Beyond Compliance 2024

Beyond Compliance: Embedding Impact through Innovative Finance3Foreword Today, more and more companies are actively engaging in social innovation, recognizing the opportunity to align their business goals with a meaningful commitment to sustainability. Since January 2024, two dozen companies, including the SK Group, have signed the Schwab Foundation’s Rise Ahead Pledge, committing to increase investments in social innovation. In addition, more than 40 companies have joined the Corporate Leadership Council on Social Innovation. Through their commitment, these companies are taking on a pivotal role in shaping a fairer, more inclusive and equitable economy. They recognize that those who lead in sustainability contribute to economic equity and create a competitive advantage in a marketplace that increasingly values impact. Yet, along with these opportunities come real challenges. Businesses now operate under the growing dual pressure of regulatory demands and the need to maintain financial performance. Companies face a choice: reactively meet compliance requirements or proactively pioneer innovative solutions that create a lasting impact and set them apart in a fast-evolving world. Navigating this path is not easy; however, companies that integrate impact into their core operations will benefit society and their bottom line, enabling partnerships with social innovators and paving the way for sustained success. To be sure, achieving this alignment requires a cultural shift that may take time to embed fully. Throughout this report, we explore social innovations in financial markets, such as outcome-based funding (OBF), that directly tie financial rewards to measurable and verifiable social outcomes. These solutions have been applied in a number of fields, particularly in enabling social innovators to attract investment based on the tangible impact they create. These financial innovations have historically been applied in development contexts; yet they hold valuable lessons for corporations looking to embed sustainable practices into their core business strategies. In a global economy threatened by low growth, these approaches hold the potential to unlock entirely new value, based on quantifying and financially rewarding social and environmental impact. In doing so, they hold the promise to create entirely new markets for aspects of our lives that we value but do not reward. Organizations like SK Group’s Center for Social Value Enhancement Studies (CSES) have already implemented such approaches, providing real-world evidence of the mutual value created for businesses and their communities. Social Progress Credits have distributed over $50 million to social innovators in South Korea. Other social innovators recognized by the Schwab Foundation, such as the Tamarack Institute for Community Engagement or Education for Employment, have leveraged similar mechanisms to create novel approaches to addressing the most pressing societal and ecological challenges. Developed collaboratively by the Schwab Foundation for Social Entrepreneurship, CSES and Rockefeller Philanthropy Advisors, this report offers practical guidance on deploying innovative financial solutions like OBF to integrate social impact into core business practices. Through real-world case studies, it shares actionable insights into how innovative finance can address corporate impact challenges and lays out practical steps for successful implementation. We hope this report serves as an inspiration to learn from social innovators and their approaches to recognizing and rewarding positive impact. We encourage companies to leverage these mechanisms and accelerate their own transformation to enable more positive and sustainable impact through their business operations. We are certain that, through these solutions, companies can help build a fairer, more inclusive economy grounded in business innovation and social responsibility.Hilde Schwab Chairperson and Co-Founder, Schwab Foundation for Social Entrepreneurship Latanya Mapp President and Chief Executive Officer, Rockefeller Philanthropy AdvisorsChey Tae-Won Chairman and Chief Executive Officer, SK Group Beyond Compliance: Embedding Impact through Innovative FinanceJanuary 2025