From generation to generation, in the name of impact. Identikit of family businesses

Awareness of environmental and social issues is evolving. What was considered a simple savings or efficiency exercise has become a strategic lever

Plural enterprises
Let’s go back to the present day, because, as written, that scroll tells what it means to do business and to make community. A story encompassing many stories, as we already reported several times in our longforms. Because after all, the family business, and by extension every family business, is a bulwark of the Italian productive fabric, an outpost of that district that over the years would represent a distinctive feature of our industrialization process. And it goes far beyond the perimeter of its own walls, aggregating an extensive supply chain. Between tradition and innovation, one could say, the 'startup plug-in' effect is grafted, as described by economist Giulio Buciuni, professor of innovation at the Trinity College business school in Dublin and author of the book 'Innovatori outsider' (Outsider Innovators) published by Il Mulino: new companies graft - technically 'plug in' - with innovative products, services and processes, relying on tech elements in a virtuous path with established companies. From eight centuries ago to the present day. It is no coincidence that today 33% of emerging companies in the Biella area are led by people under-35 years old, the highest figure at the national level according to a recent report by the Guglielmo Tagliacarne Research Institute, as La Stampa also wrote recently. This share is also higher than the average for Piedmont (23.2%), which has the highest figure among Italian regions. This entrepreneurial dynamism is rooted in a solid tradition of family businesses that have built a deep bond with the territory over time. Just like our Sella Group which, on the strength of a family and entrepreneurial history born in the Biella area, continues to support local innovation through locations such as Sellalab, where start-ups take shape and find the tools to grow. 

The long-term perspective generates economic value, strengthens trust and reputation, and increases positive impact

Numbers and visions
From a scroll dating back to the mid-13th century to the present day, from Biella to the rest of Italy. Such Italy of a thousand bell towers and far removed from metropolitan contexts. This is the strength of family businesses. According to data from the latest Istat census, 81% of Italian companies are characterised by a family-type ownership structure. AIDAF, the Italian Association of Family Businesses, estimates that these businesses are responsible for about 80% of the GDP, employing 75% of the working population. We are talking about 2 million businesses. These are very significant numbers for the economic fabric of the country. But how have they changed over time? How is the transition between generations managed in family businesses? And which role do digital and environmental elements play? An answer comes from the new research 'ESG and family businesses', conducted by the Family Business Lab (FABULA) of the LIUC University, led by Salvatore Sciascia and Valentina Lazzarotti, in collaboration with Banca Sella and under the patronage of AIDAF. For FABULA, Rafaela Gjergji, Sofia Brunelli and Andrea Sanseverino also contributed to the research. The aim of the study was to investigate ESG issues in family businesses, analysing the determinants - and thus the drivers - and their effects. The research, of a qualitative nature, highlights some 'best in class', i.e. six family businesses that have long since embarked on a virtuous path to convey ESG in their companies including processes, services, narrative paths (read more about previous editions here). The cases of Brembo (Bergamo), Davines Group (Parma), FERRAGAMO (Florence), Ferrari-Lunelli (Trento), illycaffè (Trieste) and Ponti (Novara) were studied. "The role of family businesses in Italy is vital: they contribute to the majority of the GDP and employment: that’s why studying and supporting them is crucial for the well-being of our country. We are not only talking about SMEs or local businesses, but also about entities that reached considerable size and global operational presence. There is a tendency to think that their pervasiveness is an all-Italian peculiarity, but this is a false myth: in the rest of the world, too, family businesses are the most widespread and contributory enterprises. And their role will remain decisive in the years to come: after all, family businesses are evolving in terms of governance, management and finance, thus laying the foundations for greater resilience'. So says Salvatore Sciascia, professor of business economics at the LIUC University of Castellanza and co-director of the Family Business Lab - FABULA in the same academic pole. For years at LIUC we have been trying to decode that varied and numerous galaxy linked to family businesses, trying to map their genetic code, to sequence their DNA: in short, what specificities do they have? And why do they become so relevant for the new increasingly connected and networked districts? Sciascia, together with the other researchers in the lab, has no doubts: their success comes from their relationship with communities and their vision over time. In short, they think about generations, not only those who will lead the organisation on a family - and increasingly managerial - level, but also those who work and somehow live in it. "The specific elements of family businesses are at least three. The first lies in the fact that the people at the helm of these companies are linked by emotional and blood relations, with all the complexity that this entails. The second is that these companies also have fundamental and often prioritised non-economic objectives such as family harmony and reputation. Finally, the third element concerns the orientation towards achieving long-term rather than immediate results. In the light of these peculiarities, family businesses play a crucial role in the new districts: they establish a strong link with the territory, contributing to its stability and development. Moreover, they preserve local expertise and contribute to its renewal and adapt quickly to changes in the markets. And then they facilitate collaboration between the actors involved and become the spokesman for a true orientation towards sustainability,' says Valentina Lazzarotti, professor of economics and business management and co-director Family Business Lab (FABULA) at LIUC University. 

The challenge is to measure sustainability, i.e. to quantify the positive impact of ESG policies on economic performance indicators

The time factor
But there is another element that fits into that identikit we are trying to trace. And it comes from the time factor and therefore also from the inevitable generational changes. "The economic crisis linked to the pandemic has led to an acceleration of generational changes. In an increasingly global and digital world, the new generations can certainly be of significant support to the survival and development of family businesses (and not only). Indeed, younger people are more familiar with digital tools that allow them to increase productivity exponentially. They are also more globally oriented, because transport and communication technologies enabled them to travel and learn more about the world beyond national borders. But beware. It would be wrong to think of the new generations as an alternative to the previous ones: they are complementary figures to the more mature ones. It is no coincidence that the companies that value generational co-presence, even at the helm of companies, are those that perform best,' Sciascia points out.   

Innovation through ESG
In a world trying to reinterpret social and environmental challenges, awareness of ESG issues, which we have repeatedly covered in our longforms, also comes through the work of the best family businesses. According to the research, there are four family drivers for ESG orientation: founder's imprinting, oversee of a family member on ESG issues, family culture and rootedness in the local area. Four are also the business determining factors: sectoral context, global exposure, professionalisation and differentiation strategy. As far as family aspects are concerned, the main beneficial effects identified include strengthening family culture, harmony and cohesion among family members, facilitating generational transition and increasing attractiveness to new generations joining the company. The main benefits at a company level, on the other hand, include operational efficiency through reduced energy costs, more sustainable packaging and intelligent use of resources, improved company reputation, sales growth and finally product and process innovation. 

Evolve la sensibilità sui temi ambientali e sociali. Quello che era considerato un semplice esercizio di risparmio o efficienza, è diventato leva strategica

"Family businesses, traditionally attentive to the value of resources and the environment in which they operate, have often found ESG issues a natural alignment with their own values and long-term vision. Over time, awareness of these issues has matured: what was once considered a simple savings or efficiency exercise has now become a key strategic lever. The most forward-looking family businesses have become aware that embracing ESG issues is no longer just a good practice, but a real challenge allowing them to chart a course of innovation and transformation, promoting a broad-based sustainable development model,' says Lazzarotti. For researchers in the academic lab, the main focus is usually on the environment, as E stands for Environmental. The reason lies in the urgency of climate issues and increasing regulatory pressure on the subject. This is typically followed by the social sphere - represented by the S for Social - which is gaining more and more relevance, especially in relation to issues such as diversity and inclusion, the wellbeing of workers and the impact of companies on the communities and the territory surrounding them. Finally," the researchers argue, "there is a focus on governance, which is made explicit by the letter G, but which is still underdeveloped on average. "Moreover, in family businesses, it is necessary to develop not only corporate governance mechanisms, but also family governance: a particularly complex task," adds Lazzarotti.

Doing and letting people know
This brings us to the six cases studied in the university's qualitative research. "Italian companies are of different types: some  are very attentive to sustainability processes, but not very capable of communicating it, some communicate more than they really do, and some know how to do and know how to let people know. The six cases studied represent the excellence of this third type: they have the ability to combine the strength of their facts with the effectiveness of their communication. In other words, in the six case studies, the focus remains on processes and storytelling is used to effectively communicate achievements. This is especially true for B2C companies, where communication takes on a more strategic role,' says Sciascia.
 

It emerges how the sustainability path of the six companies interviewed by the researchers, rooted in the founder's vision, has evolved, structured and consolidated over time. "The reference field context is a fundamental factor capable of influencing ESG practices in companies, conditioning their choices. For example, in the case of Brembo, the fact of belonging to the automotive sector has played an important role: in fact, in this field, the transition towards a green model was mainly motivated by strict regulations focused on reducing emissions and energy efficiency. In the food and cosmetics sector, on the other hand, the efficient use of natural resources and the preservation of biodiversity are priority objectives that influence the work of companies such as illycaffè, Ponti, Ferrari-Lunelli and the Davines Group. So Italian family businesses can draw inspiration from our six business cases to achieve an integration of sustainable processes and authentic storytelling, thus helping to build trust and tangible value for stakeholders,' Lazzarotti points out. But is this approach oriented towards the short or the medium to long term? According to the professor, family businesses, in particular those analysed, tend to be characterised by an approach oriented towards the long term, generational continuity, ties with the local community and attention to reputation. "This approach is reflected in a predilection for strategic and sustainable planning, which favours lasting objectives rather than a short-term vision. Instead, the long-term perspective allows ambitious goals to be outlined and sustainability to be effectively integrated into the corporate strategy. For family businesses, this vision is essential not only to generate economic value, but also to build trust and a solid reputation, with a positive impact on the social and environmental context. However, any short-term orientations that may be found  are often the result of external pressures such as those arising from the market or regulations and should be considered as tactical rather than strategic choices. In fact, an excessive focus on the short term can lead to opportunistic decisions, less robust results and loss of stakeholder confidence,' says Lazzarotti.

The long-term perspective generates economic value, strengthens trust and reputation, and increases positive impact

The node of the method
"There are, of course, also areas for improvement with respect to which family businesses can draw inspiration from the cases analysed. The first is related to the formalisation of the ESG strategy and its integration in all business processes: in fact, the adoption of ESG policies must be present in virtually all business processes, in all functions, without substantial differences. Another important point is the involvement of stakeholders, which must be continuous and deep, to make ESG policies truly effective and shared by all those involved. 
The real challenge is to measure sustainability: the crux is still to quantify the positive impact of ESG policies on sales and on various economic and non-economic performance indicators, as well as on aspects such as reputation or credibility,' say Sciascia and Lazzarotti.

Sensitivity has changed over time on ESG issues, also to capture the attention of more attentive stakeholders. "The family businesses analysed, in their exemplary journey towards sustainability, have actively sought to involve all stakeholders. This approach generates a virtuous circle that not only promotes sustainability, but also strengthens the company's position in the long term, consolidating the bond with all those who interact with it,' conclude the two co-directors. Here then is that plural identikit of family businesses. So in uncertain times, to preserve their bearings, the family business passes from generation to generation, relying on an indispensable element: listening to the community.