I recently wrapped up 11 inspiring years of work at FSG – the first five years working in a consulting capacity with the world’s largest companies on the toughest social issues confronting their businesses and the last six years as the inaugural Executive Director conceiving, launching and growing the Shared Value Initiative into a global community of shared value practitioners. Not having had an opportunity to discuss my departure with each partner, colleague and friend that I’ve worked with over the years, I wanted to put forward a final Initiative blog with my closing observations on what the shared value movement needs to ensure continued growth and success and also where I’m heading next.
To start, I couldn’t be happier with last week’s announcement naming Bobbi Silten as the Initiative’s new Managing Director. Bobbi and I had met over the years at various Clinton Global Initiative events. Her extensive senior executive experience at Gap and Levi’s as well as long-time leadership on social issues within these companies makes Bobbi a perfect leader for the Initiative. And, combining Bobbi with our existing Initiative team – Stacy, Kathy, Alicia, Georgie, and Stephanie – will pay dividends to our Initiative partners as well as to advancing shared value globally. I’m thrilled to see how Bobbi’s leadership guides the next chapter of the Initiative.
I’m also incredibly proud of the progress that our partners have made in advancing shared value within their companies, nonprofits, foundations and governments. I was always thankful for the front-row seat that my role permitted into understanding how these organizations change – how they integrate a new way of thinking and engaging with society into their business or into partnering with business. Yet, I also became, sometimes painfully, aware of how hard it is, in particular for companies, to fully re-imprint their DNA around shared value. I could see the shared value tide come in and go out – oftentimes at the same company, oftentimes repeatedly. And, of course, the loudest, easiest company narrative still draws us all towards the scandalous – Wells Fargo and unauthorized accounts, Volkswagen and faked emission data, Facebook and data privacy, and on and on – scandals that can make even the most dedicated shared value aficionados wonder how much progress has really been made. Yet, with the ups and downs, the successes and challenges, the strikes and gutters, I see three key elements influencing the success of the shared value concept (and the numerous, inspiring orgs driving complementary business-in-society concepts):
- Centrality to Corporate Strategy – Over the years, I’ve seen no greater causal factor for shared value success or failure within a company than the link to corporate strategy and competitive positioning. Simply put, if the correlation between corporate strategy and shared value is high, so are the chances of success and of durable executive commitment to the concept. If it’s low, the battle will be fought uphill…and repeatedly uphill. Over the past few years, the company pursuing shared value that I found most inspiring? Easy. Enel. Why? Because in Enel’s view the future of energy is renewable. Full stop. And they’ve undertaken, with gusto, a CEO-driven mandate to transform their entire legacy coal and gas energy business away from billions of dollars of fixed thermal generation assets into renewable ones and to only build renewable assets and technologies in their new growth markets…all in a sector where many existing oil and gas companies fight tooth and nail, to this day, to do the exact opposite. Turns out, making the shared value case isn’t that hard within Enel since the concept provides the guideposts for the company’s growth, investments, innovation priorities, and competitive positioning, even if finding the exact pathway of how to make those changes within the company is an ongoing journey. Want the simplest barometer as to whether or not shared value will be successful in your company - does shared value matter deeply to your company’s future growth and competitive positioning? If yes, you’re on your way. If no, good luck.
- The Investor Conundrum – The only existential professional moment I had in the last 11 years was when Unilever came under unwanted takeover pressure from the Brazilian private equity firm, 3G, led by Brazil’s richest man, Jorge Paulo Lemann. 3G, owners of such well-known brands as Kraft Heinz, Burger King, and ABInBev, is well-known for its ruthless cost cutting approach, as Fortune detailed in this excellent feature article. And, Unilever CEO Paul Polman is known for Unilever’s Sustainable Living Plan as well as seemingly headlining every substantial business-in-society conversation that exists. As Fortune’s president, Alan Murray, opined, 3G versus Unilever was no run-of-the-mill hostile takeover. Alan asserted that it wasn’t hyperbolic to say that this was a face-off between two contrasting visions for how companies should run in the 21st century. Could a 3G takeover roll-back everything that Paul Polman had accomplished in his Unilever tenure? Or, had Polman successfully integrated the Sustainable Living Plan so deeply into Unilever company strategy that 3G couldn’t lop it off like an underperforming factory in an undesirable location even if it wanted to? If it was the former and it could happen to Unilever, it could happen to any company, right? I didn’t want to find out, and Unilever’s success at fending off 3G meant Polman and Unilever could move on with their vision intact (as well as with their radars highly attuned to figuring how to make sure that kind of unwelcome approach didn’t happen again). But, it shone a bright, unrelenting light on the alpha-dog influence that investors have over large public companies. Many admirable organizations (e.g., Ceres, Focusing Capital on the Long-Term) and researchers (e.g., Harvard Business School Professor George Serafeim) are working to change the situation, but I fear their well-informed, data-driven, heroic efforts are nowhere near enough to turn the tide and create capital markets that fully incorporate these issues into how companies and their management teams are viewed, valued and rewarded. Even the much ballyhooed Larry Fink letter exposes another weakness in today’s system for companies pursuing shared value – that the investment firms themselves, including Blackrock, have not fully embedded shared value thinking in a way that will drive meaningful change. In other words, if shared value remains as one of many considerations in how a Blackrock investment team makes a decision about a company and its value, it’s not much better than a sub-scale shared value project sitting off to the side of a big company gasping for air and attention. To me, unlocking shared value success, to this day, remains highly dependent on the success or failure in evolving capital markets to incorporate shared value dimensions into public company performance and incentives.
- Leadership – So, what kind of world do we want to live in? In my view, the world we want is one in which companies can and do play a positive role in solving the world’s greatest problems through their business. I’ve believed this core principle since we started the Initiative, and it hasn’t wavered. The scale potential of solving social and environmental problems through a business model, when appropriate, is the overarching promise of shared value and is still worth fighting for. Furthermore, I continue to believe these efforts will be a source of inspiration for attracting employees, consumers, and partners to leading companies. Of course, the success of shared value won’t mean the end of companies engaging in untoward behavior but, it does hopefully mean that Paul Polman-type leaders will grow in number and prominence. And, that nextgen talent, investors and partners will reward those companies who most substantially move away from short-term rent-seeking mindsets more definitively.
As for me, I started and departed the Initiative as the ultimate shared value believer. Almost needless to say, one can’t be the Executive Director of the Shared Value Initiative without believing. But, more importantly, I hope that I also brought critical questions to the shared value concept and respected, listened and learned from those who found shortcomings with the idea or held contrary views. Ultimately, I left the Initiative, so that I could move from an agent role helping our partners deliver on their shared value agendas into a principle role myself – helping define and deliver on a shared value strategy. I’m working on a business plan to launch a new shared value venture that aims to take on one of the greatest social issues of our time, income inequality, through a business model. And, more broadly, I feel fortunate that I can take a deep breath over the summer, walk with my kids on the beach without not so subconsciously wondering what my phone wants me to know, and weigh where within the next chapter of my career I can create the most social change through business strategy and innovation.
Thanks to everyone who supported, guided and worked with me at each stage of my FSG and Shared Value Initiative journey. Please be in touch as I will be with all of you.