April 2018

How strategic community investment can deliver better outcomes

  • By Terence Jeyaretnam, Partner, Climate Change and Sustainability, EY

Collective impact programs could be a credible way for companies to secure a licence to operate amidst growing pressure to demonstrate better social outcomes

Over the past decade, managing a social licence to operate has consistently featured in EY’s top ten mining and metals industry risk reports. Despite the importance of community investment within the resources sector, examples of progress have been underwhelming. Based on the current evidence, a strategic approach using a collective impact engagement model could help the mining industry address social and environmental issues more effectively.

Navigating the changing paradigm: from ‘social licence’ to ‘social purpose’

In January 2018, BlackRock CEO Larry Fink wrote an open letter to company leaders in which he called on businesses to serve a social purpose. Fink said that ‘to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.’

Fink’s letter is a timely reminder of growing social expectations of how businesses should operate. The last three editions of EY’s investor survey show an increasing demand for reporting broader intangible value. This reflects a more sophisticated understanding of the connections between a business’ ultimate success and its social and environmental context. The growth in better social and environmental impact measurement frameworks has also provided momentum for companies to review their community investment approaches. This, in turn, has allowed companies to use resources more efficiently and to make a stronger case for their social licence to operate.

Historically, the resources industry approached community investment as a way to promote development and provide benefits to local stakeholders. This approach came with a perception of ‘giving’ rather than ‘investment’. Well-meaning community development was too often accompanied by insufficient participation and ownership by local stakeholders, overemphasis on infrastructure, underemphasis on capacity and skills building, limited understanding by the business of the often complex local context and a detachment from core business strategy. The result: diminished social returns, inefficient use of resources, unsustainable outcomes and little positive impact.

In 2010, the International Finance Corporation (IFC) published a strategic community investment framework that outlined best practices for companies looking to engage in effective community development. The publication was a breakthrough for practitioners in community investment. The guidelines provide tools and resources that can be applied from planning through to execution.

In the winter of 2011, Kania and Kramer’s article on ‘collective impact’ in the Stanford Social Innovation Review garnered significant attention (2011). They introduced a new framework that relied on cross-sector collaboration and aligned interests to address complex social issues at scale. The framework was a beachhead in how organisations approached community investment. The collective impact framework was introduced as a more effective approach to addressing social issues and community development, as opposed to what Kania and Kramer referred to as ‘isolated impact’ (2011) when organisations address isolated issues on their own. Kania and Kramer advocate for five preconditions (listed below) that need to underpin collective impact to deliver ‘collective success’ (2011).

  • ‘Common agenda’ – all participants have a shared vision for what they are trying to address, and agree on the primary goals for the collective impact initiative
  • ‘Shared measurement’ – a shared measurement system enables participants to remain aligned and manage a shared vision across agreed metrics that define success
  • ‘Mutually reinforcing activities’ – Kania and Kramer posit that the effectiveness of collective impact comes from the coordination of differentiated activities of all participants that contribute towards a common agenda
  • ‘Continuous communication’ – provides a basis to build trust and a common vocabulary among the various participants
  • ‘Backbone support organisations’ – a separate organisation, created to convene and coordinate the collective efforts of each participant.

The five conditions of collective impact, if read in tandem with the IFC strategic community investment framework, have the potential to deliver substantially improved and sustainable outcomes. In 2016, the Collective Impact Forum augmented the original five conditions of collective impact with seven additional ‘principles of practice’.

Collective impact and the Australian experience

Collective impact initiatives in Australia present a varied picture. It has been argued that in the Australian context the nomenclature of collective impact is not entirely new, given the historical emphasis on place-based work that has focused on sites of entrenched disadvantage (Graham and Weaver, 2016). Since 2011, there has been a steady adoption of collective impact principles, with an estimated 80 collective impact-style projects currently being implemented across the country (Graham and Weaver, 2016). ‘Logan Together’, established in 2014, is a well-known collective impact example from Queensland, which is a ‘whole-of-city child development approach’ (Smart, 2017). The initiative aims to improve outcomes for children aged between 0-8 years and is funded by 12 different partners comprising federal and state government, local organisations and philanthropic funders. As one of the flagship collective impact programs in Australia, Logan Together has demonstrable results that highlight the value of the collective impact approach.

Despite evidence demonstrating the merits of collective impact programs, adoption of this approach, particularly by the mining sector, has been tentative. As mining companies grapple with an evolving regulatory landscape, increased social impact assessment rigour and discerning local communities, the need to secure a social licence to operate is more important than ever.

Embarking on a collective impact journey is challenging and requires specialised skills to deliver a meaningful program. It has to overcome company self-interest if it is to achieve long-term change. As a country with a deep historical connection and culture of place-based intervention programs, strong service delivery credentials in government and a thriving sector of NGOs and non-profit organisations, Australia presents a perfect environment to reap the benefits of collective impact while optimising resources. The business sector in general, and the mining industry in particular, are arguably the missing links in an otherwise perfect environment to scale up collective impact programs as a means of addressing social development issues.

As an example, the opportunity for mining companies to design and deliver their Reconciliation and Action Plans through a collective impact model could substantially improve outcomes that contribute towards ‘closing the gap’.

For the mining industry, collective impact could be a credible and effective way to strengthen its case for a social licence to operate amidst a shrinking investment budget and growing pressure to demonstrate tangible social impact as a proxy for return on investment.

The views expressed in this article are the views of the author, not Ernst & Young. This article provides general information, does not constitute advice and should not be relied on as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Liability limited by a scheme approved under Professional Standards Legislation.

References

Kania J and Kramer M, 2011. ‘Collective impact’, Stanford Social Innovation Review [online]. Available from: https://ssir.org/articles/entry/collective_impact

Graham K and Weaver L, 2016. Engage for impact (presentation). Canberra: Department of Social Services.

Smart J, 2017. Collective impact: evidence and implications for practice. Child Family Community Australia, paper no.45.

Image: DragonImages/Shutterstock.com.

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