How Your Company’s Social Purpose Can Also Drive Profit
By Thomas W. Malnight and Ivy Buche, Harvard Business Review, October 27, 2023
Purpose-driven strategies focus on relationships with multiple stakeholders and seek to solve higher-order problems for society. To be successful, these strategies also have to achieve top- and bottom-line growth. The question is: How can companies achieve both of these goals?
To find out, we conducted an in-depth study of purpose implementation at 12 companies that were reorienting themselves to create multi-stakeholder impact while seeking high financial growth. Although each company used various industry-specific strategies, a common theme emerged. The companies that successfully achieved the dual goals of purpose and profit did so by adopting an advocacy-based business model.
The advocacy model focuses on targeted stakeholders. A company leverages its products, services, and capabilities to address key socioeconomic or environmental issues challenging these stakeholders — in alignment with its purpose. When the company can demonstrate tangible progress, these stakeholders are converted into advocates of the firm which, in turn, drives positive business outcomes. Our research shows that an advocacy-based business model is underpinned by four key elements.
Taking a Stance
To adopt an advocacy-based business model, companies have to take a stance, typically on societal or environmental problems. Consider A.P. Moller–Maersk, the company that pioneered container shipping and has enabled global trade. In 2021, the company’s leaders stepped forward to acknowledge Maerk’s contribution to the climate crisis: greenhouse-gas emissions that amounted to approximately 1% of the 3.5 billion tons produced annually by the global transport and logistics industry. Taking an industry-first stance, the company announced that — in line with its purpose of “improving life for all by integrating the world” — it would decarbonize its shipping as a strategic and moral imperative.
Building a Corporate Purpose
To that end, Maersk decided to gradually renew its entire fleet to eventually operate solely on green fuels. It began by ordering 19 new container ships, even though it wasn’t clear whether there would be enough green fuels to power them. This sent a signal to the ecosystem, and fuel suppliers came forward to develop strategic partnerships for the incoming fleet. The company signed nine agreements for the production of green methanol, thus providing the requisite scale to address the supply-demand dilemma that had thus far held back the shipping industry’s green transition. The company also successfully launched “ECO Delivery,” the only carbon-neutral shipping option in the industry. Between 2019 and 2022, the demand for ECO Delivery grew 170% year on year, driven by Maersk’s largest customers, which include Nike, H&M, Disney, Novo Nordisk, BMW, and Volvo — a sign that the company’s advocacy-based model was being translated into positive business outcomes.
Royal Canin, a specialist in science-based health nutrition for cats and dogs, is another company that has created value by taking a stance that aligns with its purpose. Royal Canin (part of Mars, Inc., and the company’s largest single brand) operates what it refers to as a mutual value-creation model with pet professionals — veterinarians, shelters, and breeders. For each stakeholder, the company offers active programs focused on their pet-related pain points while taking a stance to address the higher-order challenges of the industry.
To help vets, Royal Canin provides several services including access to the latest products, e-learning, accredited continuing-education courses, and veterinary technical support. To help shelters, which struggle with return of pets and a lack of funding, Royal Canin in Canada created a direct-to-consumer program that (1) provided recommendations for local vets and enabled continuity of feeding from the shelter to the pet’s new home, and (2) gave subsidies to the shelter for food ordered by new pet parents on the company’s platform, thus ensuring a source of funding for the shelter and recurring revenue for Royal Canin.
This advocacy model turned out to be more effective than traditional marketing in helping Royal Canin develop lifelong trusted relations with pet owners. “An advocacy model is an incredibly powerful long-term financial model,” Cécile Coutens, Royal Canin’s global president, told us. “There is no better approach to having real impact than building trusted partnerships — and it is part of the DNA of Mars.”
Extrapolation
Neither Maersk nor Royal Canin built completely new processes to support their purpose. Instead, they extrapolated from what was already in place.
Maersk did this by moving up the timing of its goal for achieving net-zero greenhouse-gas emissions. In 2018 the company had announced a target date of 2050 for a carbon-neutral fleet, but in 2021 it changed the date to 2040. Vincent Clerc, the company’s CEO, told us, “A 2050 target meant that there would be three or four CEOs before somebody had to deliver. By advancing the target, we ensure that every investment being made today is with the mindset of contributing towards our new goals.” Additionally, the company completely restructured its entire operational effort to bring its sustainability commitment to life via specific investments in decarbonization initiatives that are aligned with its stakeholders and business. Maersk’s former head of corporate strategy is now the head of energy transition.
At Royal Canin, leaders achieved a similar alignment on an advocacy-driven approach by building on the premise that knowledge creates recommendations. This required the company to reshape its underlying investment model. Instead of chasing a wide range of opportunities, they allocated resources to specific health areas such as start of life, obesity, and healthy aging. This strategy informed investments in R&D — and has resulted in new niche products that anticipate health issues and are sold through vets and speciality retailers. The result is better pet-health outcomes and mutual value creation for stakeholders and the firm.
Strong Leaders Who Accept Vulnerability
For most companies and their leaders, driving an advocacy-based business model is a pioneering move. Despite their bold efforts to create higher-order impact, we find that they are still willing to acknowledge the risks that stem from not knowing the answers to questions raised by the new model.
For example, when Maersk announced its capital-expenditure investments, it was not clear whether it could make a green transition profitably or whether green methanol, which it had backed, would be the fuel of the future. Furthermore, could Maersk alone precipitate an industry-wide shift toward decarbonizing shipping? “We’re very reliant on mobilizing the ecosystem,” Vincent Clerc told us, “We’re keeping a close eye on strategic partners; the oil majors have not yet come to the table.” Adopting an advocacy-based model has created vulnerabilities for Maersk, but the company’s leaders have taken them in stride as they try to stay ahead of the curve.
Traditional logic would suggest steering clear of unproven niche markets. But Royal Canin seeks them out. As Loic Moutalt, the global president of Mars Petcare, told us, “Royal Canin has been the antithesis of scale. We don’t focus where the value of the market is. We operate where everybody else doesn’t dare to go.” In thinking about R&D, Royal Canin doesn’t start with the size of the margin accretive contribution. Instead, it starts with a pet’s health problem — putting the pet at the center, as substantiated by its petcare stakeholders. By operating in niches with a focus on future advocates, Royal Canin makes itself vulnerable to the risks of unproven markets. Thanks to the commitment and persistence of its leaders, the company has achieved 20 years of double-digit revenue growth.
An Enabling Culture
On an electric circuit board, the light doesn’t come on until the last wire is connected. Similarly, in advocacy, companies can only create higher-order value for multiple stakeholders when all elements connect.
Throughout its history Maersk has built a legacy of trust by connecting suppliers and customers. The next frontier for the company is fighting climate change by decarbonizing shipping. Maersk feels its responsibility is not just to solve the problem but also to figure out how it will be solved. Making tough choices to do the right thing, being deliberate about the risks involved, and being open to starting from scratch — these are key aspects of the culture Maersk has developed as it pursues its advocacy-based model.
Royal Canin, too, has developed a culture that is founded on absolute clarity about the company’s purpose and vision. “Cat and dog first,” Cécile Coutens told us. “It motivates and shapes everything we do. People who work here have a belief that we are collectively having true impact, and this is our source of pride and passion. We are united around a common Mars Petcare purpose: ‘A Better World for Pets.’” That enabling culture — focused on the long-term impacts that the company can have in everything it does on pets and their lives — has been a key to Royal Canin’s success.
An advocacy-based model helps companies think in a consistent, long-term way about what’s really at stake for them and their stakeholders. When companies do the right thing, the key stakeholders in their value chain recognize this, which enhances overall trust and commitment. Especially during tough times, this improves business resilience and allows companies over the short- and long-term to achieve two mutually reinforcing goals: significant impact that’s in line with their purpose, and sustainable financial growth.