Beyond Compliance 2024

Beyond Compliance: Embedding Impact through Innovative Finance111.5 Innovative corporate philanthropy Where it is legally possible, companies are increasingly aligning their corporate philanthropy with strategic objectives, such as exploring emerging markets, supporting the talent pipeline or addressing accessibility of their products and services.27 This approach not only aligns social and economic goals but also leverages companies’ strengths for social impact and may indirectly benefit companies’ long-term business prospects.28 Certain companies have aligned their corporate philanthropy directly with their core business. For example, Reckitt’s Fight for Access Fund focuses on various thematic areas, including access to water, hygiene and sanitation, which ties directly back to key product categories of Reckitt’s core business.29 Most companies however, still face challenges in aligning their philanthropy with corporate interests for a range of reasons, including difficulties in impact measurement, adopting suitable financing mechanisms and undergoing organizational change. Often there is also a genuine caution about leveraging corporate philanthropy as a tool for business; however, there is an opportunity and mounting evidence for innovative financing models to be used to deepen the alignment of philanthropy with corporate objectives for societal good. In sum, corporations are increasingly facing heightened regulatory scrutiny and societal expectations regarding social impact. Companies might opt to simply comply with new regulatory requirements, but this approach is likely to generate costs without unlocking the significant benefits that these developments hold. As companies navigate these complex issues, there is an opportunity to use best practices to integrate impact into their core operations and decision-making, and to truly initiate corporate transformation and drive meaningful change for long-term value creation. Decades of innovation in the development sector can be leveraged by the corporate sector to adopt and adapt financing approaches that consider societal impact to accomplish their business as well as social and environmental impact goals. 1.4 Talent and skills Skills development has become increasingly critical given significant changes driven by global megatrends such as automation, climate change, digitalization and a shrinking labour force, which are expected to transform over 1.1 billion jobs in the next decade, according to the World Bank.20 Currently, 25% of firms view workforce skills as a significant constraint on their operations, a figure that rises to 60% in certain African and Latin American countries.21 Additionally, 75% of employers report difficulties in filling open positions.22 Six in 10 employees need retraining, yet only half of them have access to adequate training opportunities. As technology adoption continues to accelerate, 75% of companies anticipate the need to upskill their workforce and recruit for digital competencies over the next five years.23 Only one- third of organizations, however, feel prepared for the impending workforce disruption.24 Additionally, a recent United Nations Industrial Development Organization (UNIDO) publication emphasizes the importance of skill development with suppliers across the entire supply chain as companies adopt more sustainable practices.25 There is a critical need for companies to address future skills requirements in their operations and supply chains, especially as companies engage emerging markets. By closing the skills gap, global GDP could increase by approximately 5%, amounting to an estimated $6.5 to $8.5 trillion in economic growth.26 Skilling often requires cross-sector collaboration efforts for long-term success, however. Companies may need to work with governments and NGOs to implement innovative skilling initiatives; they tend to struggle when incentive systems are not aligned, measures of success vary and horizons for decision-making differ. There is an opportunity for companies to link funding for recruitment to retention programmes, ensuring that skills are market-relevant, especially in emerging markets. This innovative approach fosters collaboration among stakeholders and enhances transparency of the return on investment of skills development initiatives.25% of firms view workforce skills as a significant constraint on their operations25%