Phil Preston, a leading collaboration and shared value expert, will present on this topic at the upcoming AFGC Future Leaders Forum on September 20, 2018.
Inside FMCG: Describe what you’ll be discussing at the AFGC Future Leaders Forum.
Phil Preston: It’s essentially about moving beyond corporate social responsibility (CSR) as the key social focus for companies. What we find is CSR is very much around protecting or managing brand and reputation but there’s a lot of new thinking around how you can make strategic and profit driving strategies around social factors, or social and environmental factors. I’ll be trying to break open some new thoughts and ways of thinking people can use.
If you go back to Harvard Professor Michael Porter’s work about how you become competitive in an industry, he’s recently led a charge to modify some of that stance. Where doing great business used to be about scale and accessing capital, we know it’s going into a more knowledge-led area. A way to get competitive advantage is to build different and unassailable business models and if you can connect with certain parts of the community or partner with various NGOs to help you do something differently and that difference builds a value proposition in the eyes of the consumer, you can end up with a more sustained advantage than you normally would.
For example, sugar is a current health topic and a focus for many. So the question is not how we get better accreditation around our sugar – that might be part of it – but how do you use that health issue to come out with a product, strategy or business model that gives you a sizeable lead over your competitors?
It’s still a risk to manage sugar content and there’s a risk you’ll get regulated, but I suppose there’s an opportunity where if you can create a solution that really does fit into the community and government agenda, if you can do the thing other people can’t do and do it well, there are big commercial gains to be had.
Regulation can in fact help companies gain advantage. When faced with new home insulation regulations that would add to the cost of residential developments, Stockland’s natural reaction might have been to lobby against it.
However, it realised that there was market opportunity in innovating and responding quickly. This change of mindset also led Stockland into other innovation areas, such as voluntary investments in social infrastructure because they found customers were willing to pay higher prices for certain features.
Inside FMCG: Where does collaboration come into developing these strategies for businesses?
Most of the strategies involve collaborations with other businesses, but you’re also going across sectors. It’s a change in relationship between businesses and not-for-profits. It’s becoming a strategic relationship when you go into this area, which is different to philanthropic relationships and sponsored programs and the things you normally see under the CSR approach.
Inside FMCG: What advice would you offer businesses that are looking to develop these kinds of relationships with not-for-profits?
There’s a mindset shift to get into this space and some companies are doing it well and some aren’t. Interestingly, the companies doing it well are the ones that see opportunities invested in a problem, those that aren’t sitting on their laurels and investing in working out how to do it better.
The mindset is, “There’s a problem here, it probably does present a commercial opportunity for you, but the challenge is where in my business do I find the opportunity?” It could be about new markets and products but it could be about issues impacting costs in your supply chain.
There are many different places you can look for these kinds of opportunities – it’s about knowing how to look at some of the tools and techniques you need to find them.
Inside FMCG: What businesses do you think are doing a great job of developing socially responsible strategies?
There’s Nestlé, which has been at the forefront of this. One example in Australia is based on their sourcing of oats for their Uncle Toby’s brand, where the majority of oats were being imported from Canada for what is a very Australian brand. The challenge was to encourage local oat growing by farmers of a crop that wasn’t well suited to Australian conditions, with the end business goal of reducing their input costs and transportation requirements.
Nestlé helped farmers within a 100km radius of their Wahgunyah (Victoria) factory with seed technology, agronomist services and flexible contracts, to make oats an attractive and diversifying crop. Their willingness to invest in social and environmental challenges has solved a business problem they faced and boosted the local economy, with flow-on positive impacts for the community.
Inside FMCG: What are some of the biggest challenges for businesses in creating these strategies?
I guess it’s getting them out of the mindset that it’s CSR – it’s not. CSR people typically sit in a department or in their own area with a limited budget and they don’t heavily influence the core strategy of the company.
This is not a CSR discussion, this is something you have to embrace as part of your core strategy. These are things that become business-as-usual. I’m not talking about products and strategies in some magical land. They’re effective because they become business-as-usual. Instead of them being restricted to a CSR manager’s small budget, you’re potentially bringing the full resources of a company to a social or environmental problem, because there’s a win-win, there’s a return on investment that’s built on a business case.
Inside FMCG: What trends have you noticed in terms of corporate social responsibility in businesses?
The language around this is a challenge, because it does fall back into CSR. The trend is that this stuff is great, but often it has limited impact. The challenge with this whole field is lifting it out of what seems to be a niche, isolated area that only people who want to save the earth are interested in and bringing it into mainstream. There are now companies bringing it into the mainstream and therefore, every business will be challenged about what it means and how they can use it to bring better business.
These strategies also tend to benefit businesses in terms of attracting talent and employee retention, too.
You’re actually helping people participate in a social benefit within their everyday work, rather than just saying, “You can make a donation to this cause that we support”. That’s good, but a lot of people are seeing that traditionally, work is one thing and purpose in one’s life as being separate, but this is bringing the two together and that’s powerful.
This interview first appeared in the July issue of Inside FMCG magazine.