Corporate Good and Social need

Volume 18 Letter 1

Novo Nordisk has long been a world leader in diabetic therapies. In past newsletters we’ve looked at the innovative Novo pen that allowed diabetics to click and prick rather than use a needle to inject their insulin. What many don’t know is that Novo Nordisk was one of the early companies to adopt the triple bottom line. The three bottom lines being profit, environmental sustainability and social responsibility.

Generating profit is nothing new. Adding specific measures regarding social responsibility and environmental responsibility was an innovative step. According to Novo Nordisk, environment sustainability and social responsibility carry equal weight as profit garnering new investment attention with the same level of rigor as profit generation.

To see this is not an inconsequential fad, look at what Lawrence Fink, head of BlackRock Investments, a company that controls six trillion in assets, wrote to in an open letter to corporate CEO’s. Fink stated. “Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

Business schools around the world have preached the mantra of increasing shareholder value. While this metric isn’t going to go away it is no longer enough. Businesses play an important role in stitching together the fabric of society not only providing livelihoods but touching all aspects of public life. Ignoring the concept of three bottom lines won’t be an option in the future. As you develop your strategy what can Novo Nordisk and BlackRock teach us:

  1. Get out in front: Show leadership in these three areas. It’s not only good business – it’s the right thing to do.
  2. Rigorously vet all investments: Investments in environmental and social projects may need different measures of success but ensure they go through the same investment rigor as any R&D or M&A investment.
  3. Measure ROI on all projects: If you don’t measure it – it won’t get done. Paying lip service to protecting the environment and building a socially responsible organization won’t pass muster. Measure improvements as you measure profitability.

Creating shareholder value is an important goal but the days of companies ignoring the needs of greater society and putting profit over environmental and social responsibility are numbered. In the world of today where news travels virally, corporate good might just trump corporate greed.

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