MEASURING SOCIAL VALUE: THE KEY TO A POST-FRIEDMAN ERA?

  • by Jim Wood, CEO, Green Mondays
  • Jul 04, 2013
  • 0 comments

Many of our regular attendees will know Sue Latham, who has ,since 2008, welcomed people at the front desk of Green Mondays. She is, in fact, the only survivor from Ben Patten’s founding team. And Sue said something to me in passing a few weeks ago that I found very interesting: that she used to go on holiday with the economist Milton Friedman, who she described as a “delightful and kind man”.


I must have looked a little surprised as I’m used to using Friedman’s 1972 quote that “the social purpose of business is to make profit” as a poster child of “flat-earth” capitalism. Where resources were considered unlimited, and companies were divorced from society and just complied with environmental and social regulations and paid their taxes.
 

By today’s standards, Friedman’s thinking is not just lacking in soul, but it is increasingly a recipe for destroying shareholder value.


The post-Friedman era was beautifully illustrated recently by Havas Media’s Meaningful Brands Index. It used customer research to identify the brands that consumers associate with social purpose, and then tracked their performance against mainstream stock indices. In his blog, Paul Frampton explains how the companies behind these brands have outperformed their peers by a staggering 120%. That’s about all the proof we need that we are already in a world where purpose and profit are becoming linked.


That’s the big picture. But what is a lot more challenging, and interesting, is how individual organisations can link a social initiative to the value of their business. If a leader of a FTSE100 company were to say to her shareholders “by investing £100m in tackling this complex social issue we estimate our share price will rise by 10%”, would anyone have a problem with it? They’d like the return, but they would certainly ask to see more of the logic.


And this is the bleeding edge where some of the leading companies such as O2, BskyB and GSK are starting to develop their thinking. Bella Vuillermoz ’s is clear in her blog that its “Bigger Picture” sustainability programme is good for business, and she explains how Sky is measuring initiatives such as how sky has reached its goal of getting one million more people to cycle regularly. We look forward to hearing at Green Mondays how Sky is linking this back to shareholder value? I look forward to Bella answering that question on the 8th July.


As Stephen Howard says in his blog, it involves learning a new language. “It’s a complex, evolving area and we shouldn’t pretend it isn’t – it’s a language that’s still working on its vocabulary and grammar.” Not only do they need to work out the measure social value to their own satisfaction, they also need to look at how to communicate it to external stakeholders to get the reward.


And we’re delighted to be able to cross-pollinate innovation through our panel on the 8th July, subsequent roundtables on topics such as “shared value” and blogs from leading thinkers. And with the help of Fishburn Hedges we will weave these thoughts into a crowdsourced report coming out in August. We hope this will move the dial in a potentially transformative area.

 

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