BUSINESS ETHICS HYBRID ORGANIZATIONS AND SOCIAL INNOVATION 2021

Purpose-driven Companies for Common Good:Managerial Characteristics and Dynamics

GIANLUCA GIONFRIDDO - VALENTINA CUCINO - ANDREA PICCALUGA

Objectives. In recent years, several contributions have regarded the need to reimagine the current capitalist system (Henderson, 2020a), given the dysfunctionalities of the value creation process (Mazzucato, 2018) and the need to address environmental degradation, social injustices and economic inequalities (Pope Francis, 2015). As a matter of fact, empirical data clearly demonstrate how capitalism is globally accelerating income inequality, which reached its peak in OECD countries for the past half century, where the average income of the poorest 10% of the population is about nine times lower than the average income of the richest 10% of the population (OECD, 2021) . About the environmental conditions of our planet, the data from the World Bank Group show that the carbon dioxide emissions in the atmosphere have been constantly raised since 1960, reaching the highest level of 36 000 kiloton of CO2 in 2016, which is the most recent year where data are available (World Bank Data, 2021).

Unsurprisingly, business is largely considered the main cause of such economic, social and environmental dysfunctions, due to the negative externalities coming from the business activities performed by companies (Mazzucato, 2018). The production of negative externalities, and the consequent market failure to solve today’s societal challenges, traces back its foundation on the so-called “shareholder primacy” or “Friedman’s dogma” (Friedman, 1970), which is the obligation of companies to maximize shareholder value (i.e., profits), even when this happens at the expense of other parties, that are broadly referred to as society and planet (Mayer, 2020). Thus, companies’ activities of shareholder value maximization have been preferred to activities of societal value creation, leading to a profound crisis of our capitalistic system (Henderson, 2020a).

The consequent erosion of trust towards businesses is accelerating the design of new models and rules through which companies may again contribute to prosperity (Mayer, 2018). From this perspective, it is promising that significant changes have been observed in some companies – both large public companies and small ones, often family owned – that have adopted purpose-driven strategies, attributing more importance to value creation rather than short-term profits (Asselle and Piccaluga, 2019). Indeed, some companies have implemented some concrete changes and are adopting more conscious and humanistic approaches (Rey et al., 2019). These companies are often referred to as Purpose-driven Companies (Rey et al., 2019), since their objective is “to produce profitable solutions to the problems of people and planet and not to profit from producing problems for people or planet” (Mayer, 2020, p. 6). More concretely, Purpose-driven Companies aim at improving social wealth and meeting social needs (De Clercq and Voronov, 2011; Lumpkin, Moss, Gras, Kato and Amezcua, 2013; Zahra, Gedajlovic, Neubaum and Shulman, 2009).

The fulfillment of companies purpose will also lead to the production of common good for society: eventually, this will lead to create the conditions for society members to achieve their personal goals (Argandoña, 1998). More concretely, we affirm that common good in society is built by the members of society; it is realized in society; and it is shared by members of society. In particular, companies are organizations that relate and interact with the rest of society and they generate common good by achieving their purposes.

Despite the recognized relevance of Purpose-driven Companies by different authors (Henderson, 2020b; Mayer, 2018; Rey et al., 2019), still few studies have emphasized management dynamics of Purpose-driven Companies and their role in society. Thus, this paper aims to answer the following research questions: what are the management dynamics of purposeful companies? How purpose-driven companies create common good for society? To address these research questions, we reviewed both purpose-driven companies (Harrison et al., 2020; Henderson, 2020b; Mayer, 2018; Rey et al., 2019) and common good literature (Hollensbe, 2014; Peeters and Martin, 2017). Based on this literature we identify the main dimensions (e.g. vision and alignment; effort and creativity; trust and relational contracts) that can be considered to characterize Purpose-driven Companies’ actions.

Consequently, we elaborated a conceptual framework that combines these dimensions and applied it to 5 emblematic cases of Italian Purpose-driven Companies. Specifically, after a description and discussion of the above-mentioned literature, we analyze evidence from five medium and large Italian companies (Aboca, BB, Enel, Faac, Loccioni) which are well known for the adoption of purpose-oriented strategies.

#Common Good #Integral Human Development #Purpose-driven Companies