Sustainable Development: The UN Millennium Development Goals, the UN Global Compact, and the Common Good

15. Pursuing Purposeful Profit

292 15 | Pursuing Purposeful Profit Mark R. Kennedy After observing business from both a business executive suite and the halls of congress, both in America and around the world, I am convinced that the greatest untapped profit opportunity available to businesses today is having a purpose that benefits both society and the bottom line. That’s not just a truism. As I will show, the particular features of the modern economy mean that rewarding returns are best achieved by orienting your business along parallel goals of business profit and the social good. While I was in congress, Paul neaton, a local farmer, challenged me to focus, as he put it, on “the left side of the decimal point”—not on actions that change the price of corn by pennies per bushel but those that change the price by dollars. In today’s competitive marketplace, it is hard to find unexploited prospects for gaining incremental advantages over your rivals. Businesses invest enormous effort to improve their marketing, operations, or logistics. But, partly because their competitors are making similar expenditures, these efforts rarely contribute more than pennies a share to a company’s incremental profit. That’s the wrong side of the decimal point. This prevailing preoccupation with functional effectiveness reflects an incomplete understanding of the nature of business. Pursuing Purposeful Profit 293 According to a 2008 Mckinsey global survey, only 12 percent of business executives believe their companies do a good, or even adequate , job anticipating societal needs and pressures.1 This shows that businesses are not serious enough about developing strategies for the so-called nonmarket—the broader societal forces, in politics, regulation , and activism, that shape the market from the outside. And that’s a shame for society and for business, because the best way to add dollars—rather than just cents—to your profit per share is to identify and truly appreciate society’s needs and direct your company’s energies to profitably meeting them. Too few businesspeople have studied Plato, who wrote, “Good actions give strength to ourselves and inspire good actions in others.” he understood millennia ago that good actions benefit the good people who do them—that advancing society’s interests could advance one’s own interests. Many businesspeople don’t understand that. The recent Mckinsey survey also found that approximately twothirds of all ceos thought corporations should “balance generating high returns to investors with making contributions to public good.” of that subgroup, more than half said that they reached this conclusion because they believed it was the right thing to do. While one should applaud these executives for their good intentions, their response misses what Plato observed so long ago—that good actions could benefit them directly, too. Another third of those executives who believed in contributing to the public good responded that corporations should do so in order to gain competitive advantages. That is closer to the mark. Yet, they identified those advantages as “customer loyalty, a better ability to attract or retain talented employees, and positive media coverage.” In other words, they thought the advantage was that doing good would inspire others to do good for them. These executives got a part of Plato’s insight but missed many of the other ways in which good actions can make a business stronger. The idea that you can raise your profits by improving society is not new. In 1953, charles erwin Wilson, then president of General Motors , was appointed secretary of defense by President eisenhower. During his hearing before the Senate Armed Services committee, he was asked if, were he secretary of defense, he could make a decision averse 294 Mark R. Kennedy to the interests of General Motors. Wilson said he could but added that he could not imagine such a situation, “because for years I thought what was good for the country was good for General Motors and vice versa.” (Wilson is frequently misquoted as saying, “What’s good for General Motors is good for the country.”)2 The idea itself has stuck around, though it isn’t always put into practice. In a recent Harvard Business Review article, Michael Porter and Mark kramer observe that executives fail to understand the full benefits of good acts. According to them, “most companies remain stuck in a ‘social responsibility’ mind-set in which societal issues are at the periphery, not the core. The solution lies in the principle of shared value...