Leadership: Tapping The Power Of Purpose

Doing well by doing good

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 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 “Corporate social responsibility” is often used, but some companies view this label as out of date.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 a popular designation, especially among younger people. “Sustainability” is a common term but often applies more narrowly to creating environmental change and stewardship. “ESG” (environment, social, governance) is gaining in popularity. There is no universal descriptor. 

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 corporate leaders must show the way 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 companies 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. 

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. 

The shared value argument is compelling. Just about every business leader I know has read the article. The idea of doing well by doing good wasn’t a new concept, but Porter and Kramer synthesized it, branded it, and expanded it powerfully. After the article appeared, Steve Lohr in the New York Times wrote this: 

“Corporate social responsibility efforts have always struck me as the modern equivalent of John D. Rockefeller handing out dimes to the common folk . . . small gestures at the margins of what companies are really trying to do—make money. Shared value is an elaboration of the notion of corporate self-interest—greed if you will. The idea that companies can do well by doing good is certainly not new. Shared value . . . points toward a more sophisticated form of capitalism,’ in which “the ability to address societal issues, is integral to profit maximization instead of treated as outside the profit model.” 

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 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. A few years ago Babson College and the consulting firm IO Sustainability reported that corporate social responsibility (or whatever you choose to call it) can create business value by:
 

• improving how shareholders view performance (share price and market value)
• increasing sales and revenue
• reducing risks and protecting or improving a company’s license to operate
• growing and protecting brands and reputation
• enhancing competitive positioning
• deepening customer relationships; and 
• improving commitment and engagement of employees

Porter Novelli developed its Porter Novelli / Cone Purpose Premium Index, a study of the top 200 companies in the United States. The findings show that purpose is an important driver of overall reputation. Nine out of ten companies with strong reputations also have strong purpose scores. And consumers value corporate purpose: the attributes they rank highest are being responsible, caring, advocating for issues, protecting the environment, and giving back to important causes.

Roy Spence, the head of the ad agency GSD&M, which did outstanding work for AARP when I was CEO there, made a similar argument in his book It’s Not What You Sell, It’s What You Stand For. In the book, he calls for a strong and unique purpose as a way to make a difference in the marketplace and create a path to high performance for your company. A strong purpose, he argues, drives corporate decision-making and is a determining factor in allocating resources, attracting employees, planning for the future, and creating customer preference for your company. 

Simon Sinek, the noted author, speaker, and management consultant, also supports this view. He believes that people don’t buy what you do, they buy why you do it. He argues that highly successful companies succeed because they have found—and they communicate—their “why.” In other words, they know their purpose and use it to drive success, regardless of what kind of business they’re in. 

As compelling and attractive as all this sounds, none of it is a magic solution for outstanding corporate performance or for going to heaven. It is not a substitute for strong management, high- quality products and services, effective marketing and sales, and solid operational practices. But it is a powerful opportunity, if seized upon, to succeed. 

As Porter and Kramer and others point out, public trust in business is declining. Trust in other institutions is on the decline as well, including government, the media, nonprofits, and, in the United States as in many other countries, elected officials. The late US senator John McCain liked to say that trust in Congress is now down to a few friends and blood relatives. 
As for business, lack of trust is due to many factors. There have been scandals, like Volkswagen’s cheating on pollution tests; Wells Fargo’s practice of signing up customers for credit cards without their knowledge or permission; and Uber’s “step on toes” marketing, poor treatment of its drivers, and harassment of women employees. The public is also concerned about companies’ impacts on the environment, including water contamination, air pollution, and harmful mining and other extraction practices. 

In today’s world, the public has come to expect—even demand—that companies take a positive stand on social issues, support communities, and invest in causes and social problem-solving. And many corporate leaders have come to understand this. They are finding their sweet spot: in doing well by doing good.