Luis Prata | The private sector and socio-economic impact in the age of accountability

On Friday, November 22, the Financial Gleaner published an article headlined ‘Red Stripe tees up pitch for another tax break’; however, the truth is our story is much bigger.

As a corporate entity, we derive our social legitimacy and right to operate from the economic value we create for society at large, from our performance for both investors and a wider network of constituencies, our partnership with Government and other agents in solving social problems, and the trust our leadership inspires in employees and society as a whole.

Partnership is what we seek to leverage in reducing the high costs associated with local production. A case in point is cassava in our brews. Our commitment to the expansion of the agricultural sector costs us way more than it is for us to import high-maltose corn syrup. This is daunting for our operations and for so many other manufacturers in Jamaica.

We, therefore, are cognisant of the criticality of public-private partnership in driving the integration of the production of primary agricultural produce along all the stages of the supply chain through to value added and facilitating full commercialisation of outputs of the agriculture, manufacturing, and service sectors and as such, look to the government for support.

Therefore, the words of 17th century poet John Donne “no man is an island, no man stands alone” espouse the undeniable truth – the world is essentially one interrelated village.

Today, it is far too easy to observe the negative and positive effects of decisions of consequence rippling throughout our entire social system. It comes as no surprise, therefore, that this epoch of interconnected exchange should be characterised by the resounding need to gauge accountability.

Far from being a hindrance to further progress, this age of accountability provides organisations with a unique opportunity to re-establish the responsibility that private sector has to its most important stakeholder – the consumer. In fact, supporting accountability by measuring social and environmental impact can serve to demonstrate the value organisations provide to the wider society and sustain that organisation’s continued success.

In all the nooks and crannies of business, the practice of demonstrating impact, particularly socio-economic impact, has grown significantly in importance, requiring greater portions of business operation budgets. This practice comes with the added benefit of promoting a culture of innovation and efficiency within organisations, in the long run, improving their capacity to execute their goals.

An organisation open to such measures indicates a willingness to support universally recognised best practices. This creates a competitive advantage for that organisation to attract the attention of investors who’ve grown increasingly sensitive to impact assessment as integral to good investment strategies.

Furthermore, these demonstrations hold organisations accountable to efficient management, goal execution, and the delivery of products and services with the good of the society and environment at heart.

Measuring impact also forms the vocabulary for articulating an organisation’s achievements – through data and testimonials, the organisation’s work crafts an accessible and effective narrative of success and purpose.

Given the interconnected nature of social institutions in today’s world, an organisation within the private sector that is serious about measuring its socioeconomic impact need look no further than the flow of capital across its various value chains.

THREE PRIMARY FORMS

Tracing these financial flows throughout the operations of that organisation, it becomes apparent that impact takes three primary forms.

1. First, there are direct impacts which usher from the immediate operations of the organisation. This considers capital flowing through direct employment, taxes and profits for the organisation’s financial stakeholders.

2. Second, there are upstream impacts which refer to the flow of capital inspired by the procurement of goods and services necessary for the operation of the organisation. This, too, considers secondary employment and wider economic impacts.

3. Last, there are downstream impacts which considers the flow of capital inspired by the distribution and trade activities of the products and services generated by the organisation.

In my experience, such an approach has revealed the extent to which Red Stripe has had a positive impact on the Jamaican economy. Through our various value streams, our organisation has actively supported the creation of over 6,700 jobs and the addition of J$21 billion to the nation’s gross domestic product.

We have observed first-hand how these impacts proliferate, as the Jamaican government is our biggest beneficiary through millions of dollars in taxes. The ripple continues from these tax dollars out to further support job creation in the economy, infrastructural development, and the upkeep of social services such as public schools and hospitals.

Attempting to disentangle the operations of any organisation from the wider effects they inspire would not only be ill-advised, but would prove futile. Instead, embracing the entanglement of society, environment and organisational operations provides a unique opportunity to leverage relevant impact assessment to maximise on potential benefits for all.

In this sense, understanding the flow of capital across various streams, or properly identifying and mitigating negative environmental externalities such as pollution, endows private-sector organisations with legitimacy and a greater sense of responsibility to the wider society.

Certainly, in this age of accountability, no organisation is an island, and no organisation can stand alone.

Luis Prata is the managing director of Red Stripe. Email feedback to columns@gleanerjm.com.