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Sustainability: a new business opportunity

May 24, 2019 at 10:49 AM by Luís Jerónimo

Al Gore stated recently that sustainability is “the single largest investment opportunity in history” and that “we are at the early stages of a technology-led sustainability revolution, which has the scale of the industrial revolution, and the pace of the digital revolution” [1]. The question, then, becomes: how can organizations change their business model to meet this new paradigm without compromising the present?

Author: Luís Jerónimo and Francisco Palmares | Reading time: 4 minutes

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Today, one of the biggest challenges of leadership is balancing financial performance and contribution to society. This is neither easy, nor simple. It is a complex challenge that implies a demanding process to drive the change of paradigms within organizations. That change can consequently drive business opportunities by combining financial return and social or environmental impact.

Impact – trend or market demand?

The transition to a sustainability or impact mindset sometimes looks intangible or aspirational, but the market is demanding it. Nowadays, 65% of consumers prefer products that meet sustainability standards [2]. Furthermore, over two thirds of the millennials who entered the job market are looking for companies that generate a positive impact in their community [3]. This group, that will be transferred around $24tn until 2020 [4], is taking into consideration environmental, social and governance factors in its investment decisions [5].

How can a company unleash this potential?

The path set by the United Nations through the Sustainable Development Goals may be used as a global reference and a starting point of the transformation process of organizations. Each company must, however, define and implement its own transition process to be sustainable and improve its social impact, beyond its strategies of social responsibility. With that said, these strategies are usually seen as a cost instead of an investment that drives value and growth opportunities. In order to better implement these transition processes, the sustainability goals must be incorporated in the core business. Therefore, it is necessary to redesign the supply chain to guarantee a better alignment between profit and impact. The possibility of combining financial return and social impact made it possible to develop a new investment concept – impact investing – that may help companies during the transition.

What is impact investing?

It is the allocation of capital in activities, organizations or funds aiming to obtain both financial return and social return, given that they are both measured and influence the investor decision [6].

This investment area is growing worldwide (GIIN estimated the overall impact investing industry at USD 502 billion as of the end of 2018 [7]), especially in the Anglo-Saxon countries (United Kingdom, United States and Canada), but the same is happening in Portugal.

Why Portugal?

In a global landscape, Portugal has a privileged position for impact investing because it combines the necessary elements of a vibrant ecosystem:

  • Connectivity with the world thanks to its geostrategic location;

  • Incentives to attract startups;

  • Openness to innovation;

  • A proper market to incubate new products;

  • Talent at a competitive cost when compared with the rest of Europe.

The role of the Calouste Gulbenkian Foundation

One of the biggest bets of the Calouste Gulbenkian Foundation is to promote an agenda of innovation and impact investing as part of its social intervention work. The latter tries to combine:

  • research to generate knowledge and market intelligence;

  • dialogue at a national level through a group designed for to promote it, called Portuguese Social Investment Taskforce;

  • revitalization of international partnerships, such as the Global Steering Group for Impact Investing;

  • financing of social initiatives that test and validate this new approach, such as the investment in Social Impact Bonds.

The creation of the Social Investment Lab – MAZE – in 2013 was decisive. MAZE is a startup specialized in the promotion of impact investing. Since then, numerous initiatives have taken place. The creation of acceleration programs to foster startups, meetings with the public sector to promote access to data about potential impact and, recently, the creation of an impact investing fund are examples of steps that were taken. Indeed, the path taken up until now has positioned Portugal at the forefront when it comes to impact investing, from public policies to new financial instruments.

These initiatives are preparing the field for innovative projects by giving them conditions to grow. These projects can, in return, help organizations through processes of paradigm change towards a more sustainable, profitable and impactful strategy.

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The Calouste Gulbenkian Foundation and Nova School of Business & Economics joined forces to support organizations going through this paradigm change process. Paradigm Shift is the executive program that was born from this partnership, in the scope of Gulbenkian Chair on Impact Economy.

Paradigm Shift is a program for executives, whose first edition will take place in 17th, 18th and 19th of June. Around 20 C-level participants (Chairman, CEO, CFO, COO, CMO, Human Resources Directors, Sustainability Directors, etc.) will meet in the new Carcavelos campus to discuss sustainability. The Calouste Gulbenkian Foundation will offer seven scholarships to organizations with high potential of transformation, specifically from the social and the environmental sector (micro, startups and SMEs).

References:

[1] “Al Gore: sustainability is history’s biggest investment opportunity” (link here)

[2] The Sustainability Imperative, Nielsen (link here)

[3] Purpose at Work, LinkedIn (link here)

[4] Millennials – the global guardians of capital, UBS (link here)

[5] Sustainable Signals, Morgan Stanley (link here)

[6] Glossário para a Economia Convergente, LIS (link here)

[7] Sizing the Impact Investing Market, GIIN (link here)

Topics: Opinion Articles, Sustainability

Luís Jerónimo

Published by: Luís Jerónimo

Director of the Social Cohesion Programme @ Calouste Gulbenkian Foundation

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