Preferred Futures: Foresight to Address Social Imperatives

Originally Published in Research-Technology Management

More companies are realizing they have a role to play in solving some of the most critical problems of our time. Sustainability, social justice, and community development are now in scope for corporate innovation, planning, and R&D. In fact, innovative solutions to these larger environmental, social, and governmental (ESG) initiatives can be good both for society and for the bottom line of the companies that bring them to market. But traditional scenario-based approaches to foresight may not be enough to identify and support these new areas of focus, because they are built for companies to respond to any future that may arise, not influence events themselves. Embracing systems thinking and “hard visions”—visions of the future based not on hope but on careful evaluation of emergent change—can help companies develop plans to pursue ESG initiatives that will yield both meaningful change and real profit.

Corporate ESG Initiatives—The Challenge

In the past, companies refrained from pursuing ESG initiatives due to the rules of incorporation, which typically state that 100 percent of profits must be returned to shareholders. Leaders were concerned that shareholders would sue if profits were diverted to support non-business outcomes. After all, shareholders invest in companies to make a profit, not to make the world a better place. 

But in recent years, consumer sentiment and investor money have combined to make values-based pursuits a source of competitive advantage. 81% percent of Millennial shoppers, now the largest bloc of US consumers, expect companies they do business with to make their social values public, and 73 percent will pay more for sustainable products. 

Shareholders’ focus is also shifting to encompass larger social aims. Values-based investment managers that follow ESG guidelines now manage more than $12 trillion in assets in the United States, and Millennials are expected to add an additional $15–20 trillion over the next three decades. Globally, the amount of capital invested in ESG funds exceeds the entire GDP of the United States, and it has grown 25 percent over the last 5 years.

Given these statistics, it makes good business sense for companies to engage in ESG activities, but for many, the idea is still relatively new. Most companies have focused on reducing their own environmental and social impacts—making operations more efficient, using less energy overall and more clean energy, reducing waste, and making their workplaces more tolerant and diverse. 

These actions serve both society and the bottom line—efficiency and energy savings that are good for the environment also reduce costs—but they are internally focused; they work only to minimize the company’s contribution to societal issues, not to help solve those problems altogether. Further, these broader social problems present fruitful opportunities for innovation. 

But once leaders look outside their four walls, past what they control directly, they can quickly—and justifiably—feel overwhelmed. Many of the issues companies are being asked to tackle have been intractable for decades, with governments and nonprofits spending billions of dollars each year trying to improve outcomes. Few business leaders learned public policy in their MBA programs; they lack the training and experience to understand how to engage in and manage ESG projects. Consequently, companies adopt a conservative approach, choosing to be good stewards of their shareholders’ money and reduce unintended consequences that might damage the corporate brand or create financial losses. 

On the other hand, consumers and investors are all pulling companies into ESG initiatives, and the innovation opportunities are too good to ignore.  A collaborative foresight approach that includes all stakeholders can help companies wade into this territory. Such an approach allows company leaders to sense the needs of the community and create alignment with external stakeholders on the right ways forward.

So You Want to Change the World and Make Money

While working at the Waitt Foundation, I spent four years building and using a foresight process to help community stakeholders create hard visions of successful futures. In 2010, this approach was modified and applied to corporate innovation functions, a process described in detail in a 2012 RTM article. This process was not based on a traditional visioning exercise, in which leaders imagine the best possible future and attempt to find ways to achieve it. Those “soft visions” are not based in reality and can be very difficult to connect back to strategies to be enacted today. Rather, the visions generated by this process were based on current trends; participants sought to identify leverage points for positive change in the interactions among those trends.

Leverage points are areas where a small amount of energy or intervention can create an enormous amount of change. By understanding feedback loops between various trends in technology, regulations, economic incentives, and the environment, communities can identify ways to reduce negative feedback loops, fuel positive ones, or change the dynamics and information in a system to produce desired change. 

Where to Start

Companies should start their ESG exploration with their own values. What areas fit the brand identity, the products and services the company sells and supports, and employees’ passions? Answering these questions can generate an initial list of potential activities. At this point, it is helpful to engage external stakeholders related to the activities in that list in a collaborative foresight and cocreation process. The goal is to generate the hard visions of the future needed to identify the leverage points where innovation can have the biggest impact.

Typically, this process consists of several workshops. Working together, business and community leaders select critical trends, extrapolate their impacts, and assess how those impacts will combine to create sources of change. A working team takes the workshop output and architects alternative future systems—usually causal loop diagrams or influence diagrams that show the relationships among social, technology, economic, environmental, and political trends.

A second set of workshops with stakeholders introduces the theory of leverage points; participants then seek places in the future systems where different information flows, a change in incentives, elimination of negative feedback loops, encouragement of positive feedback loops, or other interventions might improve outcomes. At this stage, the company has a choice: it can continue to cocreate products, services, or business models with external stakeholders, or it can take the future systems and leverage points generated by the process in-house, where they can guide development of proprietary innovations that address key leverage points and fit the company’s values and capabilities. 

Conclusion

Companies can improve the health of their communities, employees, and the planet, and it benefits them to do so. Engaging in a foresight process with external stakeholders that creates hard visions and identifies leverage points to guide innovation can help business leaders identify ESG innovation opportunities that improve communities and may improve the bottom line. Such a process can also address the experience gap: as business leaders engage with external stakeholders and experts, they develop empathy and knowledge that gives them confidence to move into the new areas of business created by social issues.