Next to delivering profits to their shareholders, companies are also increasingly expected to contribute to development needs, and pay taxes in the locations where they create added value. But at a time when the expectations of corporate stakeholders around the world are rising, corporate social responsibility (CSR), the bolt-on approach that is compliance driven, costs money, and produces limited reputational benefits is gradually losing its utility.

In South Africa, for example, many companies are legally mandated to comply with the Broad-Based Black Economic Empowerment Act 53 (2003) that seeks to reverse economic and social inequalities inherited from the Apartheid period by requiring that all stakeholders are appropriately considered in the internal operations and external stakeholder interactions of a company. This translates into preferential procurement policies to empower groups that had been previously disadvantaged, resulting e.g. in the active involvement of such groups in economic value creation via CSR initiatives.

Many firms, moreover, need to comply with the King Reports on Corporate Governance. The third report, published in 2010, brought the issues of sustainability and risk management to the fore, and requires all companies to adopt an “apply or explain” approach. Compliance with King III is mandatory for companies listed on the Johannesburg Stock Exchange, which typically translates to a firm dedicating one percent of post-tax profits to CSR projects. For example, Standard Bank (JSE: SBK), a South African financial institution with global revenues of ZAR 66 billion and ZAR 8.3 billion net income in fiscal year 2013, funds its Corporate Social Investment expenditure via an annual allocation of no less than one percent of the previous year’s after-tax income from its South African operations.

Raising impact and competitiveness by leveraging four megatrends

When they take citizenship commitments seriously, corporations find they are up against a seemingly endless ocean of need. For example, in the recently published World Economic Forum’s Global Information Technology Report, which assesses a countries’ readiness to benefit from emerging opportunities in information and communications technology, South Africa ranked 146^th for its overall quality of education, before Yemen and Libya; it ranked at the bottom (148^th) in terms of the quality of its math and science education.

When companies regard the right balance between corporate responsibility and corporate opportunity, the overall transformation of the corporate value chain can help them deliver on both dimensions. Next to secular trends such as globalization and technical progress, four megatrends are creating new opportunities for profit and impact: (1) Growing demand for affordable products and services at the Base of the Pyramid (BoP), which is a 5 trillion dollar market opportunity; (2) People increasingly looking to gain meaning from their consumption, creating a virtuous consumer segment estimated at USD 546 billion globally; (3) The advent of green growth and the goal of a circular economy, which is creating, as just one example, a USD 700 billion cost-savings opportunity in fast moving consumer goods industries; and (4) A welfare state increasingly at odds with fiscal and demographic realities—with insufficient delivery of goods and services to cover fundamental basic needs being a particularly well-known challenge in South Africa.

Together, these trends are driving a reconsideration of the role of business in achieving financial, social and environmental goals (see graph below).

The way forward: marry corporate venture capital and impact

To future-proof profits and stay in business for the long haul, companies need to now find ways to derive economic value from the megatrends reshaping the economy and society in ways that are compatible with stakeholder expectations about corporate responsibility. Acting on the opportunity, however, has proven challenging for many. At a time when sustainability considerations loom ever larger for global CEOs, and in the minds of consumers and regulators, many executives report that they are stuck on their climb: the path to transformation is not yet readily discernable.

Impact Economy—the global impact investment and strategy firm—recently released “Driving Innovation through Corporate Impact Venturing: A Primer on Business Transformation” to help address this issue. Corporations invest in research and development; corporate venture capital has helped them over the past fifty years to capitalize on their profound industry expertise, moving from early insights into emerging trends to actual investments that yield the new products and services that can power core business.

The pursuit of impact is now being added to this formula: sustainability is increasingly driving value creation, and assessing joint opportunities for financial and social returns is gradually becoming the way forward. This new modus operandi, Corporate Impact Venturing (CIV), builds on the proven channel of corporate venture capital in order to source the innovations now needed. The advent of Corporate Impact Venturing is especially relevant for BoP consumers. The ranks of the disadvantaged will not diminish considerably anytime soon if we expect governments and development agencies to do the job alone. Novel affordable products and services, and jobs are also needed. Companies from emerging markets are in prime position to serve new customer segments due to proximity.

Anyone who wants to be successful needs to understand what matters to their customers, the business models that work in practice, how to make distribution happen, and how to become a trusted product and service provider—at the Base of the Pyramid and elsewhere. This typically requires the identification of pioneering business models and taking time to learn from implementation before attempting to scale.

Seeding the next generation of transformative business models

Leveraging core business competences can offer a powerful pathway to systematically engage in corporate opportunity without neglecting corporate responsibility. Consider, for example, Standard Bank’s AccessPoint model, which includes 3,900 AccessPoints across South Africa, with 37 percent owned by women. The AccessPoint model operates via installed facilities at local traders and spaza shops and takes banking to customers in the community, enabling them to do basic banking operations in a store and avoid the costs of traveling to a branch or ATM; the model processes around ZAR 5.3 million in transactions through small businesses partners (2013).

Globally, corporate venture capital invested USD 29.4 billion into 3,995 deals in 2013. Now imagine what would happen if companies diligently applied the corporate venture capital logic with impact considerations, strategically made investments in start-ups and spin-offs that were economically viable and created social impact, and if emerging market companies leveraged their locational advantage. As the pathways for sourcing business innovation are being updated, the pendulum is swinging to a new approach that reconciles corporate responsibility to include opportunity.

The time has come to welcome Corporate Impact Venturing, and get serious about building a promising sustainable future for everyone.

Maximilian Martin, Ph.D. is the founder and global managing director of Impact Economy, an impact investment and strategy firm based in Lausanne, Switzerland, and the author of the report “Driving Innovation through Corporate Impact Venturing.”

It has been a sobering month of news about climate change.  A few weeks ago the National Climate Assessment was released, which documented the increasing impacts of the changing climate across the U.S.  The take away of the Assessment report was climate change is happening now and it is affecting all Americans. Meanwhile, new research reported in Science Magazine this month indicated we have already committed the world to over three meters of sea level rise, as a result of the irreversible disintegration of the West Antarctic Ice sheet – and now there is nothing we can do to avoid this level of  rise in the sea. Together these stories are contributing to an ever clearer picture that the ‘here and now’ of the climate crisis is inextricably intertwined with the ‘distant and future.’

For many Americans increasingly focused on the hyper-local and hyper-now, these sorts of reports are difficult to process, and the risks of our changing climate are often imperceptible. Occasionally, a big climate-related event crashes down on American communities and acts as a temporary wake-up call to the risks posed by climate change. For example, nine years ago, Hurricane Katrina swept through New Orleans killing nearly 2,000 people and resulting in $81 billion of damage. Katrina shook the nation. Americans watched the devastation in disbelief as it seemed more reminiscent of the disasters that take place in the developing world, not in the United States of America.

Then came Superstorm Sandy, the wildfires and ‘biblical floods’ in Colorado, and the prolonged drought throughout the much of the nation. All of these events led to a temporary upsurge of interest in global warming by news media and the American public.

Do these moments provide opportunities to build a culture that looks beyond the hyper local and hyper now – to the distant here and the future now so critical for building a global society resilient to global environmental changes?

The immediate question that arises after mega-weather related disasters is: Are these extreme events the result of the changing climate? While scientists cannot say that any specific extreme weather event was caused by human-induced climate change,one thing we can say with certainty is that most of the devastation from both Katrina and Sandy was the direct result of human activities. Poorly planned coastal development exposed populations and economic assets to storm damage. Much of New Orleans sits several feet below sea level.

Despite an extensive levee system city officials knew that they faced considerable riskof flooding from coastal storm surge – it was not a question of if, it was a question of when. The same can be said about Sandy. New York had been given warnings of its vulnerabilities. William S. Nechamen, New York State’s floodplain chief, warned in 2006that New York could face “higher than necessary flood damages” if efforts were not made to upgrade the city’s flood maps. Yet despite Nechamen’s warning, FEMA decided to save money in New York City by digitizing old flood maps rather than updating the maps using the newest available science and technology. These decisions reflect the deep-rooted reluctance to think and plan beyond the here and now, and ultimately one of society’s biggest hurdles in addressing climate change.

Another huge hurdle that Americans need to overcome if we want out children to live in a society of peace and prosperity, is the recognition that community disaster risk management is no longer just a local issue; it has now become an issue of global security and economic stability. This is because local economies, ecologies and human health are now all connected by the continuous ebb and flow of goods and services as well as the ebbs and flows of the ‘bads and disservices.’

The shock of Hurricane Sandy was felt well beyond the US eastern shorelines as the resulting two day shutdown of the New York Stock Exchange had ripple effects across global economies. Similarly, the 2011 floods in Thailand and the 2013 typhoon in the Philippines were a reminder of the vulnerability of global supply chains to local weather disasters. And consider an event like the 2010 floods in Pakistan which destroyed 1.8 million homes and killed over 1,700 people. These floods impacted the poorest parts of Pakistan where extremists and separatist movements thrive. As a result this devastation created not only a humanitarian crisis but also a national security crisis for Pakistan, and a potential regional and international security threat for the world.

The international community must begin to approach the risks of local climate and weather-related disasters as a global threat.  American must begin to recognize that reducing vulnerability to climate risks in any community is ultimately contributing to the economic and human security for the world.

We have to be smarter about preparing for climate change—both at home and abroad: if we’re not, climate disasters abroad will increasingly mean problems for us here at home.

Article by Amy Luers, Director of Climate Change, Skoll Global Threats Fund

New research into firms’ symbolic and substantive CSR practices has shed light on differing expectations of the role of business in society. The extent to which companies meet their CSR promises depends on national attitudes to competition and individualism says Oxford academic Thomas Roulet.

The assumption that corporations say one thing and do another when it comes to Corporate Social Responsibility (CSR) is not far from the truth, but just how much they follow through on their promises depends on cultural interpretations of the principles of liberal economics and the perceived role and strength of the government, says Thomas Roulet, Research Fellow at Saïd Business School, University of Oxford. In a paper for the Journal of Business Ethics, “The Intentions with Which the Road is Paved: Attitudes to Liberalism as Determinants of Greenwashing”, Thomas Roulet and his co-author, Samuel Touboul, IPAG Business School, explored the ambiguities surrounding firms’ commitments to social and environmental initiatives.

They discovered that in countries where people believed strongly in the virtues of competition, firms were more likely to practise “greenwashing” – that is, to make a lot of noise about their CSR but to do very little. In countries where liberalism was interpreted as predominantly about individual responsibility, firms were more likely to focus on concrete actions. “Our research suggested a highly complex relationship between beliefs in particular virtues of economic liberalism and the socially responsible behaviours of organisations,” said Dr Roulet.

“It also raises a number of subtle questions relating to the respective roles of business and the state. When a small state is favoured, for example, it seems more likely that companies will step in to ‘fill the gap’. Indeed, some businesses end up having more power than the state and, through becoming involved in developing infrastructures, even substitute for it. However, the business people we interviewed were keen to make a distinction between socially responsible things that businesses should be doing, such as reducing the harmful emissions that they generate themselves, and activities that they engage in that are not really part of their remit, but may enhance their reputations.”

Even when firms act responsibly, they can be doing so with a certain amount of cynicism.

Using qualitative and quantitative methods, the researchers calculated average country-level beliefs when it came to two central tenets of economic liberalism: a belief in the virtues of competition and a belief in the importance of individual responsibility. They found that developed market economies such as Switzerland, the United States, New Zealand and Canada tended to have higher cultural beliefs in favour of individual responsibility. While those countries also score highly in terms of cultural beliefs in favour of competition, it appears that countries with higher scores on this variable are fast developing countries such as India, China, and Morocco.

Mapping these country-level beliefs against the CSR actions of firms in those countries confirmed that firms are more likely to greenwash when populations’ beliefs in the virtue of competition are predominant, and when their beliefs in individual responsibility are less prominent. Therefore, in a country like Morocco, where beliefs in the virtue of individual responsibility are low, but in the virtue of competition are high, firms are more likely to greenwash. Conversely, in a country like France, where the population believes in the virtue of individual responsibility but prefers an absence of competition, firms are less likely to greenwash as they tend to implement socially and environmentally responsible actions without specifically signalling those actions.

“We tend to assume that firms are inherently selfish and more likely to indulge in symbolic CSR practices that look good, such as getting green accreditation, than actively trying to improve stakeholders’ welfare by, for example, reducing CO₂ emissions,” said Dr Roulet. “In fact, our research has shown that what a firm does in the context of CSR is influenced by the shared cultural expectations in its country of origin, which either unconsciously encourage greenwashing or demand substantive action.

Subtle distinctions between different countries’ interpretations of what a liberal economy is all about can lead to very different attitudes and actions when it comes to how businesses operate in relation to society.”

International affairs columnist Doug Saunders notes that slums give rise to much of the conflict and social unrest we see around the world. Even in those slums where conditions seem impossible, a simple and cruel logic keep hopefuls walking in: the belief that life in the slum is still a sliver better than life in the village, says Michael Keith, Director of the COMPAS center at Oxford. He suggests that slums should not be seen as a problem in and of themselves. Rather they represent stunted progression in the journey of those hoping to make a better life in the city.

The fact that they stay in the slum is the real failure. This means that their progression is halted and that ways onwards, into work, education and toward a proper roof overhead— are blocked. For this reason, Michael suggests, the slums should not principally be targeted for infrastructural and social programs that risk institutionalizing them. Rather, interventions should focus on keeping the migrants moving, into work and education toward the goal of social and economic integration. We would do well to avoid repeating the mistakes of Europeans and North American towns of regarding slums as an uncomfortable but unavoidable and permanent necessity. The slum is a symptom, not the disease.

Most urbanization is happening in towns of 500,000 or less, with very little institutional or infrastructural capability, says Joel Bolnick, coordinator of Slum Dwellers International. Nevertheless, slum dwellers feel excluded from the societies they seek to enter. This is because they are in fact excluded, their voices drowned out by experts. He adds that the level of democratic maturity does not matter, governments pro and anti poverty management both result in exclusionary and status quo policies.

Melanie Edwards, CEO of Mobile Metrix, illustrates the disengagement of governments who report prevalence of slum dwelling in the low single percentages whereas the real numbers, even those reported by on-the-ground government officials, are closer to 40% in Rio for example. Ossama Hassanein, Chairman of TechWadi concurs and adds that the Egyptian government reports 300,000 living in Cairo’s slums, the figure estimated by non-governmental organizations being closer to 1.2 million slum dwellers.

Stanford just had a conference on the topic where McKinsey & Co, a consultancy, projected that 22% of the world’s population will soon live in the informal economy. That is one in five humans globally living in an economic environment that eschews tax, public service, basic social and private security—an environment that fuels crime and cements social inequality and conflict.

As I listen to the discussion, I think of the post financial crisis narrative around the “new normal”; a world filled with stark and pressing risks and opportunities, interdependence versus systemic contagion, rapid economic growth versus rising inequality, the rise of new global middle classes versus concentrating accumulation of wealth, increasing globalization versus geo-politicization and securitization of resources from the Internet to drinking water.

More than 100,000 people move into slums every day. That does sound like a sizeable number. One out of five people will soon live in slums. That does make food for thought. But what if this is just the new normal. The new reality as it has been creeping up on our doorsteps for some time. Economies are moving, resources are moving and people are moving. If we call them migrants, does that make them less like us?

Aren’t we all on the move in one way or another? The seminars most poignant remark is offered by Michael Keith. Migration is people moving, it is not a question of us and them, “it’s a question of human progression, journeys that are either enabled or halted, human progress stunted”, stunted by our inability to make space and opportunity for the venturesome.

“Give me your tired, your poor, Your huddled masses yearning to breathe free; The wretched refuse of your teeming shore, Send these, the homeless, Tempest-tossed to me I lift my lamp beside the golden door!”

I think that the “lamp” is not a border fence on the Mexican or Moroccan border. The lamp is not unfortunate but permanent slums. I suggest the lamp might be something more like a social impact metric. A metric for how migrant journeys, wherever they take place, cross borders, into and out of slums—progress or get stunted. Such metrics might give us data to describe the limits to human progress and suggest remedies rather than separating us from them.

Henrik Storm Dyrssen is the CEO of Leksell Social Ventures (LSV), a private impact investment company based in Sweden initiated by billionaire Laurent Leksell, founder of Elekta AB, inventor of non-invasive cancer therapy radiation knives. He is a Goldman Sachs Global Leader Scholar and McKinsey & Co Awardee that has worked an lived in Saudi Arabia, Iran, USA, UK, France and Sweden.

The Intergovernmental Panel on Climate Change has just released its 2013 report on the state of our global environmental health. Compiled by 259 authors in 39 countries the report paints a sobering picture of our current situation and the consequences that await us in the future should we fail to act. These are not sensationalized facts by an author or alarmist marketing noises from organisations with hidden commercial agendas, but rather a compilation of scientific observations from hundreds of people across the globe.

We’ve been hearing these warnings for years, yet fail to realize that it will take decades, or longer, before we can undo the damage. This issue should not be seen as the responsibility of governments only, but rather as a global business plan that we can all subscribe to in whatever way we can. Seven billion people on the planet all saying, “My small contribution to climate change won’t make a difference anyway,” is exactly the problem – it allows seven billion people to stay locked into the very habits that are destroying our ecosystems.

Many consequences of climate change remain unknown, but can we afford to be surprised one day? You wouldn’t run your business like that would you? Below is a summary of the main findings from the Climate Change 2013 report:

Graphic by Boris Rasin

Observed Changes in the Climate System

Each of the last three decades has been successively warmer at the Earth’s surface than any preceding decade since 1850. In the Northern Hemisphere, 1983–2012 was likely the warmest 30-year period of the last 1400 years (medium confidence). Ocean warming dominates the increase in energy stored in the climate system, accounting for more than 90% of the energy accumulated between 1971 and 2010 (high confidence).

It is virtually certain that the upper ocean (0–700 m) warmed from 1971 to 2010, and it likely warmed between the 1870s and 1971. Over the last two decades, the Greenland and Antarctic ice sheets have been losing mass, glaciers have continued to shrink almost worldwide, and Arctic sea ice and Northern Hemisphere spring snow cover have continued to decrease in extent (high confidence). The rate of sea level rise since the mid-19th century has been larger than the mean rate during the previous two millennia (high confidence).

Over the period 1901 to 2010, global mean sea level rose by 0.19 [0.17 to 0.21] m. The atmospheric concentrations of carbon dioxide, methane, and nitrous oxide have increased to levels unprecedented in at least the last 800,000 years. Carbon dioxide concentrations have increased by 40% since pre-industrial times, primarily from fossil fuel emissions and secondarily from net land use change emissions. The ocean has absorbed about 30% of the emitted anthropogenic carbon dioxide, causing ocean acidification.

Drivers of Climate Change

Warming of the climate system is unequivocal, and since the 1950s, many of the observed changes are unprecedented over decades to millennia. The atmosphere and ocean have warmed, the amounts of snow and ice have diminished, sea level has risen, and the concentrations of greenhouse gases have increased. Total radiative forcing is positive, and has led to an uptake of energy by the climate system. The largest contribution to total radiative forcing is caused by the increase in the atmospheric concentration of CO2 since 1750.

Understanding the Climate System and its Recent Changes

Human influence on the climate system is clear. This is evident from the increasing greenhouse gas concentrations in the atmosphere, positive radiative forcing, observed warming, and understanding of the climate system. Climate models have improved since the AR4. Models reproduce observed continental-scale surface temperature patterns and trends over many decades, including the more rapid warming since the mid-20th century and the cooling immediately following large volcanic eruptions (very high confidence).

Observational and model studies of temperature change, climate feedbacks and changes in the Earth’s energy budget together provide confidence in the magnitude of global warming in response to past and future forcing. Human influence has been detected in warming of the atmosphere and the ocean, in changes in the global water cycle, in reductions in snow and ice, in global mean sea level rise, and in changes in some climate extremes.

This evidence for human influence has grown since AR4. It is extremely likely that human influence has been the dominant cause of the observed warming since the mid-20th century.

Future Global and Regional Climate Change

Continued emissions of greenhouse gases will cause further warming and changes in all components of the climate system. Limiting climate change will require substantial and sustained reductions of greenhouse gas emissions. Global surface temperature change for the end of the 21st century is likely to exceed 1.5°C relative to 1850 to 1900 for all RCP scenarios except RCP2.6. It is likely to exceed 2°C for RCP6.0 and RCP8.5, and more likely than not to exceed 2°C for RCP4.5.

Warming will continue beyond 2100 under all RCP scenarios except RCP2.6. Warming will continue to exhibit interannual-to-decadal variability and will not be regionally uniform. Changes in the global water cycle in response to the warming over the 21st century will not be uniform. The contrast in precipitation between wet and dry regions and between wet and dry seasons will increase, although there may be regional exceptions.

The global ocean will continue to warm during the 21st century. Heat will penetrate from the surface to the deep ocean and affect ocean circulation. It is very likely that the Arctic sea ice cover will continue to shrink and thin and that Northern Hemisphere spring snow cover will decrease during the 21st century as global mean surface temperature rises. Global glacier volume will further decrease. Global mean sea level will continue to rise during the 21st century. Under all RCP scenarios, the rate of sea level rise will very likely exceed that observed during 1971 to 2010 due to increased ocean warming and increased loss of mass from glaciers and ice sheets.

Climate change will affect carbon cycle processes in a way that will exacerbate the increase of CO2 in the atmosphere (high confidence). Further uptake of carbon by the ocean will increase ocean acidification. Cumulative emissions of CO2 largely determine global mean surface warming by the late 21st century and beyond. Most aspects of climate change will persist for many centuries even if emissions of CO2 are stopped.

This represents a substantial multi-century climate change commitment created by past, present and future emissions of CO2.

The full report can be downloaded here. What are your thoughts on climate change? Can business make a difference and how? Let us know in the comments section below!

Source: Intergovernmental Panel on Climate Change / World Meteorological Organization, Switzerland.

In anticipation of Earth Day on April 22, we have published below 12 action items that you can implement to make a difference – some immediately and some with a little planning – that will reduce your company’s carbon footprint and increase your bottom line. Feel free to share these tips widely, to comment on whether you’ve taken any of these steps (and any results that might have followed), and to suggests any others you think might be a great idea. Happy Earth Day!

1. Switch from water cooler jugs to on-site water purifiers. (www.freedrinkingwater.com)

2. Ban plastic water bottles; invest in aluminum branded bottles for everyone. (www.sustainablebabysteps.com)

3. Hold e-waste recycling events at all offices/properties. (www.epa.gov)

4. Mandate double-sided printing. (www.kyoceradocumentsolutions.eu)

5. Convert to LED lighting. (www.triplepundit.com)

6. Install smart power strips. (www.science.howstuffworks.com)

7. Raise/lower the air-conditioning/heater thermostat setting by a couple degrees.  (www.life.gaiam.com)

8. Put one or two liter water bottles (sealed lids) in the flush tanks of toilets to save water. (www.wikihow.com)

9. Water aerators on taps to save water. (www.cleanenergyresourceteams.org)

10. Create preferred parking spaces for carpools. (www.drivelesssavemore.com)

11. If using takeout for office lunches/function, use/request biodegradable takeout containers instead of plastic. Otherwise, try to avoid takeout containers entirely and use reusable forks, knives, spoons, plates and cups stored at the office. (www.treehugger.com)

12. Install an Energy Star dishwasher, so everyone is happy with using the office flatware and dishes. (www.environment.about.com)

List supplied by Homer Robinson, a member of the Sustainable Business Network – a network of The Young President’s Organization (YPO)