Beyond Great: Leading with a Conviction to Positively Impact Society

This is the second in a series of articles on leadership based on my recent book Beyond Great: Nine Strategies for Thriving in an Era of Social Tension, Economic Nationalism, and Technological Revolution, coauthored with my BCG colleagues Arindam Bhattacharya and Nikolaus Lang. Please also see “Now Is the Time for Beyond Great Leadership.”

As the dangers of climate change grow and inequality around the world increases, people are demanding more of companies. Firms that can drive positive societal impact, integrating that goal into the core of their operations, will not only do good for all stakeholders but they’ll also deliver higher long-term shareholder returns.

Delivering a positive impact to governments, regulators, communities, customers, employees, and the environment is the right thing to do in a world of growing inequality and climate risk. But embedding that idea into a company’s purpose isn’t just a matter of altruism or righteousness. In many countries and industries, it’s a prerequisite for retaining a license to operate. And, more than that, it’s emerging as a powerful core business strategy for companies seeking to sustain high performance in a volatile era. Integrate a concern for societal impact into your core strategies and operations, and you can create new levers of advantage that directly improve long-term profitability.

Unfortunately, many company leaders haven’t yet internalized these possibilities. As accepting as they might be of multistakeholder models, they haven’t embraced them into their mindsets, strategies, business models, and operational norms. They continue to limit their firm’s involvement to their traditional corporate social responsibility (CSR) efforts, convinced that doing good for all stakeholders would mean sacrificing shareholder returns—a risk they are loath to take.

The good news, however, is that more leaders are breaking away from this constraining logic, and they can serve as excellent role models—delivering impressive TSR even as they build businesses that positively impact all stakeholders. In updating their mindsets, strategies, business models, and operations, these leaders are attending to total societal impact: the total benefit to society from a company’s business models, products, services, operations, core capabilities, and activities.

The good news, however, is that more leaders are breaking away from this constraining logic, and they can serve as excellent role models—delivering impressive TSR even as they build businesses that positively impact all stakeholders.

The Natura Story

When Antonio Luiz Seabra founded the Brazilian cosmetics company Natura in 1969, he was pursuing a purpose that transcended a concern for profits. Seabra sought to use cosmetics as a means of promoting healthy connections among individuals, society, and the natural world—what the company calls bem estar bem, or well-being-well.

This societal purpose derived from Seabra’s philosophical belief in the interconnectedness of all things. For the distribution of Natura’s products, he designed a direct sales model in which consultants were encouraged to form close bonds with consumers. By 2019, some 1.8 million consultants were selling Natura products. The company has always invested heavily in its people, including providing extensive skills training in personal and business development.

In addition to investing in its people—and therefore the local communities in which it is based—Natura has embraced sustainability in every part of its operating model since its founding. The company’s leadership and organizational structure is based on a goal of sustainability, and it publishes an annual environmental profit-and-loss statement alongside its financials, with sustainability hard-wired in leadership compensation. Natura has become a magnet for young employees and has built a strong leadership corps, with executives eagerly signing on. 

The company’s leadership has been committed to pursuing positive total societal impact throughout its existence, including under current Chairman Roberto Marques, who says “[it] permeates the way the company thinks and operates.” Natura has invested deeply in preserving the Amazon, for example, leveraging science, innovation, local entrepreneurship, and its supply chain. It’s now working with more than 5,000 small producers in the Amazon, collaborating on sustainable business models while protecting 4.5 million acres of rain forest.

The company has been carbon neutral since 2007—when most company leaders weren’t even considering the idea—and it measures its environmental impact along the entire value chain. It was an early adopter of recyclable packaging and the first public company to become a B Corp, a designation awarded to firms that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.

What has been the impact of all this for Natura’s bottom line? The company’s purpose and societal concerns have come to define its brand among consumers, governments, consumers, and investors. And that reputation has helped lead to the company’s expansion through M&A, including the acquisition of Aesop in 2013, Body Shop in 2017, and Avon in 2020.

Shareholders have felt the benefit. Between May 2004 and September 2019, the company’s valuation increased 15 times, outperforming all other global cosmetics players, including L’Oréal, Estée Lauder, and Shiseido.

Questions for Leaders

For many leaders, even those who want to lead with a conviction to positively impact society, it’s challenging to escape the strong gravitational pull of shareholder value maximization and the misguided belief that delivering benefits to all stakeholders means sacrificing shareholder returns.

As you ponder how to imbue your efforts toward positive societal impact with new focus and energy, consider the following questions:

• Has senior leadership taken responsibility for discovering, articulating, activating, and embedding social purpose deeply throughout the organization?
• Have you constructed a narrative about societal impact that aligns with the company’s overall business strategy and that internal and external stakeholders find credible?
• How might you establish partnerships to magnify the impact of your endeavors?
• When operationalizing your societal impact strategies, what practices will have to change to drive impact, and at what cost?
• What metrics can your company choose to convey your business’s impact while still protecting your reputation?
• How are you aligning your incentives to ensure that everyone in the company is rewarded for delivering positive societal impact?
• How will your company balance its short- and long-term commit-ments and make the inevitable tradeoffs?

It’s important to proceed thoughtfully, but the payoff—for everyone—can be enormous.

To explore more about our book Beyond Great, click here. I also welcome your feedback.