By: Nancy Elder | Chief Strategy Officer at Matter Unlimited | May 12th, 2014

This is the first in a series from Matter Unlimited about the role of Shared Value in Brand and Purpose.  http://www.makethingsmatter.com

Think about the brands you know and love that have been around for generations and are still going strong. Those are the brands that are becoming part of the fabric of our society.  You may notice they all share some characteristics: a strong mission, a focus on quality, a focus on customers, and a very competitive spirit. It’s remarkable how many of these brands attribute at least part of their continuing success to their social commitments. In many cases, their social commitment is actually central to their origin story.

Of course, brands succeed or fail for all kinds of reasons and “doing well by going good” is not a guarantee against failure. It does, however, drive long-term economic success in a great many cases.

Shared value promotes brand longevity. Companies with a higher purpose are always mindful of the social impact of their actions and of the important role that business plays in society. They are guided by their own personal North Star.

Unlike some business strategies and many media campaigns, which have a beginning, a middle and an end, shared value is a way of life and a way of thinking. A company’s shared value commitments do not have an end because purpose and values, in business just like in life, are what define us, guide us and sustain us. Our purpose and values are unchanging so our shared value commitments live on beyond the next quarter, the next campaign, the next CEO.

We founded Matter Unlimited with the specific purpose of helping brands, foundations and non-profits find their North Star so they can do well by doing good. What we have seen is that, for many brands, finding the North Star is a lot harder than it seems. Most brands do not have decades or centuries of shared value heritage to draw upon. Nor are most brands young brands like Patagonia or Starbucks or Whole Foods founded specifically with social impact in mind (although, fortunately for all of us, this is changing). Most brands, in fact, have legacies and histories that hold them back and thinking that has to evolve and change. Their North Star may be hiding in plain sight but it still has to be found before it can be followed.

Everything old is new again. Given all our recent advances it is easy to miss the point that today’s shared value -- or conscious capitalism or profit with purpose, whatever we choose to call it -- is actually a return to earlier business ethics and values. We are literally coming full circle.

When we think about the history of older companies we see that many of them started out considering their impact on society. It was part of who they were, what they were concerned about, what they talked about. We all have our favorite examples. One of ours is Cadbury.

Cadbury was one of the three major confectionery companies in 19th century England. The second-generation Cadbury brothers, Richard and George, had already innovated by transitioning the company from tea and coffee to chocolate. Now, they took the radical step of moving their operations to a green field site in Bournville in 1879. They were motivated by competitive advantage, operational efficiency, and profitability. They wanted access to transportation to key markets by rail and canal and the ability to expand their operations.  They knew that better working conditions and competitive pay would improve worker productivity. But they were motivated equally by their ethics and personal values: in 1893 they created a model village for their workers and families. The typical Cadbury worker now lived in a community with better living conditions, medical services, a school, and a healthier environment with open spaces and recreational facilities. The Cadbury brothers practiced shared value a full century before the term was coined.

Today, Cadbury is still a thriving brand, owned by Mondelēz International. Interestingly, one of their original competitors, Rowntree, now owned by Nestlé, embraced similar ethics and values.

Strategies change with the times but values are timeless. In the modern era, Howard Bowen is considered by many as the seminal thinker on corporate social responsibility. In his 1953 book “The Social Responsibilities of the Businessman” he offered a formal definition: “It refers to the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.”

Bowen’s point about policies and actions that fit society’s objectives and values is instructive. It explains why we can agree today with Cadbury’s 19th century values on education, health and the environment: values are relatively stable and enduring over time.  And it also explains why we might choose a different solution today. In the 1890’s the idea of a model village was the height of enlightened thinking, today some might consider it utopian social engineering and we would devise strategies more suited to our times.

So, as Cadbury knew, and Bowen and subsequent thinkers such as Michael Porter have reminded us, business was always about both profit and purpose. But somewhere along the way in the brand era of the past 50 or 60 years, many companies lost sight of their North Star. Brands were created, evolved and were advertised to increase consumption all without much consideration given to purpose. For many brands, the challenge today is finding or reconnecting with their North Star, recovering their heritage and rediscovering their purpose. 

The bottom line for companies is that their social purpose must be baked in not bolted on

The value of moving the brand towards social impact and shared value is about long-term competitive advantage and ROI, so the brand’s social impact must be fully integrated with economic value creation. It cannot be disconnected from the brand, an afterthought, a disposable feature. Shared value is rightfully becoming a reputational issue and stakeholders demand transparency and are too sophisticated, savvy and skeptical not to recognize authenticity when they see it. Companies know it is a long road. One global survey in 2013 showed that nearly 80% of corporate executives think we now live in a “reputation economy” but only 20% agreed their company is “ready to compete.”

The ROI of shared value is like compound interest, because shared value is a lifelong commitment and attitudinal change is a long-term process. Creating shared value works because it leads over time to attitudinal and behavioral change in consumers and other stakeholders. Shared value therefore drives KPI’s like brand preference, brand loyalty and usage frequency, attracts more valuable customers, and supports the customer lifetime value of the brand which impacts directly on market share, margin improvement and profitability. Yes, we can measure the ROI of shared value -- or anything else -- on a quarterly or annual basis, and of course we should. But when we do that we may miss the larger point which is that shared value is an investment that keeps on giving. It has a compounding effect. It makes us a long-term strategic investor not a “market timer.” It is what makes competitive advantage sustainable.

This is a very different type of effect than we see with traditional media campaigns, where adstock modeling (which predicts the effects of advertising on consumer purchase behavior) tells us that the impact of advertising decays over time and that saturation leads to diminishing returns. The adstock model is still a good model for traditional marketing but it does not explain so well the cumulative long-term impacts of shared value initiatives on consumer decision-making.

Consumers are now starting to make decisions on the basis of shared value, closing the loop between social impact and financial impact.  In other words, this is the sweet spot where the consumer and her identity, the brand and its purpose, and ROI connect. It’s an emotional, deeply personal connection. It is the proof that when social purpose is fully integrated with marketing consumers will recognize the brand’s authenticity and reward it by voting with their pocketbook, and the brand has found its North Star. Surveys increasingly show, and sales data will corroborate, that a growing number of consumers prefer to support a shared value brand than give to charity, and are more likely to choose a shared value brand if price is at parity with the choice alternative.

The race to the top is on, but how many of our leading brands have found their North Star? We still have a long way to go.

 

Nancy is a founder and chief strategy officer at Matter Unlimited and former CMO and communications executive at some of the world’s largest brands.  Matter Unlimited, a founding member of the Shared Value Initiative, is a strategic and creative communications group that helps clients align their business and their purpose-driven actions to tell a true, compelling story of who they are and what they do.

 

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