Philanthropy vs Strategic Social Investment: Moving sustainability from the periphery to the core

At the start of this Reflection series, I asked “What will it take?” for African businesses to ‘step up, scale up and scale out’© and contribute to making their countries and the continent more self-sufficient. As my last Reflection in this series, I want to return briefly to this original question.

Previously, I have discussed how Sustainability – or Environmental, Social and Governance (ESG) best practice – creates value for African businesses. In these Reflections, there have been two underlining themes: firstly, the importance of the ‘S’ in ESG which I explored through employee welfare and development and gender diversity and; secondly, for Sustainability to create value it has to be aligned with a business’s core strategy.

Throughout these Reflections, I hope I have proved that African businesses – in addition to effective business and financial planning, technical excellence and operational efficiency – must realise the value-creating potential of Sustainability if they want to ‘step up, scale up and scale out’©.

To achieve this, African businesses will need to adopt and implement ESG standards and also begin to think about their current philanthropic activities more strategically, moving them from the periphery to the core of their business.

Across Africa, small and medium sizes enterprises (SMEs) are often at the forefront of addressing poverty, unemployment and inequality because of their proximity to local communities. In fact, local communities and a business’s workforce are often inextricably linked so while issues such as climate change may be perceived as distant and intangible, social needs are often immediate and pressing concerns for these businesses.

Many African SMEs, therefore, undertake philanthropic activities that address socio-economic development challenges. These activities are often one-off events such as cash, food or other material donations that meet an immediate and short-term need, and they rarely have ongoing or enduring benefits. In communities without an effective state-organised welfare system, this role played by businesses is often critical for the survival and harmony of the local community.

However well-intentioned these activities are, the problem is that they remain largely disconnected from the core business and are managed as something separate and peripheral. Consequently, philanthropic activities are often viewed as a cost to the business and, when times are tough, they are easily abandoned.

In many ways, the ‘S’ in ESG is embedded in African culture. African culture emphasises a sense of community, a prioritisation of communal happiness and good human relations – with a focus on “community specifically and on society generally”. The challenge, then, lies not in getting African businesses to understand and accept the importance of social responsibility, but in encouraging them to translate this belief into a long-term commitment through activities that not only have a positive and measurable impact on society but also create value for the business.

To achieve this, African businesses should focus on creating a ‘convergence of interest’ between opportunities that address societal issues and also deliver real business value. This can be done by focusing on activities that measurably improve socio-economic outcomes in the local community and also help improve related core business performance (e.g. a stable business environment, enhanced productivity, decreased operational costs, and an increased customer base). Businesses and communities can only thrive in a strong society, so there is a mutual benefit to unleashing the power of businesses to help solve key societal issues.

For example, Nestlé’s Youth Agripreneurship Development Programme in Ghana, Côte d’Ivoire and Nigeria aims to develop young talented farmers by providing training on good agriculture practices and entrepreneurial skills. This programme directly benefits Nestlé by ensuring the production and supply high quality maize, cassava, cocoa and coffee, and by making farming more attractive to young people as a career choice, Nestlé are helping to ensure a stable, long-term supply chain for the company. Or, perhaps an even more explicit example is Diageo’s $100 million COVID-19 recovery fund for hospitality centres, including those in Nairobi, Dar es Salaam and Kampala. Call it ‘enlightened self-interest’, but what is important is that Nestlé and Diageo are addressing socio-economic development challenges through programmes that simultaneously benefit their companies.

African SMEs can scale up and scale out their current, and much needed, philanthropic efforts by formalising and adapting their activities to align with their business strategy. In doing so, such activities will become investments, rather than costs, that can be sustained over the long-term – creating value for the business, for society and helping to shape a sustainable future for Africa.

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