Social Value Could Unlock Transformational Change
- Sarah Stone
Sarah Stone at Samtaler discusses the importance of creating real social value in FS through corporate social responsibility.
Social Value Could Unlock Transformational Change for Banks – And Society
By Sarah Stone, Director, Samtaler
The economic value of the financial services industry to the UK is unquestionable. In 2017, the financial services sector contributed £119 billion to the economy, representing 6.5% of total economic output. The sector is responsible for 3.2% of all jobs and, perhaps more importantly, contributed £28.5 billion in tax in 2017/18. But what is its social value? And why should the sector care?
In his 2018 letter to CEOs, BlackRock Chairman and Chief Executive Larry Fink made it clear the world’s largest asset manager will be asking the companies it invests in to explain how their business makes “a positive contribution to society”. For BlackRock, simply managing funds for short-term shareholder profit is not an acceptable management strategy. By sending such a powerful message, Fink was using the tools at his disposal to effect change and create value for society.
"Society is demanding that companies, both public and private, serve a social purpose” Fink writes. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.
Creating social value through CSR
Like Fink, the finance industry controls a powerful set of tools and mechanisms which have the ability to change and shape the world for the better. This presents bankers and leaders in the finance industry with an enormous opportunity.
All too often, financial services firms view corporate social responsibility (CSR) as a marketing and PR activity which is undertaken for commercial, rather than strategic, reasons. Although banks may believe they are supporting the welfare of society, they are actually using CSR as a marketing tool to attract customers and improve their financial performance. They might be investing millions in programmes to boost entrepreneurialism, for example, or to help first-time buyers enter the housing market – but solving these issues also conveniently helps the bank sell its own products.
Creating social value to deliver real long-term benefits requires a more strategic approach. Ideally this should start with identifying a community you would like to benefit and then conducting a socio-economic analysis to identify what problems that community would like addressed.
One example of an area where the retail banking sector could take the lead would be in finding ways to address the decline of the high street, which is a massive problem in towns and cities across the UK. It’s such a significant issue, that the cash-strapped UK Government has just announced a £500m Future High Streets Fund to finance ideas which could help reverse the decline.
Could banks, for example, repurpose former branches (many of them in prime high street locations) and turn them into affordable co-working spaces? This could help encourage entrepreneurship and boost footfall into local towns, which in turn could stimulate demand for the coffee shops and cafes which sow the seeds for regeneration to start.
The scions of our banking industries count amongst some of the greatest philanthropists of all time. The Rockefellers and Peabodys of the 21st Century won’t be handing out their money to good causes – they’ll be using the tools at their disposal to redesign the world.
Sarah Stone is Director and Founder of social value agency Samtaler