Editorial by Mark R. Kramer, Founder and Managing Director FSG and co-author of Creating Shared Value, and Justin J. Bakule, Executive Director, Shared Value Initiative
This originally appeared on www.fortune.com under the title, Why More CEOs Want to Make a Social Impact.
Change the World? Indeed! The world already seems to be changing more quickly than anyone can keep up with. From one breathless headline to the next, we are seeing faster and more disruptive change about issues of global consequence than ever before.
And yet, our work with Fortune on the annual Change the World list has shown us a parallel and far more hopeful new narrative. Business leaders are now deeply engaged in the pressing societal issues of our day as they increasingly recognize that those issues affect the long-term success of their companies. Whether it’s the post-Charlottesville dialogue on racial equity, changes to immigration law that will impact Dreamers, or the Paris Climate Change Accord, we see business leaders advocating in a newly public, vigorous and informed way for solutions that align social progress with their core business interests. Prominent CEOs like Tim Cook (Apple), Ken Frazier (Merck) and Paul Polman (Unilever) have taken public stands on these issues and many more. And, as the Fortune list demonstrates, they are doing more than just speaking up; they are developing new business models that find new sources of profit in solving our society’s urgent problems. These changes in business leadership feel note-worthy, but what do they portend both for the future of business and the direction of our society?
Six years ago, when we co-authored Creating Shared Value with Harvard Business School Professor Michael E. Porter, we believed that a new, higher form of capitalism was needed to address the trust deficit that had opened up between business and society in the post-2008 financial meltdown. We also believed that a form of capitalism imbued with social purpose would lead to a more competitive business strategy. A shared value strategy views social and environmental issues as opportunities for growth, innovation and differentiation rather than as costs imposed on the business by society to be minimized or, as Volkswagen chose in the recent emissions scandal, to be shirked altogether.
What we found at the time of our original research were shared value examples from a handful of early adopters – Walmart saving money on logistics, Mars investing to increase the productivity of small-scale farmers in Côte d’Ivoire, and Becton Dickinson growing its business by inventing the safety syringe to protect healthcare workers from infections. Some companies found that shared value thinking gave them a framing and definition for strategies they had already been pursuing, and in other cases shared value inspired companies to discover entirely new opportunities at the intersection of their business and society’s needs.
Now, fast forward 6 years and the key change we see is an increasing number of companies integrating shared value thinking into core competitive strategy to drive future growth and success. Nestlé is investing billions of R&D dollars to invent a new industry that straddles food and pharmaceuticals. Novartis is expanding access to medicine by introducing equitable pricing in low- and lower-middle-income countries at a price of USD 1 per treatment per month. And newer to the list, Enel, an Italian utility giant that is shaping the future of energy through advanced technologies that expand the market for renewable energy.
As we celebrate the third release of Fortune’s Change the World list, we encourage you to judge for yourself how central shared value is to each company’s strategy. Has the company chosen to address the societal issues that most meaningfully affect their future success? Are they truly innovating or merely following industry trends? And, most importantly, what are the scale of business results and social impact actually being achieved?
As the bar for social impact and business value gets raised, we believe that each iteration of the Change the World list get stronger with well-established and new companies alike proving that purpose and profit can go hand in hand. And we think that is a good sign because, despite today’s breathless headlines, businesses are making real change in the world: reducing greenhouse gases, increasing economic opportunity, and promoting better health. Plenty of companies still operate without regard to their social impact, often causing considerable harm, but those on the list, and those who aspire to be on it in the coming years, are the future of business – and the hope for our world.