McKinsey Report - Companies Addressing Social issues

 Many companies committed to addressing social issues in developing markets are overlooking a strategy for boosting their social impact—and perhaps their profits—a McKinsey survey suggests.

The vast majority of companies, according to the results of a recent McKinsey survey, believe that economic growth in developing markets is important to the success of their business strategies.

And more than two-thirds of those companies are engaged in various programs to encourage that growth, whether through education or private-sector development or technological advancement.

But many of these programs may be less effective than they could be, the survey results suggest.

International management consulting firm, McKinsey and Company says that’s because only 19 percent of respondents say their companies’ development programs focus on women, even though a great deal of recent research by the World Bank, the United Nations, and academic scholars indicates that programs focused on women generate better outcomes, in terms of specific program goals and overall development objectives.

For instance, previous research has found that an extra year of secondary schooling has been demonstrated to increase women’s future wages by 10 to 20 percent, significantly higher than the 5 to 15 percent return observed among men. In addition, women who earn income are especially powerful catalysts of development because they reinvest a larger portion of their income in the health, education, and well-being of their families, compared to men.

The McKinsey survey asked senior executives from companies headquartered around the world if and how their companies operate in developing markets, whether they are addressing social issues tied to economic development, and whether any of their development programs focus on women.

The survey also asked about whether and how focusing on women has affected profits at these companies and, for companies not focused on women, what might cause them to do so.

It is particularly notable that most respondents to this survey whose companies focus their development programs on women say the focus has boosted profits or will do so soon.

McKinsey says this is surprising because, in general, companies have great difficulty making financial assessments of the corporate benefits of social investments. Respondents’ ability to see a clear link to profits likely results from a combination of the issues companies are addressing (particularly education), the targets of their programs (most often current and future employees), and the multiplier effect of focusing on women.