Professional services firm Deloitte’s Human Capital Trends 2018 report titled ‘Rise of the Social Enterprise’ showcases a profound shift facing business leaders globally.
This shift reflects the growing importance of social capital in shaping an organisation’s purpose, guiding its relationships with stakeholders and influencing the ultimate success or failure of the enterprise.
A ‘social enterprise’ is an organisation whose mission combines revenue growth and profitmaking with the need to respect and support its environment and stakeholder network.
A global survey of more than 11 000 business and human resource leaders from 124 countries was used to compile the report.
Based on that input, Deloitte found the number one global business trend to be a greater need for C-suite collaboration, meaning participation from senior management level in driving their respective businesses towards being a corporate citizen and operating in an ecosystem, rather than in silos.
Deloitte reported that organisations are no longer assessed based only on traditional metrics, such as financial performance or the quality of their products and services.
Rather, organisations are judged on the basis of their relationships with their workers, customers and communities, as well as their societal impact at large – transforming business enterprises into social enterprises.
Social capital is achieving newfound status next to financial capital. For example, 65% of CEOs surveyed rated inclusive growth as a top-three strategic concern, more than three times greater than the proportion citing shareholder value.
Deloitte human capital leader and report co-author Pam Maharaj explained at the report’s launch on Thursday that businesses should adopt an outside-to-inside approach – incorporating external trends, perspectives and voices, while maintaining relationships with employees, communities and customers – as opposed to the existing inside-to-outside approach.
Maharaj added that, in adopting this approach, it challenges business leaders to become part of a bigger societal picture, to act transparently with information, and break down silos to enhance collaboration and build trust and credibility.
“Doing this is critical to maintaining an organisation’s reputation; to attracting, retaining and engaging critical workers; and to cultivating loyalty among customers,” she said.
This shift in global business dynamics has been driven by social, economic and political changes that have grown since the global financial crisis in the early 2000s.
Maharaj said that, despite the subsequent economic recovery since 2008, people still feel frustrated that financial gains have failed to improve individual lives, address social problems and support political stability. “Therefore, people (employees, customers and communities) have less trust in their political and societal institutions and are expecting business leaders to fill the gap.”
She added that people are increasingly turning to the private sector and asking that companies respond to broader societal challenges and demanding that organisations serve a social purpose, which Maharaj said is not limited to corporate social initiatives, but includes stakeholder engagement and meaningful business purpose across all operations.
The Edelman Trust Barometer reported that people worldwide place 52% trust in business to “do what is right”, compared with 43% trust in government.
Meanwhile, Deloitte human capital leader and report co-author Trevor Page explained that another driving factor behind the social enterprise is the power of the individual.
“Millennials, especially, are actively questioning corporate behaviour and the social principles that guide it. Social capital plays an outsized role in where they work and what they buy.
“Eighty-six per cent of millennials think that business success should be measured in terms of more than just financial performance and, with 50% of the business workforce soon to comprise millennials, it is an important factor to consider,” he said.
A third driving force behind the shift to social enterprises is technological change having unforeseen impacts on society and societal cohesion, even as it creates massive opportunities to achieve sustainable and inclusive growth.
Page elaborated that artificial intelligence and new communications technologies are fundamentally changing how work gets done, who does it, and how it influences society.
Many stakeholders are alarmed, and they expect businesses to channel this force for the broader good.
Technological advances can open up new ways for businesses to have a positive impact on society, said Page, citing that 87% of C-level executives say the Fourth Industrial Revolution will lead to more equality and stability, and 74% say business will have more influence than governments or other organisations to shape this future.
The Deloitte human capital trends report found that, while 85% of respondents agree that the symphonic ‘C-suite’ is the most important trend to consider, only 46% indicated readiness to adopt it.
Further, 85% of respondents said people data is important, but only 42% said they are ready to leverage it more.
Eighty-four per cent of respondents agree that businesses should not offer careers to employees, but rather experiences; however, only 37% of the business leaders indicated readiness for this trend.
In terms of citizenship and the corporate social impact consideration in an entire ecosystem, 77% of the respondents recognised its importance, while 51% indicated readiness to implement it.
Moreover, 72% of respondents said artificial intelligence, robotics and automation are essential for business going forward, but only 31% of respondents indicated readiness.
In conclusion, Page noted that a social enterprise seeks to actively manage its position in the social ecosystem by engaging with stakeholders and strategically determining and pursuing the kind of relationship it wants to maintain with each.
“Leaders should form relationships with the governments and the regulatory bodies that shape the ‘rules of the road’, work collaboratively with them to create a fair marketplace.
“Leaders should also partner with communities and educational institutions to help sustain a steady flow of talent with the right skills for the organisation – and the broader economy – to thrive,” he concluded.