Indholdsfortegnelse for 12. December 2023 i I by IMD

We are inundated with signals indicating that our business practices are unsustainable. Investor activists, as reported by Kristin Hull in this edition of I by IMD, are actively urging companies to address issues that are often ignored. How can we transition to a business model that aims to produce positive social and environmental outcomes alongside financial returns? As you will discover in our in-depth coverage, the impact economy could be the answer. Several factors are converging to position impact investing as an appealing alternative to conventional business practices. These include a clearer understanding of impact business models, innovative financing schemes, supportive governance structures, enhanced impact assessment methodologies, and the emergence of successful case studies. Participants in the impact economy are becoming more explicit about their intentionality, defined as their “Theory…

M-PESA, the mobile money service, hosts transactions worth more than 50% of Kenya's GDP and serves more than 50 million customers in seven African countries. This runaway success story, credited with lifting 2% of Kenyan households out of poverty, was catalyzed by a £1m UK government grant 15 years ago. It's just one example of the power of impact investing to transform economies across Africa. Early on, the UK grant de-risked M-PESA enabling follow-on commercial capital to come in and support its growth, helping to create a financial inclusion ecosystem that now fuels scalable innovation in Kenya and beyond. Without that grant, it would have been near impossible for the company's leadership (then the multinational Vodafone) to invest its own money in what was then a high-risk and low-return pursuit…

The investment landscape has experienced a noteworthy evolution over recent years, as we've witnessed the integration of profit-making with purpose-driven initiatives. Impact investing centers on generating positive, measurable social and environmental impact alongside financial returns. The belief is that one can “do good” for society and “do well” financially. Recognizing the multidimensional nature of social issues, Jane Fraser, CEO of Citi, introduces a new “S” in ESG: security. This encompasses food security, energy security, defense, and financial stability. According to Fraser, security is not just a social issue but also vital for good governance, highlighting the interconnectedness of social, economic, and environmental challenges and underscoring the need for comprehensive, impactful solutions. Other examples include: • Clara Miller, President Emerita of the Heron Foundation, emphasizes the dynamic nature of money, asserting…

Investors and companies in the US have applied an approach to climate investing primarily focused on shorter-term financial returns, especially compared to the more stakeholder-focused approach of their peers in the European Union. We see this in the rush to invest in renewable energies after the passage of the US Inflation Reduction Act and its associated subsidies. Concerns about short-term profits are also evident in the political discourse that attempts to vilify ESG investing strategies. While differences in social norms and dependencies on fossil fuel-based economies may underlie these concerns, an often-overlooked reason for this discrepancy stems from the complex and diverse legal structures that define the responsibilities of capital owners and managers in the US – and a lack of understanding about what they do and don't allow when…

At Nia, we are activist investors. Encouraging big companies to improve their practices is a large part of the strategy behind our shareholder engagement. In an effort to reduce risk, encourage responsible and sustainable business practices, and to increase long-term ROI, we seek to engage with every company in our portfolios on environmental and social justice issues. We like getting to know the people behind the ticker symbols, working to build win-win relationships, and using our investor voice for change in areas that we identify as material. We persuaded Apple to remove NDAs from employee contracts, Fortinet to start their first diversity reporting, IBM to significantly increase theirs, and SunRun to end forced arbitration for employees. These are among the changes we have achieved by raising our investor voice. What…

If we want to have the biggest impact, the best way to do this is to make sure we always focus on solving the most important problems. Mark Zuckerberg, American entrepreneur and co-founder of Facebook (Letter to Investors, 2012) Don't underestimate the positive or negative impact that you may have on others. Robert Ballon, Belgian priest and business management scholar (Talk in Tokyo, 1983) Every interaction you have is an opportunity to make a positive impact on other people. Jacques Horovitz, French business management scholar, entrepreneur, and consultant (Comment made at IMD, 2005) One does not make a difference unless it is a difference in people's lives. Peter Drucker, Austrian-born American educator and business philosopher (Business Week, 2005) Simple routines mean greater impact. Ingvar Kamprad, Swedish entrepreneur and founder of…

Companies navigating a purpose-guided sustainable business transformation are often faced with a critical question: How can we successfully mix purpose, sustainability, and profits? The Digital Birth Registration (DBR) initiative from Telenor offers us a window into how companies attempt to find this balance. As a for-profit entity, Telenor is conscious about improving its bottom line. It is not in its interest to take on a project, product, or service without the confidence that it will create a return on its investment. At the same time, the company has put sustainability at the core of its strategy: empowering societies and connecting to what matters most. Telenor's purpose is fundamentally about Goal 10 of the UN's Sustainable Development Goals on reducing inequalities. Initiatives in mobile finance, health, and agriculture in Pakistan and…

WeWork's declaration of bankruptcy in November closed a revealing chapter in Wall Street history. The company's failed IPO in 2019 became a cautionary tale of the wild excesses enabled by the venture capital (VC) funding model – in particular, VC's ability to fund audacious bets, turn visionary founders into overnight billionaires, and burn investor cash by the barrelload. A chastened WeWork ended up listed through a different, less demanding route, but its sketchy business model – taking out long-term leases on acres of office space and retailing access by the month – ran headlong into the COVID-19 pandemic, leading to a disastrous collapse in its share price. It's not just WeWork that has disappointed retail investors. The American stock market is home to hundreds of tiny money-losing companies whose valuations…

The impact economy has introduced a confusing array of organizations, regulations, and protocols. Here's a quick guide to some of the most important terms: Blended finance The OECD defines blended finance as the “strategic use of development finance for the mobilization of additional finance towards sustainable development in developing countries” to address the SDG funding gap. Practically, blended finance refers to the combination of capital that has commercial risk-return expectations with funding that is concessionary in some form (typically from a public funder) to generate additional and measurable impact. Additionality According to the “additionality” principle, impact investors – including public funders such as the International Finance Corporation (IFC), the World Bank Group's private sector arm – should make a contribution beyond what is available in the market (either financial, non-financial,…

Described recently as the “economic avant-garde” by Frank-Walter Steinmeier, the federal president of Germany, steward-ownership is gaining ground among companies seeking to have a positive impact on the world. To protect their mission and ensure they can focus on their impact, entrepreneurs and family business owners are turning away from traditional absentee ownership and shareholder value primacy. In an interview with Bryony Jansen-van Tuyll, Adrian Hensen, Co-founder of the Purpose Foundation, explains how the model of steward-ownership equips businesses to deliver positive change What is steward-ownership and how does it differ from other corporate ownership models? My background is in business and psychology, so let me explain from a psychology perspective. That requires looking at a company as a human. If a person would like to improve their lifestyle, they…

The 200 parties to the UN Convention on Biological Diversity last year agreed new global targets to be met by 2030 – the KunmingMontreal Global Biodiversity Framework (KM-GBF). Alongside ambitious conservation and restoration targets, the KM-GBF called on governments to take legal, administrative, and policy measures to encourage and enable business to “regularly monitor, assess, and transparently disclose their risk, dependencies, and impacts on biodiversity” as well as providing relevant information to consumers. Legislation is being introduced in many parts of the world – most notably, the EU's Corporate Sustainability Reporting Directive (CSRD), which comes into force on 1 January and initially will affect 50,000 companies. Under the directive, companies will be required to “have specific targets related to biodiversity including on the restoration and rehabilitation of biodiversity and ecosystems”…

We are all different. Each of us has a unique profile of strengths and challenges. However, across these profiles are clear patterns and themes of behavior and personality. They all fall under the broad umbrella of “neurodiversity” – the idea that humans have naturally occurring variations in the way we think, feel, and perceive. In an often rigid and biased world of work, these patterns and themes have exposed weaknesses in the way organizations hire neurodiverse talent and, if onboarded, in accommodating and making the most out of that talent. In turn, talent gaps and oversights mean that many organizations are not just falling short when it comes to diversity and inclusion, they are missing out on the clear benefits that neurodivergent people – and smarter HR practices – bring…

With four in five CEOs concerned about finding the talent they need to execute their strategies, according to IMD survey research, people with disability present a significant opportunity. According to the World Health Organization, PWDs account for more than 10% of the world's working population. This translates to one billion globally who live with a disability – the world's largest “minority” group. Yet organizations often struggle to attract, develop, and retain PWDs. While disability awareness and other formal procedures are helpful, they are often insufficient when it comes to creating the conditions that enable organizations to harness the talent and potential of PWDs. Equally, paid employment has been shown to provide a vehicle for accessing a range of benefits – including social, economic, and personal opportunities – for PWDs. Paid…

Visions of Inequality Branko Milanovic Imagine an IMD event in which a high-level panel is invited to debate on inequality. By a miraculous combination of holograms and AI, six key figures will sit next to one another on stage in front of a live audience: François Quesnay, Adam Smith, David Ricardo, Karl Marx, Vilfredo Pareto, and Simon Kuznets. As a well-informed, sometimes humorous, and always lively moderator, Milanovic allows the panelists to make their points and share their views on what remains one of the main challenges in the global economy. As timulating read for all of us trying to squeeze interesting narratives out of data and for anyone interested in global issues. Bruno Lanvin, President, Smart City Observatory So Much Stuff: How humans discovered tools, invented meaning, and made…

When Salesforce CEO Marc Benioff first tapped Jessica Sibley for the CEO position at TIME, he asked her how she would transform the venerable news group. Like a true media veteran, she responded with a headline. “I looked at my blank computer screen and the first thing I wrote down was TIME 3.0,” she recalled. “And I think that by the time I actually walked in the door, I was on seven pages in version seven with seven leading priorities and goals.” Almost a year into her role, Sibley, who jokingly describes herself as an impatient New Yorker, has taken action on all seven priorities with the overarching goal of making TIME, which is celebrating its centennial year, relevant for new audiences in the digital age. Though not a journalist,…

[ Impact economy ] Impact is a term that has rapidly gained prominence in the business world in recent years. It is typically used to describe the positive social or environmental effects of an organization's activities, products, or services. Impact is also associated with new forms of investing and venture creation, such as impact investing or social entrepreneurship that aim to generate social or environmental benefits alongside financial returns. But what does impact really mean? And why should it matter to corporate managers, boards of directors, and business leaders? Here we explore these questions and argue that impact considerations deserve to be on an equal footing with financial and strategic decision-making. We start with a simple observation: all organizations have economic, social, and environmental impacts. However, this alone is not…

More than two billion people – or a quarter of the global population – live in fragile contexts. Through the UN Sustainable Development Goals (SDGs) and other frameworks, the global community is committed to advancing development and assisting our fellow human beings in humanitarian need. To help achieve this, official development assistance (ODA) totaled $185.9bn in 2021. This is a lot of money, but not nearly enough to resource sustainable development and humanitarian assistance worldwide. In fact, if all of this capital went to the world's least resilient countries only (which it does not), today's development assistance would be just over $90 a year per person. That is roughly the cost of the world's cheapest smartphone plus a solar cooker. To finance the attainment of the SDGs, we are short…

DOUBLE FOUNDATION This model legally separates money and power: one entity holds the control rights, with its managers acting as stewards for the company. Another, charitable, organization holds the economic rights and shares of the company. Examples: Bosch (Germany), Globus (Germany). SINGLE FOUNDATION All voting and economic rights are held by a self-governing non-profit foundation. It acts as a shareholder and guardian of the steward-ownership structure and principles. Examples: Novo Nordisk (Denmark), Zeiss (Germany), Carlsberg (Denmark), Märkisches Landbrot (Germany), Elobau (Germany). VETO SHARE The guiding principles of steward-ownership are included in the company's articles of association. The steward-owners of the company hold 99% of the control rights, but no economic rights. 1% of the control rights, the so-called “veto-share” or “golden-share”, is held by an independent non-profit entity. It has…

Companies seeking to be “nature positive” and comply effectively with new biodiversity regulations should consider the following: 1. Get ahead of the curve. As the requirements to act on biodiversity loss are increasing, companies will gain a competitive edge by acquiring knowledge in biodiversity target-setting and monitoring. 2. Shape the future of monitoring. By partnering early with biodiversity data startups, companies can help provide key data into future models and make the future market more efficient 3. Be transparent. To avoid accusations of greenwashing, it will pay to rely on expert third parties and to have all biodiversity data technologybased and open source, so consumers and regulators can verify information in near-real time.…

The insights in this article inform how elea, a philanthropic impact investor, approaches its core value of partnership and collaboration with impact entrepreneurs. The organization provides long-term investment in the form of equity (or equity-like instruments), loans, or grants, while also typically matching every Swiss franc invested with another Swiss franc of strategic support provided by the elea team, which has business and social innovation expertise in its investment sectors. Sector-specific insights from a global perspective and access to networks across stakeholders allow elea to contribute to how a venture can shape wider ecosystem change. It also supports a venture in defining its funding strategy. As an early-stage philanthropic impact investor, elea seeks to de-risk ventures for complementary funding across the spectrum of capital, including more commercial capital over time.…

It's one of the biggest conundrums facing leaders today: how do you balance approachability while maintaining your authority? To empower your team to produce their best work, you need to encourage them to speak up and be creative while maintaining accountability to ensure the project doesn't overrun. In a quest to balance the two, leaders sometimes swing between a “command and control” management style (issuing orders and checking up) and being overly nice. This is not only confusing for your team, but risks coming across as dishonest. The trick in overcoming the approachable/authority paradox is holding your authority with authenticity. In this article, I outline seven leadership behaviors that will help you to lead with care and courage. DISTINGUISH BETWEEN AUTHENTICITY AND NICENESS The mistake many leaders make is confusing…

Have you ever thought twice about your birth certificate? For most of us, it is a privilege we often overlook. Yet today, there are roughly 1.1 billion people around the world who are considered “invisible”. Without a birth certificate, they lack an official identity and they cannot access basic services: going to school, visiting a doctor, or getting a passport. At Telenor, we realized that we could help to change this situation. From smartphones to mobile connectivity, we knew we had the tools at our disposal to reimagine the registration process and to enable millions of disenfranchised people to gain access to a birth certificate. But we also understood that, as a privatized telecommunications company, we could not move the needle alone. Like many of today's complex challenges, success would…

As the year turns, transformations are taking shape across the tech, pharmaceutical, and fashion sectors. Tech giants such as Nvidia and Microsoft are remodeling the landscape with AI and integrated software solutions. The pharmaceutical industry, led by Pfizer, Eli Lilly, and others, is boldly stepping into the era of personalized medicine and digital therapies. Fashion brands like Nike and Hermes are adapting to the relentless ebb and flow of market demands and consumer behaviors. This tapestry of change, woven by leaders in their respective fields, has been tracked by IMD's Center for Future Readiness in its latest rankings. Our Future Readiness Indicator clearly shows which industry titans are leading the charge into the new year and offers key insights into what others can learn from their examples. FROM ALPHABET'S SLIP…