This is the fifth in a series of articles based on the guide to Centering Equity in Corporate Purpose published by FSG and the Shared Value Initiative in May 2022.
There’s a saying many of us have heard over the course of our lives: don’t put all your eggs in one basket. This concept has been around for hundreds of years and is still used today, often when discussing the importance of diversifying financial investments to spread risks and opportunities. We believe this time-tested idiom also offers wise advice to business leaders seeking to advance equity through their companies.
Systems of inequity are extremely complex and no single program, policy or practice, no matter how strategic or well-considered, will be highly effective at changing the system on its own. Even powerful practices such as shared value, which seeks to leverage a company’s core business to improve societal and business outcomes simultaneously, are more effective when a portfolio approach is taken and shared value is complemented by efforts such as aligned philanthropy, strategic CSR efforts, collaborative partnerships, and more. The portfolio approach is the fifth and final practice that we recommend in the guide Centering Equity in Corporate Purpose. This approach helps to strategically knit together a company’s suite of practices.
A portfolio approach starts with identifying the range of solutions a company has at its disposal to tackle a specific social disparity, which we refer to as an equity domain. Let’s say a financial institution is committed to addressing economic inclusion and elects to focus on creating more equitable access to capital. With this focus, this company’s portfolio could include as potential solutions new or redesigned products and services, changes in fee policies, customer training and education, philanthropic giving, pro-consumer lobbying, supportive payment terms for small businesses serving the company, and volunteering.
Once a business has identified the potential pool of company resources to draw from, it can examine these elements by considering the time it takes to create a benefit, the cost, and the scope of impact. For example, investing philanthropic dollars may allow a company to move quickly to address issues of equity by leveraging pre-existing relationships and knowledge networks, but for most companies, this investment is hard to scale. Efforts such as shared value may take time to create social impact but are more sustainable because they generate profit and can scale as they are linked to the core business and its growth. When shared value efforts are built in collaboration with people with lived experiences and the community they are intended to benefit, they can be even more effective due to this inclusive process. There are some efforts to address equity that may be a short- and long-term expense for the company such as a revised fee policy that may lower revenue earned from late payments and other forms of penalties. And then there are solutions the company may build and share with others to help shift industry practices. While there is equity benefit in each singular solution, if you think of them working together, you can create a more powerful outcome and have more impact.
Nestlé, the world’s largest food company, offers an interesting illustration of employing a portfolio approach through its support for regenerative food systems in order to “protect and restore the environment, improve the livelihoods of farmers and enhance the well-being of farming communities.” Through a nearly 1.2 billion USD investment over five years, Nestlé aims to ignite the practice of regenerative agriculture across their supply chain and deliver more equitable outcomes for farmers as Nestlé lowers its environmental impact. In their portfolio of practices, Nestlé has a range of efforts to benefit farmers, from agricultural training to help farmers learn to improve yields to offering financial support and co-investments for purchasing specific equipment to paying a premium for regenerative agriculture raw materials. These varied efforts deliver outcomes over different time periods, have distinctive costs and returns, and a range of impact on the farmers, environment, and business. And Nestlé’s portfolio of practices extends beyond the company’s own activities: it has created a human rights framework and roadmap intentionally designed to inspire and leverage collective action, too. When these activities are designed together through a portfolio approach, the complementary practices help to reinforce each other and can create better outcomes.
There are many ways to puzzle together a portfolio and the more informed you are about the systemic problem you’re trying to address and the people it impacts, the more effectively you can assemble a high-impact portfolio to advance more equitable outcomes. And as you do with your personal financial portfolio, you should check the mix of portfolio elements over time as systemic problems don’t stay static so neither should the solutions.
Tackling complex issues and changing the systems that hold them in place require more than one solution regardless of its individual strength. Taking a portfolio approach and building a powerful, complementary set of solutions can magnify the impact and help companies more effectively fulfill their commitment to advancing equity.