Transcript - Episode 17: How can impact-driven strategies help companies be sustainable?

Hannah Audino: Hello and welcome to the latest episode of PwC’s Economics in Business podcast. I am your host Hannah Audino, and today we will be talking about the increasing importance of purpose-driven strategies for businesses, and how we help companies understand their impact on consumers and the wider society. Today, I am joined by Priya Ravidran and Ioanna Sikiaridi, who work in our economics and strategy team. Their work involves helping company’s and industry bodies understand their impact on both stakeholders and society, as well as the impact of disruption on their business. In this way, they help businesses to make better decisions and drive transformation.

Thank you both for joining me today.

Priya Ravidran: Hi Hannah, thanks for having us.

Ioanna Sikiaridi: Hi Hannah.

Hannah: Hi both.

There is increasing recognition that profit should no longer be the sole pursuit of corporations. Companies are starting to recognise the importance of considering the interest of all of their stakeholders, including employees, customers, and the wider community. Earlier this year, CEOs of the business roundtable of fortune 500 companies concluded that profits and purpose are inextricably linked.

To kick off, Priya, can you tell us a bit more about why companies are looking beyond profits to think about their purpose and their impact on community?

Priya: Thanks Hannah, indeed, we are now seeing consumers and employees, especially millennials, wanting to engage with companies that share their values and are increasingly demanding companies demonstrate how they make a positive contribution to society. Companies are recognising that short-term profitability is only one objective; understanding their impact on customers and wider society is also an essential component of growth, and to protect the company’s relevance in the society of tomorrow. Government policy is also evolving with greater regard to social and environmental issues.

For example, a large consumer goods company no longer has a separate corporate social responsibility department, but instead has a new business model with sustainability at its core. They have recognised that business growth should not only be at the expense of people and the planet, and businesses cannot thrive in a world in which people don’t.

Hannah: What about the role that technology is playing in this transformation?

Priya: Yes, technology has absolutely been a driver of change. Firstly, social media has completely changed the way companies engage with their customers. We are now more connected than ever before and companies have been able to leverage this to grow their business and to build a brand that resonates with customers and society, but this also means greater customer power and any bad publicities spreads quickly and is likely to stick around longer. A large footwear company have been really successful in connecting with their customers through their shared values. They have built their business by committing to a purpose that is beyond profit, by providing a pair of shoes to a person in need for every shoe that they sell.

Ioanna: Yeah, and Priya I think it is not only about social media and increased transparency because customers are requesting that, I think it is also important to mention that we now have an abundance of data on customers and activities of businesses. They have access to all this data and information, but actually some companies find it challenging to really use that information, to understand and measure their impact across all stakeholders and areas. Yes of course, some are issues around data privacy, but also there are lot of challenges around how do you actually quantify and measure social impact, such as wellbeing, which are often subjective, diverse, and very difficult to monetise.

Hannah: Yeah absolutely, and let’s get on to that in a bit later, but first, Ioanna can you tell about how you are helping companies to achieve this shift?

Ioanna: Yeah, I think in the past few years, we have been seeing increasing demand from companies, who want to really understand the wider impact of their core business and their supply chains. Actually on the back of that, a few years ago, together with PwC’s sustainability and climate change team, we developed a methodology, which we called Total Impact Measurement and Management or TIMM, which essentially provides businesses with a holistic perspective of their contribution to society. We, in our team, can help businesses understand, communicate and enhance their impact. Firstly, we can help them understand how their services and their products have an impact on wider economy, society, and the environment, what we call impact pathways. We can also help them measure and integrate this wider impacts within their strategy and decision making. For example, we can help them develop and measure appropriate KPIs, and linked to this we also help companies communicate their impact to different stakeholders, whether that’s internally within their organisation or externally with their customers or the government. This is linked also to what Priya was saying, the increased transparency and use of digital information.

Hannah: You mentioned before, how hard it is to measure some of these impacts. For example, social impacts being really difficult and very conceptual. What are some of the challenges you face in this work, Priya?

Priya: Yes, the measurement of social impacts such as wellbeing is very hard, because its subjective, and there is no one size fits all approach to measure everything in pounds or in terms of return on investment, but as we said earlier, we are living in a world where we are generating a lot of data. Data is now inexpensive and the techniques of extracting patterns and trends are becoming more accessible and more innovative. This, combined with valuation techniques developed over time and the interest of companies to understand their wider contribution, allows us to measure some of these more complex impacts. Understanding the direct financial impact, but also the wider economic, social and environmental impacts enables companies to make better strategic and investment decisions.

Hannah: Let’s talk through some real life examples of how companies are changing their strategy and business plans. Ioanna, can you talk through one example for us?

Ioanna: Yes, I think really good example that help demonstrates what we have been talking about is work with a company, who are changing their strategy to focus more on long-term profits and growth by integrating customer impact within their business operations. We worked with one of the world’s largest education company and book publisher, who was facing three major disruptive changes in their wider environment. First, the rise of digital technologies put a pressure on the profitability of its traditional text book business. Second, the world of education is changing, with governments, parents, and students now demanding more from their education providers. They really want to know what education will provide to them, and how it will translate into employability and income in the future. Thirdly, slow growth in the developed world and the rise of emerging economies has made companies such as this one having to re-think their strategy, and where their products and activities are taking place.

Hannah: These are like challenges that companies across many industries can relate to. How did the company respond?

Ioanna: Yeah, I think this is why this is a really interesting example. The company announced that they would re-organize itself around customer impact. Making learner impact or what they called a focus in education essential to everything that they do. Essentially, this meant demonstrating how any of their products or services can have a measurable impact on improving the user’s life through learning. This shift in strategy was driven by the idea that by having a bigger impact on education, whether that’s expanding access or improving outcomes, it will also help the company to grow faster and more sustainably in the future. For example, now every acquisition that they are considering, they will also review its approach or its impact on learners together with any commercial indicators that they are looking to assess.

Hannah: That sounds like a really big shift in strategy, how did PwC help them?

Ioanna: Yes, it was a big shift in strategy. We helped a company, similar to the approach that we described earlier, think about what they called measureable impact on learners. We challenged their approach to measuring and reporting the impact of their products and services on users. Our assurance team also is providing assurance to the claims that they are making about the impact of their products and services. Essentially what we did is, we used all our impact assessment tool kit from developing impact pathways to developing a framework and using tools for measurement, to really help them develop and approach to measuring their impact. We also tested, then this resonated with a diverse set of stakeholders, and provided a way of adding value really to the business and their customers as well. They are now publishing annual reports where they demonstrate the impact of their products, and I think this a long way to increase in transparency and demonstrating their commitment to their customers.

Hannah: Thanks Ioanna, that’s a great example of how companies are now thinking about the wider impact to customer. Priya, can you give one more?

Priya: Yes Hannah, let me talk you through our work with community pharmacies in England and Wales. Community pharmacies were facing a potential reduction in their funding to provide a series of health services. This would imply a potential closure of pharmacies across England and Wales. In response to this, community pharmacies were forced to re-think their strategy and how they communicate their value to key stakeholders, and in this case to governments.

Ioanna: Similar to the discussion earlier, what we did is we helped them understand and then measure the value of a set of services that they provide. For example, such as the provision of emergency hormonal contraception or the supervision of substitute medicines for drug users. We really worked with them to develop impact pathways and understand the impact across different sets of stakeholders, from patients themselves to wider society, and to different areas of government, whether that’s the health sector or the criminal justice sector. For example, we assessed the value of delivering prescription medicines that community pharmacies now do, by trying to understand what would happen in an alternative scenario, that would imply longer journeys, need to take time off work or need for carers. We also helped them communicate this to government and other stakeholders in their discussion of funding arrangements.

Both these examples that we discussed are great examples that show how re-organizing, re-shaping your strategy, and embedding an impact driven strategy can help businesses grow commercially and be financially sustainable, but also have an impact on their customers and wider society.

Hannah: Thanks both, and that brings us to the end of our discussion and thank you for listening. If would like to read more about the work that Priya, Ioanna and the team have been doing, and how it might be able to help your organisation, take a look at our economics page in our website with the link and the description. You will find more information on our work and impact driven strategy, our total impact measurement and management approach, and some more case studies.

Please subscribe to our channel, economics and business for updates on future podcasts and to look out for Priya and Ioanna’s next podcast building on this discussion, to talk about the importance of wider societal and environmental impacts in the public sector. The team has been looking at New Zealand’s recent wellbeing budget and its relevance from UK perspective - should be interesting listen.