English-Video.net comment policy

The comment field is common to all languages

Let's write comments in your language and use "Google Translate" together

Please refer to informative community guidelines on TED.com

TED@BCG Milan

Wendy Woods: The business benefits of doing good

Filmed:
1,216,322 views

"The only way we're going to make substantial progress on the challenging problems of our time is for business to drive the solutions," says social impact strategist Wendy Woods. In a data-packed talk, Woods shares a fresh way to assess the impact all parts of business can have on all parts of society, and then adjust them to not only do less harm but actually improve things. Learn more about how executives can move beyond corporate social responsibility to "total societal impact" -- for the benefit of both a company's bottom line and society at large.

- Social impact strategist
Wendy Woods is a Senior Partner and Managing Director of The Boston Consulting Group (BCG) and Global Leader of BCG's Social Impact practice, which she helped create. Full bio

A few years ago,
00:12
all the developed
countries in the world --
00:14
the wealthier ones --
00:17
and all of the charities
00:18
together donated about 200 billion dollars
00:20
to developing countries in the world --
00:23
the ones that bear most of the burden,
00:25
the heaviest burden
of the world's biggest problems:
00:27
poverty, hunger,
climate change and inequality.
00:30
That same year,
00:35
businesses invested in those same
countries 3.7 trillion dollars.
00:37
Now, I get to travel a lot in my work
00:45
and I'm privileged
to see the amazing things
00:48
that NGOs and some governments are doing
00:50
with some of that 200 billion dollars:
00:53
helping malnourished children
00:56
or families that don't
have access to clean water,
00:58
children who wouldn't
be educated otherwise.
01:01
But it's not enough
01:04
because the biggest problems
in our world need trillions
01:07
not just billions.
01:11
So if we're going to make
lasting and significant progress
01:14
in the big challenges in our world,
01:17
we need business,
01:20
both the companies and the investors,
01:22
to drive the solutions.
01:26
So let's talk about
what business should do.
01:28
And when I say that,
01:33
you probably think that I'm going
to talk about corporate philanthropy
01:34
or corporate social responsibility.
01:38
CSR is the norm today,
01:41
and it's very useful.
01:44
It provides a route
for corporate generosity
01:46
and that generosity is important
to many corporations' employees
01:49
and customers.
01:53
But you know what?
01:55
It's just not big enough,
01:56
or strong enough,
01:58
or durable enough
01:59
to drive solutions to the biggest
problems in our world today
02:01
because it's incremental cost.
02:05
Even when business is booming,
02:09
CSR just isn't designed to scale.
02:12
And then of course in a downturn,
02:17
it's one of the first programs to be cut.
02:20
So no,
02:23
CSR --
02:25
corporate social responsibility --
02:26
isn't the answer,
02:28
but TSI --
02:30
total societal impact, is.
02:32
TSI is the sum of all of the ways
02:36
business can affect society
02:40
by doing the real work:
02:42
thinking about their supply chains,
02:45
working on their product design
and manufacturing processes
02:47
and their distribution.
02:51
The real work of business,
02:56
when done with innovation,
02:58
can actually create
core business benefits for the company
03:00
and it can solve the meaningful
problems in our world today.
03:05
So what does TSI look like?
03:12
Focusing on TSI
03:14
means incorporating
social and environmental considerations.
03:16
And you know what?
03:22
It's something that isn't completely new.
03:23
It's been thought about for a while.
03:26
But the hard part is that corporations
almost exclusively still think
03:29
about something called TSR:
03:34
total shareholder returns.
03:37
But TSI --
03:40
total societal impact --
03:42
needs to stand alongside TSR
03:44
as an important and valid driver
of corporate strategy
03:48
and corporate decision-making.
03:53
And we've got the data
to show you why and how.
03:56
Some companies
are already making this happen.
04:00
They're beginning to make it happen.
04:04
So let me tell you the story about Mars.
04:06
Mars is the sixth-largest private company
in the United States.
04:09
If you're like me,
04:14
they make some important products,
04:16
like coffee and chocolate.
04:18
So not surprisingly,
04:21
one of their most important
ingredients is cocoa.
04:23
And some of their competitors
are actually really worried
04:26
about the sustainability
and the availability of cocoa supplies.
04:30
But not Mars.
04:35
They're confident in the stable supply
of that crop for the long term.
04:36
And why is that?
04:41
It's because they partner
with NGOs around the world
04:43
that are working
with small shareholder farmers.
04:47
And those certification agency's NGOs
04:50
are working to help farmers
improve crop yields,
04:53
they're making sure that they get
a fair, premium, livable wage
04:57
and they're helping them address
any human rights potential issues
05:01
in supply chains,
05:05
and they're helping minimize
the effects on the environment,
05:06
like deforestation.
05:10
Mars is on a path
to 100 percent certified cocoa,
05:12
so this is a good program
for farming communities,
05:16
it's a good program for the environment,
05:20
and it's a good program for Mars,
05:22
who has solved a significant risk
in their supply chain.
05:25
But now let's get to the data,
05:30
because it's actually really awesome.
05:33
And let me explain exactly what the data
points I'm going to talk about are.
05:36
When analysts and financial people
look at companies,
05:41
they think about
a lot of different statistics.
05:45
I want to talk about
two of the most important ones.
05:48
I'm going to talk about
the overall value of a company --
05:52
it's valuation --
05:54
and I'm going to talk about its margin.
05:56
Basically the difference
between all of its earnings
05:59
and all of its costs.
06:02
So in our study,
06:05
we looked at oil and gas companies,
06:07
and the oil and gas companies
06:10
that are performing
most strongly on TSI --
06:11
total societal impact --
06:15
see a 19 percent premium
on their valuation.
06:16
19 percent.
06:22
When they do really well
06:23
on things like minimizing
the impact of their company
06:25
on the environment and water,
06:28
and when they have very strong
occupational health and safety programs.
06:31
And when they also add in
strong employee training programs,
06:35
they get a 3.4 percentage point
premium on their margins.
06:40
But what about other industries?
06:45
Biopharmaceutical companies
that are the strongest performers on TSI
06:47
see a 12 percent premium
on their valuation.
06:52
And then if they're best
at expanded access to medicines --
06:55
making medicines available
for the people who need them --
06:59
they see a 6.7 percentage point premium
on their growth margins.
07:02
For the retail banks
that are strongest on TSI,
07:08
they see a three percentage point
premium on their valuation,
07:12
and then for those that differentially
provide financial inclusion --
07:17
access to financial products
for people who need it --
07:21
they see a 0.5 percentage point premium
in their net income margin.
07:24
Now, these numbers for banks
may not seem very big,
07:30
but in highly competitive industries,
07:35
even really small differences
in margin matter a lot.
07:37
Now, what about those
consumer goods companies --
07:42
the ones who make those products we love
like coffee and chocolate?
07:45
Consumer goods companies
that perform best on total societal impact
07:49
see an 11 percent valuation premium.
07:54
And then if they do those smart
things with their supply chain --
07:59
inclusive and responsibly
sourcing their product --
08:03
they see a 4.8 percentage point premium
on their growth margins.
08:06
These numbers are significant.
08:13
We've long known that things
like fundamental financials,
08:15
growth rates and financial risks
are key drivers of valuation,
08:19
but this rigorous analysis shows
that social and environmental factors --
08:25
total societal impact measures --
08:30
are also linked to valuations and margins.
08:33
Wow.
08:39
All else equal --
08:41
we didn't confuse
the analysis with anything.
08:42
All else being equal,
08:45
companies that perform strongly
on social and environmental areas
08:47
achieve higher margins
08:53
and higher valuations.
08:55
Now, I do understand
08:57
that companies are under
a lot of short-term earnings pressures.
09:00
But fortunately,
09:06
the investors who create
some of this pressure
09:07
are actually more and more themselves
starting to think longer-term
09:11
and starting to think with this TSI lens.
09:16
In our conversations
and surveys with investors,
09:20
75 percent of them say
they expect to see improved revenues
09:23
and improved operating efficiency
09:29
for companies that are thinking
with a TSI lens.
09:32
And they're actually starting
to incorporate this
09:36
in their own investing behavior.
09:38
Last year,
09:41
23 trillion in global assets
09:43
were in the category
of socially responsible investing.
09:47
Now, that's five billion
over just the last two years.
09:52
And it represents a quarter of the total
global assets managed in the world.
09:57
I know that some of you
may be cringing a little bit right now.
10:05
Because in my decades
of strategy consulting
10:10
with businesses and NGOs
and governments around the world,
10:13
I find that many businesspeople
10:18
are hesitant to talk
or even sometimes think about
10:21
the business benefits of doing good.
10:26
They somehow think
it's going to negate the value
10:30
of the benefits
they're creating for society.
10:32
Or that they'll be perceived
as heartless or even mercenary.
10:35
But we really do need
to think differently.
10:40
We need to think differently
10:44
because the only way
we're going to make substantial progress
10:46
on the challenging problems of our time
10:50
is for business to drive the solutions.
10:53
The job of business
is to meet customer needs
10:56
and to do so profitably.
11:00
They need to to survive.
11:02
So one of the best ways for businesses
to help ensure their own growth,
11:04
their own longevity,
11:10
is to meet some of the hardest
challenges in our society
11:12
and to do so profitably.
11:17
And when they do that innovatively,
11:20
when they do that ethically,
responsibly, incredibly,
11:23
they should be proud.
11:28
But if you still aren't sure about this,
11:34
let's talk about a few more examples.
11:37
What if you're a technology company
11:40
and you're trying to grow your platform
11:42
and you're trying to grow your customers?
11:45
Like, Airbnb.
11:48
Airbnb has a portfolio
of total societal impact activities.
11:50
They're all spot-on their core business.
11:55
In one initiative,
11:58
they're helping enable their community
12:00
to provide housing for free
to those in disaster:
12:02
crisis survivors and relief workers.
12:05
In another effort on their part,
12:08
they're actually helping
and working with NGOs
12:11
to ensure that people can provide
housing for free for refugees.
12:15
Now, what I love about this program
12:21
is that I don't think
most people would've figured out
12:23
how to express their generosity
12:26
and open their homes
for those in such dire need --
12:28
certainly not so quickly
or so easily or efficiently --
12:31
without this innovation by Airbnb.
12:34
But at the same time,
12:37
this is core to their corporate strategy
12:39
and core to their growth
12:42
because they grow by increasing
the number of hosts and guests
12:44
using their platform.
12:49
But if they'd only
been thinking exclusively
12:52
about the return side of things,
12:55
I'm not sure they would have ever
figured out this route to growth,
12:58
because they're not
charging transaction fees.
13:01
So it's a pretty exciting way,
13:04
when they were thinking
about how to bring their capabilities
13:05
to a need in society
13:08
and at the same time
drive their own growth.
13:10
But what if you're trying to find
new customer segments?
13:14
Let's move to South Africa,
13:18
and let's talk about Standard Bank.
13:21
In South Africa,
13:23
the government has a regulation
13:25
that requires all banks
to donate 0.2 percent of their profits
13:27
to small and medium
black-owned enterprises.
13:32
And many banks just donate
this to the entrepreneurs,
13:36
but Standard Bank thought creatively.
13:40
And what they did is they took those funds
13:42
and they invested them
in an independent trust,
13:45
and they used that trust to fund loans
to these black entrepreneurs.
13:49
This is a highly leveraged model.
13:54
They can support a lot more
entrepreneurs with capital,
13:57
and because their success
is completely intertwined
14:00
with the success of the entrepreneurs,
14:03
they're actually also using the fund
to provide technical assistance.
14:06
More entrepreneurs supported,
14:10
more people and communities
being lifted out of poverty.
14:13
And it's successful for Standard Bank.
14:17
So successful that they're actually
working on expanding this program
14:19
to other areas in their portfolio.
14:24
It's not like we haven't been trying
to solve the problems in our world
14:27
for a long time.
14:31
We have, and they're still here.
14:33
We're making progress,
14:36
but it's not far enough,
14:38
or fast enough,
14:40
or universal enough.
14:41
We need to flip our thinking.
14:44
We need to have business --
14:47
both companies and investors --
14:49
bring creative, innovative
corporate strategy and capital
14:53
to solving the biggest
problems in our world.
14:59
And when they do that innovatively,
15:03
and when they do that
15:08
with all of their thinking
and all of their strategy
15:11
and all of their capital,
15:14
and they're creating
both total shareholder returns
15:16
and total societal impact,
15:19
we know that we will solve those problems,
15:21
both profitably and generously.
15:24
Thank you.
15:28
(Applause)
15:29

▲Back to top

About the speaker:

Wendy Woods - Social impact strategist
Wendy Woods is a Senior Partner and Managing Director of The Boston Consulting Group (BCG) and Global Leader of BCG's Social Impact practice, which she helped create.

Why you should listen

Wendy Woods is responsible for BCG's work addressing global health, development, education, environment and climate, humanitarian response and total societal impact. She works with businesses, governments and social sector organizations, helping clients rethink business's role in society, create inclusive strategies, improve effectiveness, develop public-private partnerships and drive change. She is passionate about improving cooperation across the private, public, and social sectors to help solve the world's most intractable problems, as highlighted in her previous TED Talk, "Collective cooperation in the social sector."

Woods is also a frequent contributor to BCG's thought leadership across a wide range of topics, most recently co-authoring "Preparing for a Warmer World," "Total Societal Impact: A New Lens for Strategy," and "Why Paid Family Leave is Good Business."

Woods is a member of the Board of Trustees for the Centre for Public Impact, a BCG foundation dedicated to improving the positive impact of governments. She earned a BA in economics from the University of Michigan and an MBA from the J.L. Kellogg Graduate School of Management at Northwestern University.

More profile about the speaker
Wendy Woods | Speaker | TED.com