Business for good: what place does social impact have in corporate value creation?

Business for good: what place does social impact have in corporate value creation?

With ESSEC Knowledge Editor-in-chief

In 2015, the United Nations outlined 17 sustainable development goals to create a framework for building a better future by 2030. These goals are: 

1. No Poverty 

2. Zero Hunger

3. Good Health and Well-being 

4. Quality Education

5. Gender Equality 

6. Clean Water and Sanitation

 7. Affordable and Clean Energy

8. Decent Work and Economic Growth 

9. Industry, Innovation and Infrastructure

10. Reducing Inequality

 11. Sustainable Cities and Communities

 12. Responsible Consumption and Production 

13. Climate Action

14. Life Below Water

15. Life on Land

16. Peace, Justice, and Strong Institutions

17. Partnerships for the Goals

This serves as an agenda for relevant stakeholders, including businesses, which are increasingly concerned with their social impact and value creation. As such, corporations are duly recognizing social impact as a major challenge, meaning what society would be like without the company, and assessed by looking at the changes enacted by the company’s value creation chain and by its direct and indirect stakeholders. It can be both negative and positive, and is inextricably intertwined with corporate value creation. Companies need to measure their social impact for many reasons, including addressing regulations, informing partners and stakeholders, communicating about policies, and especially, sustaining activities. 

In France, a positivity index was established in 2015 to measure company activity. Companies receive a grade between 0 and 100 that assesses 35 indicators in 5 different dimensions: their environmental footprint, work conditions, sharing value, research and training, and their long-term strategic vision. The index focuses on long-term improvement and tracks progress. It is designed to be a universal tool that does not discriminate based on company size, sector, or location. If companies want to be recognized as having a positive impact on society, they need to prove that they indeed have a positive social impact, so they need valid, reliable measurement tools

To investigate further, Jean-Marie Peretti (ESSEC Business School) and Soufyane Frimousse (associated researcher, ESSEC Business School) consulted 70 experts in France and across the globe, talking to researchers, consultants, business leaders, and human resources experts, asking them: What place does social (or societal) impact have in corporate value creation?  

Among the experts consulted were professors and researchers from ESSEC. Professors Viviane de Beaufort and Stefan Gröschl provided their insight, as did researchers Yves Le Bihan (ESSEC Change Management Chair) and Elena de Preville (ESSEC Change Management Chair).

Viviane de Beaufort asks: “Why do we still have to ask ourselves what the place is of social/societal impact in corporate value creation?” For Dr. de Beaufort, a company’s value lies in their human capital, rather than in their financial statements. Motivated, happy employees are good for a company. What’s more, the generation entering the workforce now cares about the values of the companies they work for, and they want to make sure that companies practice what they preach. While “value” is historically an abstract, hard-to-measure topic, the UN’s development goals provide a common reference, allowing companies to gather data and measure progress. This shared reference will help companies set social and societal goals so that social value creation can be measured. 

As Dr. Stefan Gröschl notes, our society is facing urgent global challenges, making it critical for companies to consider their impact on society and the environment. “Business as usual” cannot go on: let’s move toward business as unusual, and focus both on societal impact and the bottom line.  For this to happen, companies need to prioritize decoupling economic growth from natural resources and reducing socio-economic inequality. While this will be no easy feat, stakeholders and shareholders are increasingly clamoring for sustainable business models, where profits are directed to serving societal good. This will require leaders of a certain ilk, with a strong vision, strong values, and self-awareness; creative leaders who have strong critical thinking skills and are open to change. In short, business as unusual requires a paradigm shift in our priorities and the qualities we look for in leaders. 

Two researchers associated with the ESSEC Chair of Change Management also provided their insight. Yves le Behan, also president of the Institut Français du Leadership Positif (French Institute of Positive Leadership) agrees with Dr. Gröschl that we need a leadership revolution: specifically, we need to align leadership styles with corporate social goals. He lists several questions worth investigating: how does a leader’s “raison d’être” drive the company’s transformation? Which leadership qualities help convince stakeholders, and can we cultivate them? How do we narrow the gap between what companies practice and what they preach? More work is needed to understand how leadership can impact transformation and which tools are most effective in change management. Elena de Preville discusses the idea that some companies, like B Corp certified organizations, seek to be not the best companies in the world, but rather the best companies for the world. Companies are increasingly reflecting on the best way to contribute to society, and consumers on whether or not companies reflect their values. Companies are recognizing that having a societal purpose does not detract from the bottom line, and in fact that having such a mission can improve productivity by boosting stakeholder commitment.

While the experts have different takes on the nature of social impact, there is a clear emerging message: companies need to prioritize their social impact and actively measure it. What’s more, employees and consumers alike are paying attention to how companies impact society, and may decide not to work somewhere or shop somewhere if corporate values don’t line up with their personal ones. This suggests that committing to having a positive social and societal impact is beneficial for the company’s economic status. Through Dr. Peretti’s and Dr. Frimousse’s work, we can gain insight as to how experts representing a range of different fields see the future of corporate value creation and what steps we need to take to attain the 2030 goal of a better society for all. 

Reference

Frimousse, S., & Peretti, J. M. (2020). Impact social positif et création de valeur. Question (s) de management, (1), 91-130.

essec knowledge on twitter

blog comments powered by Disqus

FOLLOW US ON SOCIAL MEDIA