Companies from DuPont to Microsoft drive social innovation
I had never heard of social purpose before, but it intrigued me. After learning about it, I was convinced and drafted a social purpose for my business.
This quote is from a business leader who recently attended a United Way workshop as part of its new social purpose business series.
With this action, the leader joined a growing number of businesses around the globe that are redefining their role in society: They are looking beyond generating economic value to creating social value as well. Rather than standing on the sidelines, these companies shift from passive bystanders to playing an active role in sustaining the communities they serve.
For some, social purpose transcends maximizing profits and shareholder value, and for others, it is how they create value and grow. Either way, they recognize that the revenue-generating side of the business and the social impact side can co-exist and in so doing, generate greater impact than if each were treated as separate and distinct.
Investors are taking notice, too. Significantly, BlackRock, the world’s largest asset manager with over $6 trillion in assets, is calling upon companies to determine their sense of purpose.
In his 2018 letter to CEOs, chairman and CEO Larry Fink pointed out that society is demanding that companies serve a social purpose.
"To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society," he wrote. "Companies must benefit all of their stakeholders, including shareholders, employees, customers and the communities in which they operate."
In the letter, he urged companies to find their social purpose by asking,
What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that that will help them achieve their goals?
He argued that without a sense of purpose, no company can achieve its full potential. And he tied that directly into financial performance. Not only are large investors starting to pay attention, but so too are community-based NGOS.
The United Way — a nonprofit that works locally to raise funds and invest in improving lives in its community — defines a social purpose business as:
A company whose enduring reason for being is to create a better world. It is an engine for good, creating social benefits by the very act of conducting business. Its growth is a positive force in society.
Three fundamental dimensions drive the social purpose business:
- It has a reason for being. It knows why the business exists and what it stands for.
- This reason for being is infused with a social ambition. A social purpose company has a humanitarian quest or north star.
- Its profit motive links to its societal agenda. Social purpose companies pursue one of two profit models: 1) it sees its social purpose as either beyond profitability and transcending profitability; or 2) as the route to profitability.
The graphic below depicts the business model that drives the social purpose firm (PDF). With social purpose as the engine fueling the cycle's iteration, the company can grow for good; through eliminating its social harms, it can reduce its costs and risk.
By focusing on its social purpose, a business drives social innovation, leading to the next level of action and impact for business and society, so that it generates a virtuous cycle between business performance and community impact. The business does good — that drives business results — which in turn, allows it to do yet more good.
When companies look past the balance sheet and base decision-making on purpose, they become part of a growing number of savvy companies that are redefining how to run a 21st-century business.
Companies you’ve heard of and some you haven’t (yet) boldly have articulated their commitment to being a social purpose business. If you’re wondering what a social purpose statement looks and sounds like, check out these very public commitments made by game-changing companies around the world:
- Danone: To bring health through food to as many people as possible.
- DuPont: To solve some of the world’s greatest challenges.
- Google: To organize the world’s information and make it universally accessible and useful.
- GlaxoSmithKline (gsk): To help people do more, feel better, live longer.
- Hootsuite: To empower organizations to turn messages into meaningful relationships.
- Johnson & Johnson: To help people everywhere live longer, healthier, happier lives.
- Maple Leaf: To raise the good in food.
- MEC: To inspire and enable everyone to lead active outdoor lifestyles.
- Microsoft: To empower every person and every organization on the planet to achieve more.
- Nestle: To help shape a better and healthier world. We also want to inspire people to live healthier lives.
- Philips: To make the world healthier and more sustainable through innovation.
- pwc: To build trust in society and solve important problems.