It’s the forever challenge of teams working on social impact initiatives: How do you convincingly make the case for social impact when the easiest thing you can measure is spend, not return?
For executives at companies like Bayer, Citi, and IKEA, the answer is hiding in plain sight: Dollars are the metric. “The question I discuss at every meeting is, how do we bring social impact into the business strategy?” Daniella Foster, an executive committee member of Bayer, told me.
There’s no shortage of challenges if you want to measure the “S” in ESG or other social initiatives. ESG standards are an alphabet soup, success is defined differently from company to company, and social impact is often lumped together with philanthropy and diminished as a “nice to have.”
Yet to some companies, the case for pursuing social impact is crystal clear, according to executives at several organizations who joined me on an Impact Initiative call last week and in a Fortune Connect executive session earlier this week.
Citi’s Brandee McHale, who heads the bank’s community investing and development initiatives, pointed to the economic imperative in providing loans and services to communities of color in the U.S. “For every dollar in wealth a white household has, a Black household has 10 cents,” McHale said. (The Minneapolis Fed estimates the racial wealth gap to be a bit narrower, at a still-staggering 6 to 1.)
If a bank like Citi wants to thrive in the future, McHale said, it needs to do its share to reduce that wealth gap—by making the business case. So, in 2020 Citi started deploying $1 billion in strategic investment to provide communities of color with loans, mortgages, and business funds. It also launched a $2.5 billion affordable housing “social bond”—the largest ever of its kind.
Such initiatives are clearly aimed primarily at social impact, but being core to Citi’s business, they are also designed to pay off.
Bayer’s Daniella Foster, who oversees science, sustainability, and public affairs at the consumer health giant, was even more direct. “For me, it’s all about how you tie [social impact] into the business,” she said. “I am obsessed with that.” At Bayer, she continued, “we don’t have a separate sustainability strategy or a separate social impact strategy. It’s all part of our business strategy.”
It doesn’t mean Bayer doesn’t have social impact goals. It does. By 2030, the company wants to impact 300 million people: 100 million smallholder farmers (helping them produce quality food), 100 million people in economically or medically underserved communities (giving them access to self-care), and 100 million in low- and middle-income countries (providing them with modern contraception).
It’s all part of Bayer’s long-term strategy. “You can’t look at the challenges from agriculture to health care and not talk about access,” Foster said. “It’s core to how we future-proof our business.”
And an interview with Jesper Brodin, CEO of Ingka Group (which operates IKEA Retail), highlighted the fact that the DIY furniture retailer’s mission is, essentially, social impact: to “create a better everyday life for people all over the world.” It’s hard to imagine many companies that have left a larger societal footprint, I would argue: everyone has an IKEA story. At the same time, the company has had major financial success.
Yet achieving those two key objectives—a better everyday life and profits—still isn’t enough for good corporate citizenship, Brodin says. Long gone are the days when IKEA fled Sweden for fiscal purposes, for example. Today, the company pays an effective tax rate of 24%. And it is on its way to become a circular and climate-positive business.
Those efforts may not affect the bottom line positively in the short term. Taxes never do. But they do constitute a key part of the company’s social and environmental impact, and thereby its long-term viability. When pursuing impact, dollars today aren’t as valuable as dollars tomorrow. Social impact generates business value, but it’s a long-term and holistic play.
More news below.
Peter Vanham
Executive Editor, Fortune Impact and Connect
@petervanham
peter.vanham@fortune.com
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