Partnerships | pareto efficiency | aligning to the SDGs
“Children are a great example for all. They are pareto-efficient simply by talking to each other openly and using easy words. Can corporates do the same?”
In the 1990s, we would exchange comic books, VHS, DVDs and CDs with our friends. The simple example is magazines. When one person finished reading it, he passes it on to someone who wants it. Why can’t this trading efficiency and gain be achieved in today’s economy? Let’s take specifically the example of CD bartering to illustrate how cooperation and trade efficiency can solidify the United Nation 17 SDGs. Children are a great example for all. They are pareto-efficient simply by talking to each other openly and using easy words. Can corporates do the same?
Example of CD swapping
Let’s say, I have the Michael Jackson CD at home. My friend hasn’t listened to it yet and has another CD I like, the Britney CD. So, my friend Alicia and I speak at school and offer to swap CDs for a bit or maybe even decide to exchange them for good.
The outcome is that we are both better off and have greater gains without spending more money. This is only possible If we speak to each other. I wouldn’t know otherwise, that she has the Britney Spears CD and she wouldn’t know that I am bored of listening to my same songs over and over.
Now, how can companies shift their business model to partner efficiently?
When information is shared, your competitive advantage confirmed and a common goal identified – can we start talking about market efficiency. Speaking to your neighbor (as in GrowthView – article 2) is the first step, then engaging is the second step to achieve greater gains. An added benefit from this, is that both children happier, which is in itself an impact.
Economically, they didn’t spend more – the two kids didn’t ask their parents for pocket money or didn’t work their part-time job to get the CD. We should remember that satisfaction is linked to happiness, which is derived by the expectations we set in comparison to others. When kids simply swap toys, it increases satisfaction and lowers possible inequality as they each got what they wanted.
So, by swapping CDs you listen to new tunes, spend less and feel more prosperous! Win – win – win. Both children swapped CDs, and you’ve achieved social gain and economic gain. Sounds simple? So why don’t we do it in our society and in markets? So ultimately, can pareto efficiency be achieved with global priorities such as the 17 UN SDG goals?
On a global scale finding that pareto optimal point is possible– when companies, governments and people coming together to understand each ‘players’’ need and align to common denominator, common impact goal.
Example of impact projects in Nigeria
A more to-date example is a top-tier bank looking for impact investment opportunity in Nigeria as part of their thematic Fund in Renewable Energy. They partner and talk with a global computer software company, who is looking for CSR and impact initiatives in West Africa to facilitate data-driven clean water projects. Finally, we have a donor, that is funding market development programmes that take an inclusive and private sector approach.
How can all these 3 players benefit of paretoefficiency?
E | Engage with other players
Start the dialogue(i) the software company by sharing intel of rural needs for renewable energy, the distribution constraints and key private sector partners. (ii) The donor acting as the neutral connector and independent link to the local government and the UN. (iii) The bank investing in off-grid energy SMEs and providing access to finance bringing UHNW capital investment.
E | Explain what you want
It is an Ecosystem. Renewable energy is linked to financial services (access to finances) so that local businesses can manufacture, supply and distribute affordable micro-grids. Explain what your aim is. Then can we explain a common gain (outcome). In this case, it is for people in Nigeria to have more job opportunities, healthier living standards and access to better services.
They benefit from social and economic gain with an effective allocation of resources. What are the tangible gains & outcomes from the above example?
- All players: revenue (cross-sales)
- All players: social impact
- Nigerian market: investments and economic growth
- Software company: measurable impact to evidence to the UN
- Bank: Return on Investment (ROI) and Social Impact (SROI)
Each individual would be worse off. All 3 players, individually, would be worse off if they hadn’t come together; despite them having different preferences and values.
So, in practice, how do we get these players to all come together?
Communication and information sharing to achieve a COMMON GOAL. This game theory applies now to how we see corporates, banks, governments and international agencies are coming together under the same Sustainable Development Goals.
We share intelligence, knowledge, data and know-how to help us solve the complex problems of poverty, high consumption of goods, limited to no job opportunities, hunger, lack of infrastructure and most importantly knowledge and capacity to provide health and education to our future generations.
Remember, that impact investment and corporate sustainability is NOT the only solution. We need more than investments. We need to build an ecosystem and holistic framework within companies to measure the impact of their individual initiatives.
Finally, we need link initiatives and projects that can be scaled through collaboration, under the same UN SDG priority. Knowledge of local social and economic landscape is critical to invest and linking initiatives through partnerships.
Stay tuned, the next GrowthView will discuss what equitable, prosperity means in this context!
- Together we can do more
- The UN is asking for impact evidence
- Be open to be efficient
- Let’s aim to have greater gains for all