African businesses are well-placed for social value creation
The United Nations’ Sustainable Development Goals (SDGs) is a comprehensive framework for assessing the development needs of the continent. A firm, looking to create social value, would find the SDGs a good starting point. Where do African countries currently stand with respect to the SDGs? The continental scorecard is very poor. According to the 2020 Africa SDG Index and Dashboards Report, no country had a good score for 13 of the 17 goals, for instance. The most pressing SDGs are good health and wellbeing (SDG 3), infrastructure (SDG 9) and peace, justice and strong institutions (SDG 16).
Amongst the identified challenges in implementing the SDGs in Africa, the private sector could easily help with inadequate financial resources, lack of capacity in the civil service and civil society and lack of adequate data. According to The Sustainable Development Goals Centre for Africa, the SDG financing gap for Africa is estimated at between US$500 billion to US$1.2 trillion annually. Juxtapose that with more than 400 companies with gross sales of at least US$1 billion annually on the continent. Yes, these firms likely pay their fair share in taxes. But clearly, there is so much more they could do on financing alone.
In many African countries, even if a company desires to put society first, it may find itself out of business before it is ever able to do significant good
There are many other ways African firms could create social value. Firms involved in sustainable agriculture, water infrastructure or renewable energy would be creating social value by virtue of their products and services. Incidentally, these examples speak to the predominant needs related to food, water, housing, transportation and energy on the continent. In other cases, it could simply be via how firms doing business on the continent conduct their operations. Do they seek sustainable production, an inclusive workforce, gender balance and so on?
And the evidence increasingly show that even in the African case, SVC can be profitable in the long run and loss-making when ignored. For instance, when southern African firms invested in HIV/AIDS prevention and treatment, they not only helped save lives but enjoyed increase staff productivity and higher returns on their human capital. The Fairtrade chocolate initiative in Ghana is another good example. Cocoa farmers got paid more and participating firms secured better margins in tandem. And in instances where firms chose to be unethical like the UK’s Thor Chemicals in South Africa, it ended up paying a higher price.
Because of the peculiar political and socioeconomic contexts in many African countries, even if a company desires to put society first, it may find itself out of business before it is ever able to do significant good. Even Edmans (2020) admonishes, “while a company’s primary goal should be to create value for society, it is important that it does so in a discerning way.” This is because even as it is true that companies, which deliver great social value tend to also do well financially, it is not always the case. This nuance is even more pertinent in the African context.
But even in the difficult African terrain, there are many instances where an SVC mindset would have been clearly more profitable. Take the case of Shell Nigeria, which was ordered by a Dutch court in late January 2021 to pay compensation to farmers affected by oil spills from its operations in the Niger Delta. In addition to the financial reparations, Shell has also been ordered to install equipment to prevent further leaks. And while Shell argues the oil pipeline leaks were due to sabotage, there is no gainsaying that an SVC mindset – e.g., a duty of care – would have likely made the firm more enthused to ensure the leakages did not persist despite the high infrastructure and security costs.
Besides, Shell could easily have created social value by aiming for the SDGs via its operations to prevent pollution, waste generation and abuse of human rights. By the recent Dutch court indictment, it clearly failed in regard of SDG 1 (no poverty) since livelihoods were lost as fishermen could not fish, SDG 3 (good health & well-being) in light of health costs to members of the host communities, SDG 6 (clean water & sanitation) owing to pollution of water bodies for drinking water, bathing, and laundry, SDG 11 (sustainable cities & communities), and SDG 13 (climate action).
Another case in point is the construction of the Apapa-Oshodi-Oworonsoki-Ojota highway in Lagos, Nigeria, by Dangote Industries. Perennially out of repair, the highway is the main access road to the busiest sea port in the country. And every time it was repaired in the past, it almost always unraveled during the rainy season, with a constant sight of long queues of heavy duty trucks parked by the side of the road for a considerable distance. And while Dangote Industries would enjoy a 10-year tax rebate from the Nigerian government, the value to the firm and the Nigerian economy owing to the wider and expectedly more resilient all-cement road, would be far greater than the estimated tax concessions of about US$180 million (72.9 billion naira).
The initiative is multiplicative, leverages on Dangote Cement’s comparative advantage, and is material to its business and stakeholders. And even as Dangote does not explicity say the intiative would help with the SDGs, it probably should have consciously sought to do so. Clearly, the Lagos port road would help with SDG 1 (no poverty), SDG 9 (industry, innovation, and infrastructure), SDG 11 (sustainable cities & communities), and SDG 17 (partnerships for the goals).
In sum, the above examples highlight how in spite of the peculiarly difficult African business environment, firms could aim for social value creation in a systematic, measurable and sustainable way by mirroring the SDGs in their operations, CSR and philanthropy. The upside to the African case is that firms have so many opportunities for social value creation with relatively less effort and financial resources. And there is almost an immediate, direct and easily discernible development impact.
References and figures are available in the original article viz. https://rafiqraji.com/2021/03/21/social-value-creation-african-firms-the-sdgs/
