Profit from the feel-good factor
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Chemical firm Yara is working on infrastructure in Tanzania (Credit: Yara International)

Norwegian chemical company Yara International wasn’t doing well in Tanzania, where farmers simply weren’t buying fertilisers.

In 2007, the company decided to investigate. It turned out that Tanzanian farmers didn’t have access to good roads or reliable trains to get their goods to market. Even if Yara could sell more fertiliser to the farmers, it could actually do more harm than good.

Fertiliser would make the farms more productive, flooding the local market and causing prices to plummet said Terje Morten, senior vice president and head of strategy and business development at Yara’s headquarters in Oslo. With less profits, farmers would be less likely to buy more fertiliser.

So, Yara set into motion a novel plan. It helped put together a coalition of government, non-profit, and private sector interests to improve Tanzania’s infrastructure. Launched in 2010, the project hopes to attract $3bn in investments by 2030. Already, Yara has built refrigerated warehouses to help farmers store their crops.

The result so far: Yara has tripled its fertiliser sales in the country. The lesson for other companies, said Morten, is that it’s OK for companies to profit from making a positive change. What’s more, improved infrastructure is expected to benefit the community at large.

Dubbed “collective impact,” these efforts often start when a low- or mid-level executive brings an idea to upper management. The phrase collective impact first appeared in 2011 in a Harvard Business Review article co-authored by venture capitalist Mark Kramer. The paper had a simple idea: companies can increase the need for their products and services by doing social good.

In some ways, it’s the answer to “what’s in it for us?” for executives who’ve said they want to be more socially conscious but haven’t figured out how to sell the idea to investors who want to see profits, too. Not that there aren’t detractors. No doubt companies that take on collective impact projects will face criticism that they're only in it for the profits. But supporters say the end result is still positive social change.

“A company is allowed to make money while enacting social change,” Kramer said. “That’s the first thing they need to understand to get (to) the idea of collective impact.”

For Yara, the experience in Tanzania changed the way the company works, Tollefsen said. Mid-level managers can now more easily pitch social impact ideas to upper management.

But if your company is new to the idea of collective impact, you'll need to help alter the way people think about social change within your organisation, Tollefsen said.

“If you’re the first to bring in an idea for social change, find an ambassador at a high level who can talk up the idea,” Tollefsen said. “You will get a lot of traditionalists who will say, ‘Look, what can we get from this?’”

The key, then, is to focus on a simple concept: how your company can make money while also doing something good for a lot of people.

What’s in it for them

For a mid-level manager with a good idea, the trick is to pitch a social project with sales projections to back it up, Kramer said. No matter how good the idea, it’s unlikely a company will approve it without a solid cost benefit analysis showing a potential end result is increased profits.

Shiloh Turner, vice president for community investment at the non-profit Greater Cincinnati Foundation in Ohio in the US, helps companies put together collective impact projects. For instance, Turner’s organisation discovered in 2010 that a high unemployment rate in the local area was due in part to a lack of training. The area has its fair share of high tech, healthcare, and skilled manufacturing jobs, but there were few nearby residents with sufficient training to fill those roles. Instead, companies would often look at hiring qualified people from elsewhere.

In response, the foundation helped create Partners for a Competitive Workforce, which has worked with 300 companies to help train local students and unemployed workers. The partnership works with teachers at high schools and colleges nearby to make sure prospective employees have the skills to fill job openings.

People at the companies that work with the programme help local job centres and schools, creating new curricula that will prepare students for specific positions. The investment of time translates into long-term benefits for the company because they don’t need to spend as much time training new hires, Turner said.

Collective impact, Turner said, doesn’t have to be a world-changing idea. She tries to get companies thinking about what small things they can do to improve the community -- and also see profits increase.

“There’s a real strong return on investment to be made for the private sector,” Turner said. “In the end, they’re able to save money on training, because soon they will be hiring people who already know how to do the job.”

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