Corporate Sustainability: The Creation of FMG Leading Prepared for: HIS 317L Urban Economic Development Prepared by: Farhan Manjiyani June 24, 2016 EID: FFM223

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FARHAN MANJIYANI GROUP (FMG)

EXECUTIVE SUMMARY

Overview This report will compare the importance of corporate sustainability today within businesses and executive attitudes regarding this issue both in the United States and in South Africa. It will also analyze the impact of sustainability on business practices and processes, the drivers behind sustainability, and how companies are reporting on this issue.

Key Findings “Sustainability has moved up the corporate agenda in the past three years. Sixty-two percent of companies surveyed have a strategy for corporate sustainability, up from just over half in February 2008; and a further 11 percent are currently developing one; just five percent are not planning to have such strategies, while the rest will create one at some point” (Corporate Sustainability, 2010).

“More than half (56 percent) of these strategies were developed over the past three years; only 11 percent have held such a plan for at least a decade” (Corporate Sustainability, 2010).

Solution Outline Thus Farhan Manjiyani Group (FMG) Venture Philanthropy Services (“the Firm”) will be created. The Firm’s mission is to utilize tools of venture funding to promote start-up, growth, and risk-taking ventures to improve the quality of life for historically marginalized groups. To realize our mission, we actively engage Community Responsibility (CR) divisions of large firms to: • Harness the power of our network to scale active community engagement activities and identify new business

units • Increase the impact on marginalized communities by facilitating change management processes • Act as consultants to increase productivity, enhance ability, and accelerate performance of CR divisions while

reducing costs • Partner with local education systems to create infrastructure to promote financial literary in the greater

community

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FARHAN MANJIYANI GROUP (FMG)

OUTLINE

1. Business Overview (Internship)

2. FMG Overview

A. Who We Are

B. What We Do

C. Opportunities To Do

D. How We Do It

E. Cost Analysis

3. Analysis of Corporate Sustainability in the U.S.

4. Analysis of Corporate Sustainability in the South Africa

5. Conclusion

6. Works Cited

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FARHAN MANJIYANI GROUP (FMG)

BUSINESS OVERVIEW

Ubizo Events & Tours is a tour operator specializing in cultural historical tours for university students, international

students and tour destination management companies (DMC’s) into the vibrant Cape Town Townships of Langa,

Gugulethu and Khayelitsha. Ubizo has currently employed and trained 10 tour guides from the township and 3

staff members. Ubizo offers a combination of tours by foot, bus, and cycle; the itinerary is designed to cover areas

that capture the uniqueness of the township and its people. Throughout the tour the guides share their own stories

which give the tourists a more personal interaction and understanding of the township.

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Township Tour Operators continue to overwhelm international tourists through their standard tour packages simply

because these clients get to see housing conditions, cluster living, deteriorating living standards, shacks, etc. – but

this does not appeal to the ordinary African who is used to seeing these conditions. Furthermore, it does not have

lasting and meaningful impact on the community as well as the client. In fact, Township tours have often courted

controversy, and several problematic and ethical issues are raised in this context. The question arises whether a

look at poor communities from the windows of an air-conditioned bus is surreal and patronizing towards the

community. Many tourists are aware of the problem of voyeurism and have ethical doubt to attend a tour.

Ubizo’s success is largely due to the investment of Shanduka Black Umbrellas — an NPO committed to spending

R100 million on corporate social investments over a 10 year period. To date Shanduka has well surpassed their

goal and has spent R187 million, established 10 operational incubators in South Africa, supported 50 clients per

incubator, and has generated R2.5 billion in turnover. Seapei Mafoyane, Shanduka’s CEO, said “When you invest

time into someone’s life, you get massive returns; you see the person and company grow…Shanduka allows small

businesses to dream.” Shanduka is mainly funded through corporate donations from Absa and the Supply Chain

Network. For Absa, corporate responsibility is a big part of their culture:

Absa’s CSI projects are aimed at addressing social and economic disparities and responding to

government’s developmental priorities. Programmes are implemented within the following focus areas –

Education; Health and Disability; Entrepreneurship; Environment as well as Heritage and Preservation.

Projects are implemented in an integrated manner through the Absa Foundation, business units and Absa

Executives (Absa CSI Board 2016).

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WHO WE ARE

FMG Leading is a non-profit organization involved in the promotion of corporate sustainability to decrease

economic disparity, lack of financial literacy, as well as exclusion of marginalized peoples in policy-making

processes.

I decided to found this company because as a Shia Imami Ismaili Muslim I believe in gaining more to give more.

Winston Churchill said “We make a living by what we get. We make a life by what we give.” By no means did I

grow up wealthy. My parents had sacrificed everything to come to the United States, but I had never understood

how far they had come until I visited their home country in December of 2006.

My first encounter with poverty occurred early in the trip, at the train station around 5 a.m. Men and

women were scattered about on thin blankets in the cold, eyes looking around, desperately searching for

food or money. While in the car to my aunt’s house, we came across even more beggars. Some were

missing limbs. Others didn’t have eyes or fingers. Many were dressed in rags as they hobbled, limped, or

crawled toward cars to beg for money. What broke my heart the most is that I felt helpless being so

young.

The difference between the families living on the streets and my own living conditions in the United States

were my parents. They had been given an opportunity to change their lives and took a leap of faith to

come to a brand new country. They did not move here for themselves, but for their children. They came to

this country to give my sister and me the opportunities they could only dream of.

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Fast-forward to April of 2013 when I found out I had been accepted to The University of Texas and was

excited to attend the university that would allow me to change the world. As a first generation college

student, a tuition fee as high as the out of state fee was new to me. I had known that tuition was

expensive at private institutions, but I had never encountered the “out-of-state” category. Suddenly, my

perfect vision of my time at UT and making an impact shattered. Even with academic and need-based

scholarships, I knew there was no way I would be able to pay for such a large amount. However, I

couldn’t get UT out of my mind. So, like my parents, I took a leap of faith and decided to attend. After

three years, many loans and grants, and three part-time jobs, I have managed to secure in-state residency

and reduce my cost of attendance by 70%.

I decided to pursue degrees in Economics and Business, allowing me to analyze the deep poverty I was

exposed to as a child through two separate lenses to develop global acumen. What I learned in the

classroom could only take me so far without international application.  With the development of Internet

2.0, problems and solutions alike began to expand across countries and continents. Consequently, my

understanding of my role as a global citizen began to develop; we are all part of a larger emerging

community and therefore should work to facilitate progress.

I realized that just like there were many factors that allowed my parents to come from extreme poverty to

middle class citizens in the U.S., there were also many factors that allowed periphery (less-developed)

countries to transition into semi-periphery and in some cases core (industrialized) countries. Of the 54

countries in Africa, only South Africa is recognized as a semi-periphery country. Every other country is

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periphery. Johannesburg houses the wealthiest province in South Africa and has 13 nonstop flights to 5

different continents, making it the prime location for the headquarters of FMG.

Red = Periphery Countries

Purple = Semi-perhipery Countries

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WHAT WE DO

Small partnerships like Absa and Shanduka exist, but with the creation of the Firm, these small connections would

become a large network of venture philanthropists. The Firm acts a superconnector for corporate social

investment programs across the globe to facilitate the progression of countries in the periphery and semi-periphery

stages to core status. To realize this goal, the Firm creates a mentorship program with established business

employees and small business owners. Once that mentorship is created, the Firm also leverages its donor base of

venture philanthropists to help these small businesses make their dreams reality and for established business

owners an avenue to give back to the community.

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Additionally, the Firm’s social philanthropy project partners with local education systems to promote financial

literacy across all grades and for all communities. We connect with universities across the world to bring students

to periphery and semi-periphery countries to teach personal finance strategies. These classes are open to the

public and serve as educational community centers equipped with classrooms, conference rooms, libraries,

computer labs, study lounges, as well as a cafe serving free refreshments. This literacy program aims to decrease

predatory lending in low-income areas by increasing overall financial literacy.

OPPORTUNITIES TO DO

Venture capitalism is a flourishing industry. According to forbes.com, $128.5 billion was invested by VC’s across

the U.S. into 7,872 deals for the 2015 year. This is the highest invested amount since the dotcom bubble in 2000.

In contrast, venture philanthropy is still an up and coming industry. The term was originally coined by John D.

Rockefeller III in 1969. At the time, his definition of VP was “an adventurous approach to funding unpopular social

causes”. Corporate sustainability or corporate social investment (pro-bono work) can be classified in one of two

buckets: venture philanthropy or impact investing. These concepts are very similar; however, the main difference is

the ROI (return on investment). Venture philanthropy mainly focuses on social causes to improve sectors. These

engagements last for a prolonged period of time (2-3 years). Impact investing, however, has a dual goal of making

a difference, but also to get a profit in return. Impact investing takes place in emerging and developed markets and

is largely done through private equity firms. As FMG, we have projects for both types of investors.

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HOW WE DO IT

FMG follows the process below when approaching new projects:

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BUDGET

Cost Analysis

CORPORATE SUSTAINABILITY IN THE UNITED STATES

Corporate Sustainability has been a major objective on the agendas of executives from leading firms for a number

of years. Latest statistics reveal that 62% of firms are developing strategies for corporate sustainability. Martina

Scheuermann (Human Capital Management Consultant at Deloitte) said:

“I have some ideas about how we give back as a firm and can certainly share some of those. We have national partnerships and organizations we support, as well as initiatives driven by each office or region. A few examples and brief descriptions include:

Total Requirements Cost Investment

Legal $ 2,500

Office Supplies $ 1,000

Cash $ 150,000

Long-term Assets $ 25,000

Miscellanous $ 1,000

Investor 1 $ 50,000

Investor 2 $ 50,000

Personal Investment $ 80,000

Total $ 179,500 $ 180,000

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-National efforts with March of Dimes: We have initiatives to fundraise and participate in their walks every year.

-Impact Day (National Day of Service): Impact Day is Deloitte’s national day of service and a celebration of our year-round commitment to volunteerism and serving our local communities. Deloitte member firms around the world host Impact Day volunteerism events, enabling Deloitte professionals to engage with local nonprofits and make an impact that matters on the communities where they live and work.

-National Social Impact Community (SoCom): SoComs across the country bring together practitioners in all four functions who want to connect with community engagement opportunities in their local offices, develop and implement new approaches to service to maximize and sustain impact, and learn about Deloitte’s innovative eminence in Social Impact. Some efforts include highlighting local volunteer opportunities or larger initiatives such as having practitioners donate frequent flier miles to the Deloitte and Make-A-Wish “Wishes in Flight” campaign.

-People to People (P2P): Human Capital Practitioners work with an in-country partner organization to identify clients and establish broad project focus areas. The team then brainstorms and provides feasible solutions to the partners.

-Local Office Initiatives: Oftentimes, each office has their own efforts they support locally. For example, in Austin, we always have a team who rides in MS-150, have ongoing efforts where we mentor students in local schools, and also partner to support our veterans in our community.”

Danielle John, a Senior Consultant at Deloitte, said:

In short, social impact has evolved from a pure PR play to an important part of corporate strategy to protect and create value. It is a trend driven largely by millennial consumers and enabled by social media tools that have taken accountability and transparency to new heights.4 Second, we observed that there were major

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differences industry by industry in terms of the level of investment in and type of social impact pursued. Third, we recognized that ‘one size’ does not fit all, and social impact models vary based on a company’s geography, customer set, and corporate and business unit strategy.

First, the P2P program that Martina and I described involves an international pro bono project in a developing nation. Last year, when I participated, we went to Nicaragua. We select social enterprises in the developing country who are providing sustainable, empowering services to their communities, and we do what we can to help them improve their organizations.

Second, I recently heard about an exciting engagement one of my friends is doing in Congo. Indigenous communities there are losing land to encroaching energy companies, and in return, those companies are compensating the communities with large sums of money. These indigenous communities do not have the financial acumen to know how best to use this money, so practitioners from our Deloitte US Advisory firm are going to Congo to help them decide how to invest and spend this money in the best way for their communities (Personal Communication, 2016).

Deloitte is one example of many companies that are beginning to invest their time, knowledge, and resources to

give back to not only local communities, but also national and global communities. While at one point in time it

may have been true that the only benefactor of a corporation coming into the community is the corporation itself, I

believe it is now clear that many others in local communities benefit from the expansion and profits of large

corporations. No longer are corporations simply donating money to save face and gain social capital (some

continue to do so today), but the power players (Big 4 Accounting, Bulge Bracket Consulting, Top banks) are

working to ensure that the firm truly gives back.

CORPORATE SUSTAINABILITY IN SOUTH AFRICA

The following graph depicts a breakdown of the population of South Africa. By far the largest population is African.

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-tradingeconomics.com

However, even post apartheid with economic empowering programs for the black peoples such as BEE (Black

Economic Empowerment), South Africa is facing the largest unemployment rate of its history at 26.7 % for the

2016 year.

Population Group Number % of Total

African 41,000,938 79.1973994641472

White 4,586,838 8.85993489620481

Coloured 4,615,401 8.91510717838271

Indian/Asian 1,286,930 2.48583359952387

Other 280,454 0.541724861741406

Total 51,770,561 100

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Because it is extremely difficult to get a job and the government is faced with limited resources, the market is

prime for industries like venture philanthropy to flourish.

The days when the government was seen as the exclusive social change agent and the absolute macro

problem solver are becoming part of the past, as companies are gradually taking a larger role, actively

participating in social and community projects under the concept of Corporate Social Responsibility (CSR)

(African Economic Intelligence Unit, 2016).

Similar to the U.S., South African corporations also make great efforts to give back to the community.

In South Africa, CSR is not only a frequent topic for conversation and debate, but also a tangible effort by

many companies. The social picture of the country after the Apartheid era was one of marked inequalities

in terms of education, infrastructure, economic power, and basic services access (King Reports).

PwC South Africa established an educational trust called Business Skills for South Africa Foundation (BSSA). This

foundation’s mission is to “To provide systematic and formal business skills training and education for the benefit

and enhancement of the full range of SMMEs across all economic sectors in South Africa, and to create

sustainable jobs and increase wealth through the transfer of practical business skills” (PwC, 2016). By BEE

standards, BSSA is a level 4 contributor. From formal assessments undertaken, the following results were found:

• 73% increased sales

• 68% increased net profits

• 38% increased the number of employees

• 49% increased wages for employees

• 96% implemented something they learned during the course

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• 80% reported that BSSA training changed their life in some positive way

Ikhlaas Khan, a level one CFA Candidate, shared his experience saying that every firm does its best to give back to

the community through two avenues: corporate sustainability projects and bursaries. After the BEE program was

launched, companies are scored based on how much they invest back into the black community — arguably the

most marginalized of the 4 main communities in South Africa.

The BEE Act forces South African-based companies to consider all stakeholders when performing their

internal and external operations in an effort to eradicate social and economic inequalities inherited from the

Apartheid days and to help previously discriminated groups to actively participate in the country’s economy

(King Reports, 2016).

Companies also provide bursaries (scholarships) to students in need of financial assistance. While internships are

not as prevalent as the U.S., companies are happy to provide these bursaries to students. Often times these

bursaries cover the total cost of tuition for the student. Ikhlaas also added “If they have financial constraint, firms

actually step in and take care of you financially if you work for them after. They invest a lot more than the

states” (Personal Communication, 2016).

In addition to being the best moral decision, it also makes the most economic sense for companies to invest into

black communities as they make up the largest population and therefore have the potential for the highest

economic impact.

It is clear that Corporate Sustainability is on the rise in both the U.S. and in South Africa. While a majority of firms

actively engage their local communities through impact investing or social entrepreneurship, these projects are not

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widely publicized due to the fact that nearly every corporate initiative is viewed as an elaborate PR strategy.

Therefore it makes sense that roughly one in three (36%) have issued a report on sustainability performance. The

majority (40%) have no plans to do so (Corporate Sustainability 2010). Another major challenge that arises is

benchmarking. Since performance reports are scarce, it becomes difficult for firms to benchmark against each

other. If Firm A doesn’t know that Firm B is spending 30% of their revenue on sustainability projects, how can they

be incentivized to match? If FMG were created, it would act as a central connector for all of these firms. On the

FMG website, all ongoing projects would be listed and companies would be ranked based on Key Performance

Indicators (i.e. a comparison of inputs v. outputs the firm puts into the communities). As companies see their

competitors rise through the ranks, they will be incentivized to give back more. The Top 5 firms will be recognized

as “Gold Standard” firms across all FMG social media platforms. This recognition will ultimately lead to more brand

recognition, which will inevitably lead into higher sales and revenue for the firm. The more firms give back, the more

firms receive in return. While Corporate Sustainability exists to some degree today, the impact could easily be

scaled to a much higher degree if firms are not only working together, but also working in competition with each

other as they normally do.

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REFERENCES

Business Skills for South Africa: Building Capacity in the SMME Sector.(n.d.). Retrieved June 23, 2016, from http://www.bssa.co.za/index.php/about-us/overview

Corporate Sustainability: A Progress Report for KPMG’s Research Preview. (2010). Retrieved June 23, 2016, from https://www.kpmg.com/ZA/en/IssuesAndInsights/ArticlesPublications/Risk-Compliance/Documents/EIU_survey.pdf

Corporate Social Responsibility in South Africa: More than a nice intention. (n.d.). Retrieved June 23, 2016, from http://www.polity.org.za/article/corporate-social-responsibility-in-south-africa-more-than-a-nice-intention-2011-09-12

Deloitte: Driving Corporate Growth Through Social Impact. (2016). Retrieved June 23, 2016, from http://www2.deloitte.com/us/en/pages/operations/articles/driving-corporate-growth-through-social-impact.html

Impact Investing vs. Venture Philanthropy | Investopedia. (2015, June 09). Retrieved June 23, 2016, from http://www.investopedia.com/articles/personal-finance/060915/impact-investing-vs-venture-philanthropy.asp

Shanduka Black Umbrellas: What We Do. (n.d.). Retrieved June 23, 2016, from http://shandukablackumbrellas.org/about-us/what-we-do/

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