Tag Archives: EY

Could business hold the key to universal access to safe drinking water?

Imagine a life without safe drinking water. It isn’t easy. Most of us take for granted that we can just turn on a tap and fill a glass. But that’s not an option for roughly one in four of the world’s population — the 2.1 billion people who still lack access to safe drinking water today.

With half of all hospital beds in low-income countries occupied by people with water-borne diseases, it’s hard to overstate the importance of reaching the UN Sustainable Development Goal of equitable access to safe, affordable drinking water for all by 2030.

While the current rate of change isn’t fast enough to hit that target, some fantastic research by EY’s Wayne Simper suggests grounds for optimism, thanks to the growing number of impact entrepreneurs innovating new models for the scalable and sustainable provision of safe water in underserved communities.

That story of optimism is one that Unilever and EY were shouting loud and proud at World Water Week in Stockholm, late last month, drawing on a joint report based on Wayne’s insights, and which I had the pleasure of writing.

Co-signed by Kees Kruythoff (President, Home Care, Unilever) and Alison Kay (Chair of the EY Global Accounts Committee), How can a trickle become a torrent? shines a light on the critical factors influencing impact entrepreneurs’ ability to build truly scalable and self-sustaining Safe Water Enterprises (SWEs) with the capacity to bring safe drinking water within reach of hundreds of millions more people.

The market leading SWEs, analysis of whose businesses forms the basis of the report, are already serving more than 15 million people across Africa and India, and we may only have scratched the surface of what these, and others like them, could achieve with the right focus and support. Wayne’s research and analysis suggests this rests on recognizing three things above all:

  1. That the high fixed costs inherent in any SWE operating model mean that only SWEs that operate at scale can achieve true sustainability
  2. That there’s no “ultimate” SWE model that works best in all circumstances, which means that the path to scale depends on finding the best fit to a particular blend of market conditions
  3. That we need investors who are prepared to take a more balanced view of SWEs’ potential to generate returns — from a social impact as well as financial perspective — so as not to overlook promising and scalable models for safe water provision

Picking out just one of these themes, to give you a flavor of the kind of insight you’ll find in the report, it’s worth taking a closer look at the third point.

We’ve all seen the power of a “magic metric” to galvanize action, a prime example being how a single piece of data such as grams of carbon dioxide emitted per kilometer (gCO2/km) has transformed perspectives and behaviors across the automotive industry. The report introduces a new one that has the potential to create a similarly seismic ripple effect: Impact Return on Capital, or IROC for short.

In the case of safe drinking water, this metric represents the number of daily water consumers whose needs can be served per thousand dollars of invested capital. It’s an important measure because it opens up an entirely new way of looking at the capital efficiency of SWEs — one that properly takes into account the purposeful trade-offs these life-changing businesses make, often intentionally running close to breakeven in order to keep prices low and make safe drinking water as affordable as possible.

With innovative SWEs clearly so vital to reaching the SDG target of equitable access to safe, affordable drinking water for all by 2030, we can’t afford to overlook any model with the potential to accelerate that access. Combined with more the more traditional measure of Return on Invested Capital (ROIC), IROC paves the way for a more holistic approach to building and evaluating investment cases that can help guard against this eventuality.

For more on this and other insights for accelerating growth of SWEs, I urge you to read and share the full report. The health and wellbeing of more than 2 billion people could depend on following the advice within its pages.


Cracking the last-mile distribution challenge

You can’t manage what you don’t know.

While we’d probably all subscribe to that maxim, it’s one that rings especially true for organizations seeking to serve the more than four billion low-income people living at the base of the pyramid (BoP).

BoP markets have long been heralded for their potential to drive economic growth and social impact on a massive scale by providing millions of poor households with affordable access to essential goods and services such as safe water, clean energy and improved sanitation.

The fact that we’ve barely scratched the surface of that potential points to the essential problem: these markets are notoriously hard to reach, with geographic isolation and limited access to information leaving BoP customers disconnected from any business value chain.

This dislocation is the crux of the so-called last-mile distribution challenge and, if we’re going to crack it, then finding ways to reliably connect with end customers, and capture and make use of their insights, is surely a vital part of the equation.

That’s because — in largely informal economies, where word of mouth is king — the end customer is so much more than that. They’re also potentially your sales force, your design team and your corporate strategy department — your best source of market intelligence on what works and what doesn’t out there in the real world.

A collaboration between EY, Acumen (the world’s leading impact investor) and Frontier Markets (one of its investees) stands as proof of the difference that can be achieved when impact entrepreneurs invest time and energy in establishing robust feedback loops with customers, as well as the dealer networks that form an essential part of so many BoP value chains.

Insights and lessons learned from that collaboration (including from the odd failure as well as successes) are the subject of a new report I had the pleasure of writing – Are your customers in the loop? – which aims to accelerate the growth and impact of the social enterprise sector at large by translating the experiences of that single project into practical and generally applicable guidance that any BoP business can follow.

It not only shows that it’s possible to mine a rich seam of valuable customer data, if you are prepared to experiment with technology, and create the kind of incentives and experiences that make customers want to engage with you; it also illustrates how that insight can be used to drive all manner of strategic and operational improvements that can help BoP businesses to increase their resilience, productivity and capacity for sustainable growth.

The importance of such efforts shouldn’t be underestimated.

Impact entrepreneurs and their businesses are crucial to achieving the United Nations Sustainable Development Goals, making sure that many more millions of people are able to share in the benefits of economic growth. Fusing the social mission of a nonprofit with the market-driven approach of business, they are critical engines for powering inclusive growth, human dignity and potential.

They are at the epicentre of an altogether different narrative about inequality and business’ role in tackling it, by providing affordable access to the essential goods and services — energy, education, health care, housing, water and sanitation, and agricultural inputs — that give people the agency to change their lives.

Often succeeding in spite of massive constraints, few are more significant than the challenge of last-mile distribution. If we can find reliable ways through and around that challenge, then there is no telling what more these innovators might achieve.

Discovering new-found respect for philanthropy

I’ve always had a bit of a downer on corporate philanthropy, having tended to equate it with first generation sustainability strategy and practice – a model based on ‘giving something back’ that often pays little or no heed to what the corporation takes in the first place. In so doing, I’ve always felt, it tends to perpetuate the framing of sustainability as a discrete agenda, separate from core business.

Reflecting further on the latest Acumen Debate hosted by EY earlier this month, however, I’m thinking it’s maybe time to revise that view.

The spur for this reflection is a thought-provoking comment made by Sam Parker, director of the Shell Foundation, in speaking against the motion that, “This house believes that impact investors don’t need to compromise between financial and social returns.”

He was following on from – and directly responding to – the argument made in favour of the motion by Diana Noble of CDC, the British government’s development finance institution. Her experience, she said, proved there was no compromise. CDC has achieved an average 6% return on investments in its portfolio of ‘base of the pyramid’ (BoP) enterprises over the last 20 years; and on her regular visits to Africa and South East Asia, she could not go anywhere without seeing the benefit of businesses, “that simply wouldn’t exist without CDC.”

The essential thrust of Parker’s retort was that’s grand, but how did those businesses get to a place where they became an investible proposition for the likes of CDC? “Somebody somewhere had to do the heavy lifting,” he said. “Somebody somewhere paid for that.”

And you know what? I think he’s right.

If you think about it in terms of something like Ichak Adizes’ famous corporate life-cycle model, impact investors like CDC might only really enter the fray once an enterprise has reached ‘adolescence’ and the risk of ‘infant mortality’ has passed.

Work backwards through the ‘go-go’, ‘infancy’ and ‘courtship’ stages – where ultimately the business idea is but the proverbial twinkle in the parent’s eye – and, chances are, you’re going to be looking at investors with a very different profile.

Go back one step, and you might be looking at investors prepared to work at breakeven; go back two and they’re maybe willing to put up with a 50% loss; go right back to the outset, and you’re probably looking at pure philanthropy – the, “early-stage patient grant,” as Parker put it, without which, “there would be nothing to invest in.”

For me, that logic felt hard to refute and, whereas the show of hands at the end of the event appeared to show several of the audience metaphorically crossing the floor from the ‘opposed’ to ‘in favour’ camps, much to my surprise, I found myself moving in the opposite direction.

EY: Joining the battle on youth unemployment

You may remember I posted some time ago on the accession of Mark Weinberger as Chairman and CEO of EY, accompanied by a new brand identity and a clearly articulated purpose of ‘building a better working world’.

If you’re a regular reader, then you’ll also have guessed by now my penchant for – and belief in the superior value to be created by – putting purpose at the heart of profit; my belief that, in its broadest sense, ‘sustainability’ is nothing more or less than a perspective on brand and business strategy that inextricably links long-term success with serving a higher social purpose.

For me, that suggests three essential areas of focus in a business context – three preconditions for achieving enduring, sustainable growth:

  • People – In the end, it’s people who create and sustain businesses, and the societies and economies to which they contribute. Lasting, meaningful growth depends on the ideas and ingenuity of talented people in all their diversity.
  • Purpose – That ingenuity should be directed towards delivering social progress. Why does your business exist (beyond making money)? How does what you do, and how you do it, benefit the world? If you ceased to exist tomorrow, why should anyone care? While business models and strategies may come and go, this essential ‘reason for being’ should be constant, as it’s the only sustainable way to unite and motivate all the people a business touches.
  • Planet – If we continue to deplete natural resources, without consideration for their long-term sustainability, then no-one will prosper. Enduring growth also depends on innovating new business models that decouple that growth from environmental degradation.

With regard to the former – and particularly in the context of ‘building a better working world’ – tackling youth unemployment is about as material as it gets. After all, how can anyone claim to be doing so without recognising that this is (as EY’s EMEIA Managing Partner, Mark Otty, puts its) one of the most intractable economic and social challenges we face today?

It’s why youth unemployment justifiably sits atop the EU political agenda. It’s why improving the employment prospects for youth in the Middle East – where more than half the population is under the age of 25 – was a key pillar of the sustainability strategy I helped formulate for one of Saudi Arabia’s leading mobile phone operators a few years ago. It’s why ‘breaking barriers to work’ is similarly a pillar of other leading sustainability strategies like M&S’ Plan A.

It’s also why EY joined the battle on youth employment yesterday, joining the Alliance for YOUth, becoming a signatory to the European Alliance for Apprenticeships, and pledging to offer 55,000 traineeships and 35,000 paid internships for young people across Europe by 2020.

I think that’s a fabulous proof-point for the promise to help build a better working world, and one that makes me proud to be associated with EY.

Building a better working world

A lot has been written here and elsewhere about the concept of “thick”/shared value – the reconnection of business strategy to delivering social progress.

As I wrote on the Guardian’s Sustainable Business blog a few months back, business must now operate within a completely different set of frame conditions, encompassing the combined forces not only of climate change, population growth and diminishing natural resources, but also (among others) the ascent of Generation Y and increased public scrutiny in the wake of the financial crisis.

To achieve longevity, business needs to recognise these seismic shifts and re-imagine them, not as constraints on business as usual, but as the perfect opportunity to reconnect with disillusioned customers and employees by designing something better.

More than ever before, the business that wants to achieve long-term success must earth itself in a sure sense of why it exists, what it stands for, and why it matters (beyond making money). And that purpose should be self-evident in the very products and services it provides, how it organises itself, and how it conducts its daily business.

In short…

  • Purpose is the key to creating shared value – not some warm and woolly expression of values, but the ‘north star’ around which to build a strategy for enduring growth, based on improving people’s lives.
  • Purpose is the only sustainable way to recruit, unite and motivate all the people a business touches because – while business models may come and go – it’s that essential ‘reason for being’ that remains constant.
  • And it’s purpose (IMNSHO) that now represents the most powerful lever business leaders can pull to achieve competitive advantage – the single best way to demonstrate relevance in an ever changing world, and to build deeper, more lasting relationships with customers and employees who share your beliefs in their very bones.

On that last point, it’s worth drawing attention to the big news at EY last week – the formal accession of Mark Weinberger as Chairman and CEO, accompanied by a rejuvenated brand identity and, in particular, the clearly articulated purpose that forms the new tagline of “Building a better working world”.

Cards on the table, I’m an EY employee, so I’m hardly an impartial observer, but I’m massively excited by this.

An organisation I work for is really putting purpose front and centre – not in a superficial way, but based on deep thought about the essential function of a professional services firm in promoting long-term growth, through providing timely and transparent information that contributes to the critical functioning of the world’s capital markets, for example, and supporting and stimulating entrepreneurship as a key to local economic health.

I hope my colleagues and EY’s clients will feel the same intuitive resonance with this purpose as I do. In any event, I think it’s a bold move that deserves a lot of credit – especially in a heavily regulated industry that naturally tends to inspire a degree of risk aversion and conservatism.

As Simon Sinek hints at in one of my favourite TED talks, most organisations – indeed most people – are perfectly comfortable describing what they do; maybe (at a push) what it is about how they do it that sets them apart from all the rest. But very few nail their colours to the mast of why they do it 

Of course, that’s precisely why it’s such fertile territory for differentiation.