IAIA 2019 Annual Conference

Social Impact Assessment for 21st Century EconomiesLaura Harkins-SmallPrincipal & Director Many Small Things

April 2019

Social Impact Assessment (SIA) has been generally applied to large, engineering-based Projects, limiting its contribution to regional development in that it depends on the existence of a Project, the culture of the key institutions to participate in the process and leverage the outcomes, and the quality of the SIA itself. To increase its ability to not just contribute, but lead regional development, SIA must start to evolve and appeal to the broader business community. This includes engaging and contributing to emerging practices such as shared value and corporate sustainability/responsibility. It is only when enterprises large and small can incorporate SIA as a part of their strategy and operations will the practice be able to deliver transformational regional development. SIA methodologies and practitioners have significant potential to help maximise the impact of the responsible business movement, however, practitioners need to be able to better understand and articulate businesses’ social ecosystems; improve their business acumen; apply the same rigour to assessing how social issues impact business; and be prepared to democratise their knowledge and methodologies.

Changing economies in the new century The world of business and work is changing and will continue to change in the 21st Century three key trends include the digital revolution, rise of the gig economy and increasing expectations of sustainable business practices. Business in the Community (2017) has predicted that the rise of digital technology will bring a revolution that has the potential to create new jobs, enhance social and environmental outcomes, open up education, enable us to work smarter, promote competition and increase supply chain transparency. It also has the potential to bring significant challenges including adequately preparing and upskilling the workforce, addressing stakeholder concerns about the ethical use of digital, managing its environmental footprint, uneven access to technology and its benefits, and the pressure it places on communities and their wellbeing.1 This technological revolution will significantly enable the second key trend - the rise of the gig economy - where packages of work are compartmentalised and outsourced to small and micro businesses or freelancers.2 One report predicted that by 2040 work will largely facilitated by digital technology and platforms, mostly consist of many short-term assignments, small business growth will led to a boost in wages and everyone will become more responsible for their own success. 3 While the shells of larger corporations will remain, their work and workforce will increasingly be outsourced to small businesses and freelancing professionals. 4 Lastly, there is an increasing shift in focus towards sustainability within the economy, particularly amongst younger generations. For example, 64% of millennials consider a companies’ social and environmental commitments when deciding where to

1 (Business in the Community , 2017)2 (AIG Group, 2016)3 (AIG Group, 2016)4 (AIG Group, 2016)

work and won’t take a job if it doesn’t have strong values. Eighty-three percent are more loyal to a company that helps them contribute social and environmental issues.5 It isn’t just employees that feel this way, 66% of consumers are willing to pay more sustainable goods, with 45% reporting that environmental performance of a product had the ability to sway their purchase and 57% saying that they prefer products made with fresh, natural and/or organic ingredients. In 2015 sixty-five per cent of total sales of consumer goods globally were generated by brands whose marketing conveyed a commitment to social and/or environmental value. 6 So, in this changing world where businesses are becoming smaller, expectations of sustainability are growing and digital technologies are going to disrupt economies and community, how can SIA evolve to maximise its contribution to the development of communities and regions.

SIA – an ongoing evolution In 2006 Kemp & Boele outlined the generations of stakeholder engagement in the mining industry (see Figure 1).

Figure 1 Generations of stakeholder engagement in the mining industry7

Looking over the evolutions of the four generations, SIA largely sits within the third generation– focusing on achieving social licence to operate with the practice firmly setting up a relationship dynamic between the company and the impacted. When information is shared there is priority placed on it being transparent and the management system is focused around risks and opportunities. Moving beyond the first two generations has been a significant achievement, but the question remains about how we move forward to the next phase of evolution to ecosystems approaches.

5 (Cone, 2016)6 (Nielsen, 205)7 (Kemp & Boele, 2006)

The Rise of Responsible Business Movement In recent years the rise of the responsible business movement has gained momentum. At its core there is a recognition that business and society are not separate but interdependent and need to work better together in a holistic way to ensure sustained and ongoing effort for mutual development. The responsible business movement includes approaches such as shared value, purpose-driven brands and organisations, B-corps, corporate sustainability, corporate social responsibility, social enterprise and triple-bottom/ESG reporting. The movement is world-wide, led by large corporates with global reach, supply chains and workforces in the thousands.

Adoption rates of corporate sustainability are high amongst large business. In Australia, 180 of the top 200 Australian Stock Exchange (ASX) companies provide some level of meaningful sustainability disclosure, with larger companies disclosing more than smaller companies.8 The GRI framework is used by 72 percent and 20 percent use the UN Sustainable Development Goals (SDGs).9 There are still opportunities for improvement though with only 60 percent of ASX 200 companies having targets in place.10 Perhaps not coincidently, the Materials (i.e. mining and resources) and Energy and Utilities sectors, were two of the top three best quality sustainability reporting – two industries that have strong uptake with SIAs. 11

Despite this progress there is still a significant gap around social aspects of the sustainability equation. Only 18 ASX companies reported targets being in place around community programmes (which include local procurement, community investment and volunteering). This is not just limited to Australia. Just this year a group of 47 major corporates published a procotol via the Social and Human Capital Coalition. Their vision is that social and human capital will be consistently measured and valued in corporate, investor, government and organisational decision making. 12 They cite the main reason for the Coalition and the subsequent protocol as:

“Despite growing awareness, there is little consensus on how businesses can measure and assess the value of social and human capital resources. The development of measurement and valuation approaches – particularly in relation to social capital – is still in its infancy. Even when CEOs and other decision-makers recognize the value of assets such as community relationships or employee talent, they are unable to translate this value consistently into terms that people inside and outside their businesses can understand, trust and, most importantly, use. As a result, businesses struggle to embed these factors into processes such as strategic decision-making and communications. In many cases, this leads to undervaluing and consequently, underinvesting in the people and relationships on which businesses and society depend.”

Many of the steps outlined in the protocol are similar to the IAIA SIA guidelines, but more technically simple in order to be undertaken by generalist practitioners, and, its content and scope broader to encompass all aspects of a businesses; not just a project. 13

Inclusive access to social impact methodologies8 (ACSI, 2018)9 (ACSI, 2018)10 (ACSI, 2018)11 (ACSI, 2018)12 (Social & Human Capital Coalition, 2019)13 (Social and Human Capital Coalition, 2019)

Another key opportunity to maximise SIA’s contribution to regional development is to adapt the process so that it may be more accessible and useable by all businesses within an economy; not just large projects.

Queensland’s major project pipeline, the tradition domain of SIA, makes a significant contribution to the economy (see Figure 2) in investment and jobs. While major projects have the advantage of having a large impact for their relatively small number, reviewing broader economic statistics, small business prove to be the powerhouse of the Queensland economy – particularly regional areas. If SIA is wanting to maximise their impact on regional development a logical pathway to do this would be to ensure it is practiced the largest parts of the economy – in this case small and medium enterprises. If 97.4%14 of the of the Queensland economy doesn’t have the budget or capacity to understand and apply SIA methodology to their business, then SIA’s contribution is always going to be limited to the niche few in the remaining 2.6% of businesses.

EZZ

Figure 2 Key statistics of Queensland’s Major Projects Pipeline15 and Small Business Sector 16

Struck by the dominance of small businesses in the economy, Many Small Things undertook a survey in December 2018 to better understand the desire and motivation of everyday businesses on the Sunshine Coast, a region of Queensland, to improve their sustainability performance. The survey found that small businesses demonstrated similar sustainability aspirations to their corporate colleagues. Sixty-five per cent of respondents said the sustainability was extremely important or very important to their business and fifty -five percent reported that they wanted to do ‘more’ or ‘a lot

14 (Office of Small Business, 2017)15 (QMCA, 2019 )16 (Office of Small Business, 2017)

more’ in relation to sustainability. When asked what the most important sustainability issues were to the businesses, social issues such as partnerships and networks, education, health and wellbeing and regional development were high on the list, with environmental issues ranked further down (see Figure 3).

Life below water

Water management

Food value chains

Life on land

Poverty

Climate resilience & action

Peace, justice & strong institutions

Energy

Inequality, diversity & inclusion

Responsible consumption

Economic ecosystems

Regional development

Health and wellbeing

Education

Work and economic growth

Partnerships and networks

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Critical Important Somewhat importantNot relevant Neutral/Don't know

Figure 3 Importance of sustainability issues to respondent’s business (n=39, ranked by highest to lowest average score)

When these businesses were asked about their key challenges, the top four responses were keeping up with a changing world (including technology); establishing and maintaining a competitive advantage; improving access to markets and customers; and developing and implementing businesses strategy and systems. These results are not that different to the key drivers of sustainability for larger business as identified by Whelen & Fink (2016) such as driving competitive advantage through stakeholder engagement and fostering innovation.17 Critically, typical drivers for SIA including regulation and financial investment were towards the bottom of responses. Queensland provides a great example how there is a large section of the economy, and not just big corporates, which has the desire to improve their sustainability performance, particularly in relation to social issues, in order to improve their business and community around them. They just need access to the tools and support to help them do it.

Shifting SIA to an ecosystem paradigm Whether for big business or small, the question remains about how do we shift social impact assessment into the fourth, ecosystem-orientated generation. Rather than a revolution, an evolutionary step change may be required. Figure 4 is a representation of the current SIA process;

17 (Whelan & Fink, 2016)

assessing the ways local aspects of a major Project or change (represented in darker blues) impact the areas of strength and vulnerabilities of a community.

Figure 4 Representation of the current SIA process (adapted from IAIA SIA Guidelines (2015)18

Comparing this to the characterises outlined by Kemp and Boele earlier, as well as elements of corporate sustainability practice, two key changes have been identified that would help move SIA to an ecosystem approach (see Figure 5). The first is to consider the impacts a community has on aspects of businesses operations (i.e. two-way impact assessment). The second requires considering the impacts of all aspects of the business operations – not just the localised or project relevant ones. This approach would directly identify and demonstrate the social issues that are strategically and operationally critical, create greater incentive for business to take action on these issues, and create an ecosystem paradigm which will lead to improved sustainability outcomes for communities and business.

18 (Vanclay, 2015)

Figure 5 Representation of an adapted, ecosystem approach to SIA (adapted from IAIA SIA Guidelines (2015)

In practice, this might mean assessing the impacts a mining project will have on the local economy through the delivery of jobs and local procurement (current approach) as well as assessing how local skills and capacity will impact the viability of the short and long-term workforce strategy of operations, particularly in relation to skills availability. Another example is not just assessing the local impacts of a power station but also assessing how the product may be marketed and sold and, for example, its impacts on fuel inequality.

Many small things make a big change…an experiment in actionRather than just reflect on the many ways SIA has done some good, this paper has sought to challenge the practice to understand how SIA could do the most good. SIA’s ability to positively influence regional development is significant, however, this impact will always be capped if its methodologies, and the skills of its practitioners, are only able to be applied in the presence of a major project, which for many regional communities may only happen once or twice in a generation.

The rise of corporate sustainability has started a cultural shift in business to consider its relationship with society and the environment in a more concerned and responsible way. Despite the momentum that has been gathered, there remains opportunities to improve the methodologies around understanding, assessing and responding to social issues around business. If SIA can evolve to take an ecosystem approach which better maps the impacts and interdependencies of society and business; and make its knowledge and methodologies accessible to the majority of businesses within an economy, it has a much better chance of maximising it contribution to regional development.

Many Small Things, a regionally-based social enterprise founded 2018, is an experiment of this theory in action. Its purpose is to support the creation of not just purpose-driven, sustainable businesses but economies as well, providing traditional consultancy services that adapt SIA methodologies to whole-of-business contexts and then use the majority of profits to create accessible toolkits and resources to small to medium enterprises.

ReferencesACSI. (2018). Corporate Sustainability Reporting in Australia - An analysis of ASX200 disclouse.

[Online] https://www.acsi.org.au/images/stories/ACSIDocuments/generalresearchpublic/2018-Sustainability-Report-FINAL-June-2018.pdf: ACSI.

AIG Group. (2016). The Emergency of the Gig Economy - thought leader paper . https://www.aph.gov.au/DocumentStore.ashx?id=a6f714ed-dd1b-4374-a748-0c7d4d1a29d1&subId=460121: APH.

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Nielsen. (205). Consumer Goods' Brands that Demonstrate Commitent to Sustaianblity Outperform those that don't. https://www.nielsen.com/us/en/press-room/2015/consumer-goods-brands-that-demonstrate-commitment-to-sustainability-outperform.html: Online.

Office of Small Business. (2017). Advancing Small Business Strategy 2016 - 2020. Online [https://desbt.qld.gov.au/small-business/strategic-documents/advancing-small-business-queensland]: State of Queensland.

QMCA. (2019 ). 2019 Queensland Major Projects Pipeline. Queensland Major Contractors Association .

Social & Human Capital Coalition. (2019). Social & Human Capital Coalition - About Us. Retrieved from http://www.social-human-capital.org/introducing-social-human-capital-coalition/about-coalition

Social and Human Capital Coalition. (2019). Social and Human Captial Protocal . Online [https://docs.wbcsd.org/2019/02/Social_and_Human_Capital_Protocol.pdf].

Vanclay. (2015). Social Impact Assessment: Guidance for assessing and managing the social impacts of proejtcs. Online [https://www.iaia.org/uploads/pdf/SIA_Guidance_Document_IAIA.pdf]: IAIA.

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Whelan, T., & Fink, C. (2016). The Comprehensive Business Case for Sustainability. [online] https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability: HBR.