Three reasons why your company should aim to tackle social issues.
(Photo from left to right: Alan Murray, Fortune; Jaime Augusto Zobel de Ayala , Ayala; Helena B. Foulkes, CVS Health; Ed Brandt, MasterCard; and Jakob Riis, Novo Nordisk.)
While the Great Recession put a dent in the public’s trust in corporations, faith in business is now gradually on the rise. According to the 2016 Edelman Trust Barometer, no other institution recorded a larger gain in trust among the general population last year. In the same survey, 80% of respondents agreed companies should take the lead on solving the world’s most pressing social problems.
Amidst this climate, Fortune Managing Editor Alan Murray took the stage at last month’s Shared Value Leadership Summit to interview four company leaders who featured in a new ranking last year: The Change the World List, which spotlights 50 companies who address major social problems as a core part of their business strategy and innovation. The Shared Value Initiative and our parent organization, FSG, serve as research partners on this list and are seeking nominations for 2016.
In the interview, senior representatives from the “Change the World” companies – MasterCard (#11), Novo Nordisk (#18), Ayala (#29), and CVS (#31) – discussed how purpose and social issues are affecting their core models, their brand power, and growing into new markets. Here are the three biggest benefits they found in tying profits to purpose:
Your business will be more viable in the long term.
In all of these companies, social purpose drives business decision-making – and it’s delivering for the bottom line. “I wasn't approaching this from a shared value perspective,” said CVS Health EVP Helena Foulkes in regards to the CVS Health rebrand. “It was a practical issue for us at the time.” The rebrand was one way to unify the organizational structure, which housed both CVS Pharmacy and Caremark. As CVS started to use their defined purpose – helping people on their pathway to better health – as a filter for business decisions, it became clear that the only way of communicating that externally was to stop selling cigarettes and tobacco products. That official 2014 decision meant immediately giving up $2B in annual revenue, but according to Foulkes “it has paid off” in the long term with new business, rising stock prices, and increased customer loyalty.
Ed Brandt, EVP at MasterCard, described a similar journey, starting 5 years ago: “Our long-term growth is going to be dependent on global prosperity,” he said. “We need the economy to be able to grow in developing countries.” As regulation escalated after the financial crisis, increasingly the company partnered with local governments to increase financial access to emerging markets and their “huge growth potential,” he said.
Triple Bottom Line Head Jakob Riis at diabetes care company Novo Nordisk agrees that a long-term mindset shift is necessary: “If we don't have a model that's sustainable in the long run, we don't do it,” he said. In a world where only half of 420 million diabetics are diagnosed, Novo works to train primary care physicians globally to detect and care for diabetes – which in turn creates demand for their products. Riis also mentioned that Novo is developing new employee incentives to deliver on patient outcomes rather than products sold.
Employees and customers will value your brand.
The research is out there: There’s a new generation of employees and customers who want to work for and buy from purpose-driven companies. The panel universally agreed that their employees were more excited and engaged once the company more effectively communicated its purpose for good. “To the employees of MasterCard, nothing was more impactful than being on that [Fortune] list,” Brandt mentioned off-hand. Jaime Augusto Zobel de Ayala, CEO of Ayala, also marveled at how engaged his employees have been once the company began dovetailing business objectives to societal needs.
For CVS Health, the shift meant prioritizing culture change – constantly earning employees’ trust. “It's so critical that we [as business leaders] make purpose-driven decisions,” said Foulkes. “Sometimes those decisions are good for the bottom line, sometimes they're not. But when people see you doing that as a business leader they start to think about it differently.” She added that the company measures culture rigorously and leaders are rewarded by how connected their people feel to the company.
You’ll find new market opportunities (and innovate to get there).
With shared value approaches, these companies are finding that emerging markets represent a huge opportunity because they are very often untapped markets. The Fortune list highlighted Ayala’s work in privatizing and distributing municipal water in the Philippines, which they had to approach with a completely different model – billing communities instead of individuals. Before Ayala stepped in, “60% of the water in Manila was not reaching end clients,” Zobel described, “I'd like to think that a for-profit model began to address that while bringing prices down substantially.” Murray added that Fortune confirmed Ayala has the metrics to prove it.
However, you need to approach these markets with different solutions and with the help of partners. “We know the Bottom of the Pyramid is a very different service model,” said Brandt, which meant a move toward mobile services to reach those living in rural areas on less than $2.50 a day. To tackle this problem MasterCard hired new people – not from banks, but from governments, NGOs, and development agencies – to complete this work on the front lines of business development and product design. For example, Brandt mentioned the company is working with Mercy Corps and others to expand digital aid distribution services to rural communities in Philippines, Yemen, and other countries.
One common thread among all these companies is that they’re applying business innovation to solve social problems – and in that way, their business is more sustainable in the long run. If your company or one you know is addressing social problems at its core, please nominate them for the 2016 Fortune Change the World List.
MORE LIKE THIS:
- 5 Companies Finding Purpose in Solving Global Challenges
- At CVS, Improving Health Is Just Good Business
- Novo Nordisk’s Journey to Shared Value
- Fortune’s 2015 Change the World List