’ experience working in the environmental and social performance sector.