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Raffaella Cagliano

MIP Politecnico di Milano Graduate School of Business

Deputy Director for Faculty Management

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Companies must create social value – or lose stakeholders


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Society is calling for a change. Stakeholders and customers are now asking businesses to go beyond the triple bottom line of social, environmental and financial accountability in order to create a meaningful legacy.

Sustainability is core to this venture, and companies that are integrating this into their business models are likely to reap the rewards, as well as attracting and retaining the kind of talent that will drive them forward in the future.

‘Shaping a Creative Future’, a recent forum held by The Prada Group in partnership with the School of Management of Politecnico di Milano and Yale School of Management, concluded that organisations must aim to address the requests and needs of their stakeholders, from customers to employees, local communities, citizens and institutions.

These needs represent more than just innovative products, they form a philosophy which requires deep and intrinsic change in the way many organisations operate.

This involves the consideration of the economic, environmental and social aspects of all parts of the operation.

Integrating this attitude into all areas of business is a key aspect of its management. By making sure supply chains are sustainable and ethically responsible, as well as taking the issue of international legality seriously, businesses will create true value.

Quality must now not only be related to the product, it must be related to the people and the environment.

This means, firstly, the quality of the work environment and the wellbeing of employees.

Companies engaging with sustainability as a whole have to provide a working environment that is conducive to improved performance, personal growth, satisfaction, and positive contribution. In this way, businesses must aim to not just be compliant and green, but also meaningful if they want to keep – and gain – employees, stakeholders and customers.

These stakeholders and customers alike are more inclined to endorse businesses that are practising social innovation – whether that be through a new product, a new business or a shift in current sourcing policies and practices.

It is likely to soon be the case that organisations which avoid incorporating social responsibility into their business models will fall behind, not only in profit, but also in attracting and retaining the talent that will drive their company forward.

It is an often-discussed fact that jobseekers – particularly millennials – are opting to work for enterprises which they feel contribute something to society and are leaving a legacy of value.

As David Gallagher, International President of Growth and Development at Omnicom Public Relations Group, comments: “We know that younger generations see sustainability and social responsibility as essential to a company or brand’s integrity, and by appealing to them on artistic terms, not on just factual or economic terms, we may find new ways to bring meaning and value to responsible businesses.”

In a world where company success is increasingly based on the individual contribution of employees through their knowledge, skills, creativity and innovation ability, companies need to deeply motivate and engage them to exert that extra attention, thought, and energy they can put into work beyond the minimal job requirements.

As we are aware, people become engaged when their workplace activities connect to what matters in their lives and what makes them happy.

Many companies today are acknowledging that embracing sustainability in all their activities creates the meaning that more and more employees, especially younger generations, are looking for, thus creating a positive loop between motivation, engagement and ability to pursue company goals.

This also includes the improvement of sustainability performance, which often requires the contribution of employees themselves.

Businesses must also focus on creating social value for the local or wider communities that we live in.

One interesting example of a company that are successfully creating social value is IBM. As part of a project to promote and teach leadership skills, it sends its executives to emerging economies such as Brazil and Nigeria to provide technology and assistance to help address social problems like the inefficiency of global healthcare.

Samuel J. Palmisano, Chairman, President and Chief Executive Officer of the corporation, says of the global healthcare system: “In truth, it isn’t a “system” at all. It doesn’t link from diagnosis, to drug discovery, to healthcare providers, to insurers, to employers, to patients, to communities. Meanwhile, the volume and speed with which data proliferates is inundating practitioners. And for patients, the consequences are real. Personal expenditures on health now push more than 100 million people worldwide below the poverty line each year.”

The business world’s conviction to increase social, economic and sustainability standards feeds into political initiatives such as the UN’s ‘Sustainable Development Goals’.

The scheme, known as ‘Transforming our world: the 2030 Agenda for Sustainable Development’, consists of 17 goals with 169 targets covering a broad range of sustainable development issues. These include ending poverty and hunger, improving health and education, making cities more sustainable, combating climate change, and protecting oceans and forests.

By aligning themselves with these goals, business leaders are provided with a template for the kind of social value being demanded of them – and they can make a huge difference. Innovative new practices can stop – or at least help – some of the biggest social issues we face globally.

Consider the issue of wasteful food chains.

As Palmisano explains: “In a world where 820 million people are undernourished, it is a tragedy that grocers and consumers throw away $48 billion worth of food each year in the U.S. alone, according to the United Nations. And then there’s the inefficiency of what environmentalists call “food miles.” In Iowa, the typical carrot has travelled 1,600 miles from California, a potato 1,200 miles from Idaho and a chuck roast 600 miles from Colorado.

Plus, we don’t just need to supply food; we need to protect its purity. The Centres for Disease Control estimates that there are 76 million cases of food-borne diseases each year, resulting in 325,000 hospitalizations and 5,000 deaths.” 

It is clear that there is a new appetite for companies to adopt the responsibility of creating social value in all sectors – not just for its stakeholders and customers, but to attract potential jobseekers, retain employees and satisfy local communities.

Businesses that acknowledge and incorporate this into their processes, by streamlining their supply chains, committing to social initiatives, tackling domestic or international problems and even endorsing initiatives such as gender parity, will likely pave the paths to future success within their sectors.

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Raffaella Cagliano

Deputy Director for Faculty Management

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