The millennials are avid consumers and connectors. No one, and especially no business, is immune from their influence.
They care. About the environment. About equality. About their mental wellbeing. About society. About transparency. They hold us to account.
Probably because they can quantify their views. In likes. In numbers of posts. In followers. Numerical activism.
Historically, caring seemed to befall those with wealth or a particular leaning. Benthamites. Cadburys, Quakers, Methodists. Using influence and wealth, conditionally, for a social purpose.
Investment was conditional in the 70s, 80s and 90s when funds avoided South African business. That certainly helped lead to the end of apartheid.
It was conditionality that, in the 80s, following Exxon Valdez and Bhopal, led companies to embrace sustainability and environmental probity in return for investment.
Ultimately, Government embedded conditionality into regulation. If you want our bailout, then behaviours and structures must change.
Conditionality is and will always be a factor.
If you want the millennial’s consumerism, their advocacy, their “likes”, then accept their conditions.
Similarly, don’t be surprised when the investment community uses its power to drive businesses to recognize what it perceives as valuable (aka future demand).
A problem remains the paradox between delivering short term profitability and longer-term investment for sustainable growth.
If we relied on Peter Drucker’s famous quote: “if you can’t measure it you can’t improve it”, then the key to reconciling this seeming paradox would be “measurement”.
Measurement of agreed metrics which deliver this sustainable profitability.
But Drucker also said that “management is doing things right; leadership is doing the right things”. This implies that some actions that impact businesses, that influence society and that lead to change are just right, even if not immediately visible or perhaps even quantifiable.
TSR or Total Shareholder Return quantifies the return an investor receives from investment in a stock. It allows the investment community to rank companies, to measure returns and so improve investment decisions.
TSR focuses primarily on the return delivered from the goods and services the company produces. It advocated leaving societal change to governments and NGOs.
But society increasingly holds multinationals to account for far wider criteria. Millennials certainly do.
There is a growing feeling that MNCs have equal or greater influence than many governments. As a consequence, they have a duty, an obligation, to take a role in societal change. Starbucks and legitimate tax, for example.
The lens through which the digital audience judges a business’s activity is increasingly transparent and immediate.
Even a remote risk that your cheap child labour would be exposed on Instagram or your battery farming snapped on snapchat ensures that businesses recognize and instil sustainability and responsibility as good business.
Acknowledging these trends, investing has become increasingly thematic. Initiatives such as the Transition Pathway Initiative (TPI) quantify and assess a company’s carbon management and carbon quality performance, to drive investment decision making.
Algorithms attempt to incorporate values for, say, environmental, social and governmental (ESG) compliance into comparative ratings.
ESG investing attempts to evidence correlation between profitability multiples and profit margin with sustainability and measurement.
Boston Consulting Group recognized the need for quantitative proof of this correlation. They called this nexus the Total Societal Impact (TSI) performance measurement.
Because if it can be measured, it can be improved. And improving business is good for consultancy businesses.
BCG determined that real TSI impact was derived from having sustainability initiatives at the “core of the business” rather than an adjunct, as CSR had perhaps been positioned. Because as Sir David Brailsford stated “successful teams emerge from emotionally robust cultures”, not from management mantras.
This undoubtedly supported the argument that ESG investing is good business. That has to be good news.
However, the ESG proposition remains rooted in the TSR premise that the largest impact a company can have is measured through its core output of goods and services.
It is this basic precept that needs challenging.
What if the greatest productivity impacts a company can make must necessarily include a measure of the impact it has on its core asset, its employees and consequently a derived societal impact on their dependants and the society they live in?
The fact that the fastest growing sector of app purchase on both iOS and android devices are personal wellbeing apps (at 37% per annum) and that 76% of users state a willingness to purchase apps that would enhance their mental wellbeing, evidences that the millennials in particular recognise the importance of investment into their mental wellbeing.
Statistics suggest their views make sound business sense as well
The Stevenson Farmer report for the UK government showed that the impact of adverse mental wellbeing (primarily presenteeism, absenteeism, turnover) on UK business was in the region of £33- £42bn per annum. There was a further annual cost to the government (as an employer) of £23bn. In total, the annual cost to British society was around £92bn.
This is approximately twice the predicted cost of Brexit, annually.
Deloitte did some parallel work that showed the average costs to different industry sectors. These ranged from an upper estimate in the finance and real estate sector at £2,564 per employee per annum to the information and communication sector at £932, with an average cost per employee of between £1,119 to £1,481 p.a.
Deloitte also showed that the average return on investing in mental wellbeing in the workplace and particularly preventative wellbeing, delivered an impressive ROI (note; a quantitative measurement) of between 0.41x to 9.1x, with an average return of 4.2:1.
Finally, if you think that all this is better left unearthed, because data is actionable, then as the CEO or Chair of a business, with ultimate responsibility for your staff, your common law and increasingly regulatory duty of care may punish you for your avoidance.
Better mental wellbeing in the workplace drives greater productivity. Quantifiably.
Better mental wellbeing in the workplace lowers costs. Quantifiably.
It reduces the risk of legal ‘duty of care’ claims.
Perhaps as important, better parental mental wellbeing reduces childhood mental wellbeing issues and thereby drives societal change.
Mental wellbeing can be measured. A data insight startup called 87%, backed in part by AP, is focused on helping companies take responsibility for giving their employees the tools to take responsibility for their mental wellbeing.
It helps employees measure, understand and improve their wellbeing. It is a data insight business and hence intervention agnostic, simply connecting the needs to the solutions and ranking them by effectiveness.
It promotes de-stigmatization, so aiding sharing in the workplace, and produces quantitative comparative analysis for client companies of their employee’s wellbeing performance.
Over time, as the data set grows predictive, correlations between a company’s mental wellbeing profile, its level of investment into wellbeing and its financial / productivity performance will become de rigueur. Just as with ESG correlations.
This wellbeing measurement goes far beyond outputs of just goods and services. This type of investing places investment into the human condition at its very core. It adds wellbeing, the W, to ESG.
The benefits of W investing are quantifiable, immediate and predictive. The returns apply equally to the private sector as to governments, unions and benevolent societies. It matters as much to the crucial SME sector, that drives the economy, as to MNCs.
Reviewing core investment into employee mental wellbeing should become an established element for investors in every nature of enterprise.
By the investment community adding the W to ESG and driving investment based on a W index, shareholders will be using conditionality – that is, where they choose to place their funds – to enhance societal sustainability and drive corporate productivity.
Mental wellbeing can now be counted. It can be improved.
Business and leaders can do things right and do the right things.
Investors can support those leaders who do the right things and thereby enhance mental resilience alongside productivity.
W investing provides a solution to a critical and escalating business problem.
The investment community has a duty, a responsibility no less, to advocate, champion and add W investing as a condition for accessing its future funding. For the sake of business, for society and for its future returns.
The millennials are watching you.
Al Insky
10 October2018