Investment in Education: A Strategic Imperative for Business

In April, as a contribution to a series of events on global education, which took place in Washington D.C., the Global Business Coalition for Education, Accenture Development Partnerships and the Brookings Institution came together to co-host a meeting on business investment in education.

The headline figures on education may be familiar, but they are nonetheless shocking. 61 million primary-aged children are out of school, 71 million teenagers do not attend secondary school, 250 million children are illiterate and 200 million young people leaving school without job-relevant skills. These gaps are expected to worsen if the burden of strengthening weak education systems in developing and emerging economies is left to be carried by individual country governments alone, not least because global financial support for education is dwindling with a funding gap estimated by UNESCO  to be $33bn annually for the goal of achieving primary and secondary education for all children in low income countries.

Why does this ‘development issue’ matter to business?

Simply put, it is a strategic imperative for business to acquire appropriately skilled talent at reasonable talent acquisition/retention costs in order to successfully grow in new markets and develop new products and services. A PwC survey of 1258 CEOs [l], conducted last year, found that almost a quarter had cancelled or delayed strategic initiatives and 29 per cent had been unable to pursue market opportunities because of talent constraints such as an inability to recruit staff with appropriate skills – problems which impacted the overall growth and profitability of the company

These challenges exist today and are only expected to worsen without effective action to address issues related to access to quality education.  The key reasons for this are:

> There is a demographic shift in the global labour force – where 25% of the global talent pool will be from India by 2030 and the working age population in ‘developing countries’ such as Bangladesh, Nigeria, and Ethiopia is growing rapidly.

>There is significant concern around the ‘employability’ of existing and future talent pools in ‘emerging economies’ caused by lack of development of literacy & numeracy skills as well transferable skills (such as problem solving, and communication) which are generally acquired in school upon completion of secondary education.

> Migration trends suggest that talent shortages in developed countries such as the US, the UK & Australia are being mitigated via movement of people from ‘emerging economies’ such as India, Bangladesh, Pakistan and China, so poor education systems in developing countries impact the global talent supply.

There is a strong case, therefore, for businesses to ‘backward integrate’ and invest in education themselves in order to ensure supply of adequately skilled talent for future growth and profitability. Moreover, our initial analysis (based on nine Indian companies) suggests that the return on investment in education to the business in the form of value generated and costs averted is an average of 42% annually across industries. In simple terms, taking a specific example of an Indian, locally-based company, $1 invested today would generate a value of $53 in 20 years (upon completion of education). This value would be greater still in the case of a global company.

The hard-headed business case for corporate investment in education is clear. The challenge now is to develop new financial instruments which translate the future economic value of talent into an attractive – and as yet untapped – investment opportunity for businesses and impact investors today.

By Alex Canfor-Dumas/GBC-Education and Pooja Bhatt /Accenture Development Partnerships