Business

Shared value and the C-suite: Profit with purpose

2019-10-04 08:51

Research has shown that purpose driven companies outperform their competitors on a scale of one to 10.

Larry Fink from Black Rock in one of his now famous letters to CEOs said “purpose and profit is inextricably linked”.

Professor Michael Porter, a world-renowned economist from Harvard, stated at the Shared Value Global Leadership summit in May this year that purpose is about shared value. Shared value is simply put, the way every business should operate – creating economic value and value for society. Profit with purpose.

If you are lucky enough to be someone’s employer you have a moral obligation to make sure that people want to come to work in the morning – that is part of purpose-led companies and leadership.

When companies create shared value, they increase economic performance and create tangible societal benefits. This means the return to their investors can be measured in two ways – in profits as well as in societal impact

Shared value is about creating worth and shared values is more about the organisations guiding principals, about the moral compass of an organisation and also about personal values.

Shared value is not about giving our percentage of net profit after tax, shared value is not corporate social responsibility, CSR is regulatory and about compliance – we need to be sustainable as businesses, pay salaries, pay our suppliers, pay our taxes, be good corporate citizen, adhere to our countries BBBEE codes, our countries legal system, mitigate risk and harm to society and the environment as it affects our licence to operate and our reputation, we need to do our integrated reporting as listed companies, our sustainability reporting we all know there so many regulatory reporting to do and boxes so many of us just tick

Creating shared value is a choice, it is a choice that leadership make to increase their competitiveness, grow their organisation and the economy, align their business strategy to address the sustainable development goals and truly contribute towards creating a just society. It is about identifying the social issue that is holding our business back and make a solid business case based on research and analysis on how social improvement will directly improve business.

Let’s look at a social issue that is holding all our businesses back as we sit here today. Gender-based violence knows no social or economic boundaries. It is a corporate risk, it is holding our businesses back, we pay for absenteeism, low productivity comes at a cost, it creates political uncertainty that affects the economy … the loss of family income to spend on basic needs as we now have to shift our spend to medical and legal expenses not to mention the effect on our young children.

An example of private sector addressing gender-based violence through shared value comes from a member of our sister organisation in Australia – National Australia Bank’s (NAB) created a programme called “NAB assist” provides support to their clients during hardship, such as services that include family support, counselling, men’s behaviour change programmes, financial education and more.

In the first year of the programme, the bank saved A$70 million (about R700 million) in costs related to capital recovery that was affected previously by lack or failure of client to service debt. In the second year, it saved $200 million.

A textbook example of creating shared value and aligning to the SDGs.

It can be done but what we need is leadership, courageous leaders driven by a purpose, leaders that are prepared to sometimes make unpopular decisions and face the shareholders to fight for the right thing.

This is an extract from a speech delivered at a JSE event by Tiekie Barnard, chief executive officer of the Shared Value Africa initiative.

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October 13 2019