At the recent CEO Connect Forum, SVAI founder and CEO, Tiekie Barnard, connected with Shared Value stalwart and visionary, Professor Mark Kramer on the importance of profit with purpose and the role of culture and diversity in creating value for all stakeholders.

The concept of Shared Value is simply the idea of creating competitive advantage and economic success for a business by having a positive impact on society. That impact could be environmental, social, and health-related or whatever else it might be.

Unfortunately, many company leaders still think about social impact as a burden, as an obligation, or as a cost that will adversely affect their company’s performance. Or they see it as something only to deal with in terms of public relations or their public image. As a result, they miss so many opportunities to innovate in their core business model, by tackling social needs in a way that aligns with their business strategy.

This was how Prof Kramer kicked of the fireside discussion at the CEO Connect Forum, in response to Ms Barnard’s opening question on how companies can continue to create value for all stakeholders.

Creating Shared Value is a strategic business framework that was developed by Professors Michael Porter and Mark Kramer a decade ago. The concept, which argues that companies actually can improve their financial performance by having a positive social impact, seems to be borne out in practice, both in developed nations and in emerging economies like Africa.

Prof Kramer elaborated: “Traditionally, companies thought that social issues were irrelevant to their business, that they were externalities. Instead, we found that when companies begin to focus on the wellbeing of their stakeholders, when they begin to adopt a social purpose or embrace social impact as part of their core strategy – not as something peripheral through philanthropy or CSR, they actually become more profitable and more successful.”

On the subject of purpose-driven leadership, Prof Kramer stressed the importance of having purpose at the core of the company, not on the periphery. “Typically we think about purpose as being important because it motivates employees if they have a sense of purpose. And that is absolutely true. We see that time and again. If employees believe that their work is contributing to a better world, they are much more motivated than if it’s just for the paycheck.

But, as he points out, the importance of having a social purpose as part of the strategy, goes well beyond motivating employees. Specifically, when companies are driven by a social purpose, it leads them to think beyond the narrow boundaries of their industry to address many other needs of their customer populations and communities. “We see again and again that when companies adopt a sense of social purpose, it can actually redefine the industry in which they play. They do this by expanding the boundaries and taking into account other dimensions that can enable them to grow their business and gain competitive advantage.”

A case in point is Kenyan mobile network operator, Safaricom, whose purpose is transforming lives. Safaricom’s Shared Value journey has led the oragnisation to leverage technology to address the social challenges under healthcare, education, agriculture and clean energy. An example is M-PESA, an innovative mobile money transfer system used to provide unprecedented access to financial services to Kenya’s under- and un-banked populations… while generating substantial revenue and business opportunities for Safaricom.

The discussion also touched on the importance of culture, innovation, and equality. Both were despondent about the slow pace of change and limited progress the world over, towards equality both in terms of race and gender, noting that business in general has not done a good job of creating a work environment and a career advancement model that truly meet the needs of women.

Prof. Kramer argued that culture is not only one of the main determinants of how successful a company will be, it is also essential to putting purpose into practice in an organisation. “It is absolutely true that companies, which perform better on gender or racial diversity, outperform other companies. In order to meet the needs of diverse markets, you need a diverse team to lead the effort.”

He acknowledged that business in general has not done a good job of creating a work environment and a career advancement model that truly meet the needs of women.

As regards challenges associated with measuring social impact, Prof. Kramer was adamant that prevailing models such as ESG (environmental, social and governance) reporting, or the lengthy and costly randomised control trials typically undertaken by non-profit organisations or NGOs, simply do not work.

Said Prof Kramer: “In order to measure social impact, business should focus in on the two or three areas where your social impact connects with the profitability and competitive positioning of your company. If you focus on those handful of issues, you will see that it’s not hard to measure progress at all.”

In closing, Prof Kramer passionately reflected on the opportunity for Africa to become one of the dominant economic forces in the world. “I think there’s a wonderful opportunity for Africa to really embrace Shared Value thinking and leapfrog much of the rest of the world.”

“My hope is that companies in Africa will be able to leapfrog their counterparts by building businesses from the ground up that take into account issues of diversity in their workforce, issues around the environmental impact they have and how the company can contribute to the wellbeing of the citizens and the regions within which it operates, in ways that strengthen its competitive advantage,” he concluded.

Key points to take home from this dialogue.

• Culture is essential to putting purpose into practice and to bring real equality and diversity about within organisations, there must be a mandatory policy in place.
• Innovation is critical for remaining relevant and staying ahead of competitors and creating shared values for all stakeholders. People and businesses that embrace innovation grow faster. More importantly, by embracing innovation, Africa has a unique opportunity to leapfrog its developed counterparts, but business must do this collaboratively in order to leave no one behind.
• The bottom-line is that companies with culturally diverse and gender inclusive employment profiles generally outperform their competitors. So by including more women in business not only helps to preserve their rights, but it is also good for business. Also, when companies start to focus on the social dimension as an integral part of their strategy, they become more profitable and successful.