Social impact is inherent to your business.

 Business leaders don’t have to just look outside their business model for social impact opportunities.  Social impact is inherent to the business.

Mario Elias Gonzalez.

Complexity is something that very few leaders have seen before, and in current trends, the future seems more challenging. This crisis is much more complex today than during the 2008 crisis, given the multiple and diverse priorities business leaders must meet within the overlapping climate change, inflation, post-pandemic reality, and other interconnected socio-economic issues. Stakeholders, beyond investors, are shaping main management options. So, with or without a social impact mindset, business leaders are making decisions – entirely, partially, or unaware- influencing the S in ESG of their companies.

Current trends shaping the social footprint:

• Climate change impacts people. Most vulnerable populations are losing homes and, in some cases, their lives.
• The aging of the population will continue to reduce the labor force, further slowing growth. 
• Workers still feel ambivalent about responding to the pandemic, and companies are still struggling to bring them back. 
• Deglobalization and the consequent fall in world trade and investment will hinder the growth of developing countries and replace their demand with the fall in demand from industrial countries.
• Consumers and businesses are in good shape in general. Both have healthy cash balances. Consumer wages have increased and have a significantly lower debt than in 2008. Corporate defaults remain at historic lows. 
• Of the 281 Fortune 500 companies in Russia before the war, about 70 percent have reduced or abandoned their Russian operations since the beginning of the war.
• Central banks are already considering supporting retail and commercial customers over the next few years, anticipating their changing needs.

To ensure we are making good decisions and taking advantage to improve the company’s social footprint, we need to revitalize our business strategy. Consider these three tactics to start exploring the context and defining strategic aspirations for social impact:

• Core business:  consider innovation points, from customers to employees, from mitigating negative environmental or social impacts to serving new markets such as low-income segments and traditionally unserved populations.  
• Work processes and value chain: although the pandemic has forced companies to rethink work processes and digitalization, substantial profits will only occur when impediments to providing equal opportunities and digital divides among the value chain are reduced.
• Broader ecosystem and industry externalities:   find opportunities to leverage tangible and intangible assets (technology, infrastructure, intellectual capital, human capital, market presence, etc.) that have the potential to address industry externalities through open innovation and partnerships. Enhance your competitiveness by reducing the negative externalities and maximizing positive value to stakeholders.

Case Study: The S in ESG at CLARIOS stands for Systemic Change

Lead-acid batteries for our cars have 96% of lead composition or 10 kilograms of lead in weight per battery, and CLARIOS is one of the leading global makers. So, lead is strategically vital for CLARIOS, and they started a competitive advantage driven by social impact. In partnership with Pure Earth, they are pursuing a fundamental change that will affect how the whole lead ecosystem works today in Mexico. 

According to the World Health Organization, “lead poisoning can affect children’s brain development, resulting in reduced intelligence quotient (IQ), behavioral changes such as reduced attention span and increased antisocial behavior, and reduced educational attainment.”

The lead poisoning due to the use of lead-glazed pottery in Mexico has reached more than 1 million children. According to Pure Earth Mexico, This issue costs Mexicans nearly $32 billion annually (2% of Mexican GDP).

Pure Earth Mexico

Lead in the batteries is excellent, and they will continue to be crucial in the transition to a net-zero economy through electric vehicles. Still, it should not impact children’s health and quality of life due to the negligence of some lead ecosystem actors.

CLARIOS and Pure Earth Mexico are addressing the causes of lead poisoning by assembling a coalition for a systemic change under the Lead-Free Food Alliance. The alliance is advocating for better public policy, enforcement, better pottery practices and market conditions, rising consumer awareness, lead blood testing, and shifting mindsets, including potters, re-sellers, consumers, policymakers, and other private companies around the circularity of car batteries and its components, especially lead.

The CLARIOS Sustainability Blueprint‘s first element is VALUES, where circularity plays an important role and where the company ensures consistency between its social impact plan and its strategic priorities.

Find more here: CLARIOS ESG report

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Photo Credit: Fernanda Reyes, iStock