by Bill Novelli, author of “Good Business: The Talk, Fight, Win Way to Change the World“
Back in my brand management days at Unilever, the company’s annual report was a worldwide story of products and profit that contained hardly a word about sustainability or social impact and no mention of the triple bottom line (people, planet, profit). The business model has changed a lot since then. In Fortune magazine’s issue on 50 “Change the World” companies a few years ago, editor-in-chief Clifton Leaf wrote that Paul Polman, the now former chief executive officer (CEO) of Unilever, said his company was driving forward successfully largely because of its sustainable living plan.
I once attended a conference of up-and-comers, executives of various companies whom McKinsey — the management consulting firm that hosted the conference — had identified as likely to become CEOs in the next five years. I was invited to talk about social impact. After my remarks the chief operating officer of a Fortune 100 company stood up and said, “We can’t always do what we love, so we have to learn to love what we do.” Really? Is that how we want to live our careers and our lives?
The imperative to labor at what you may not love is less and less true today. People are learning to find more social reward—along with financial reward — in their daily work, and companies are engaging employees through a variety of strategies that create social good as well as profit. Indeed, social good can create profit.
Today’s business leaders are tapping into the power of purpose. They’re building social and environmental strategies into their core businesses to improve financial performance, gain a competitive edge, attract and keep talent, and achieve economic success for their shareholders as well as success for other stakeholders and for society. When they can do that, they’re doing well by doing good, and it’s their sweet spot.
There are many terms of art for this approach. “Corporate social responsibility” is often used, but some companies view this label as out of date. The “triple bottom line” — people, planet, profit — is still a popular expression, especially among younger people. “Sustainability” is a common term but usually applies more narrowly to creating environmental change and stewardship. “ESG” (environment, social, governance) is gaining in popularity. “Corporate philanthropy” is often considered a subset of a broader mix. There is no universal descriptor.
Today this way of doing business is often described as creating “shared value,” a term popularized by Michael Porter and Mark Kramer in their landmark 2010 article in the Harvard Business Review. Diminished trust in business, said Porter and Kramer, was a serious problem that could undermine competitiveness and reduce economic growth. They concluded that we need a new model — one of shared value — and that companies must take the lead in bringing business and society back together.
The new model they posited is not about charity but rather self-interested behavior: creating economic value by creating social value. They argued for expanding the pie, not merely redistributing the slices. In the Porter-Kramer concept, the roots of shared value lie in business’s having a successful “community,” not only to create demand for goods and services but also to provide critical public assets and a supportive environment. They believe that a community needs successful businesses to provide jobs and wealth creation opportunities for its citizens.
They identified three ways that shared value is created: reconceiving and reimagining products and markets, redefining productivity in the value chain, and building supportive industry clusters at the company’s locations. The gist of all this is that profits involving a social purpose represent a higher form of capitalism that will enable society to advance more rapidly while allowing companies to grow and prosper.
In the phrase “doing well by doing good,” the word “by” is important. It means that a company can improve its bottom line— shareholder value — as a consequence of creating positive results for other stakeholders and for society.
So there’s money in all this. It’s not just a moral imperative, not just the right thing to do, although many think that that is justification enough. But businesses are supposed to perform financially. In doing well by doing good, we have an important pathway to business success.
Bill Novelli, author of “Good Business: The Talk, Fight, Win Way to Change the World“, has a distinguished career as a leader in the corporate and non-profit worlds. He was CEO of AARP, founder and president of the Campaign for Tobacco-Free Kids, EVP of CARE, and president of Porter Novelli, the global public relations agency. Today, Novelli is a professor in the McDonough School of Business at Georgetown University where he teaches in the MBA program.
