The Boston Consulting Group Releases Study: Total Societal Impact – A New Lens on Strategy
The study includes two examples of PNC’s commitment to maximizing both shareholder return and societal impact – the company’s decision to limit its lending to coal-mining companies, particularly those with more than a minimum exposure to mountaintop removal mining; and leveraging its Regional Diversity Councils to cultivate relationships with diverse customers, suppliers and employees while strengthening the communities in which it operates.
An excerpt from Total Societal Impact: A New Lens for Strategy:
For decades, most companies have oriented their strategies toward maximizing total shareholder return (TSR). This focus, the thinking has been, creates high-performing companies that produce the goods and services society needs and that power economic growth around the world. According to this view, explicit efforts to address societal challenges, including those created by corporate activity, are best left to government and NGOs.
Corporate leaders are rethinking the role of business in society.
Now, however, corporate leaders are rethinking the role of business in society. Several trends are behind the shift. First, stakeholders, including employees, customers, and governments, are pressuring companies to play a more prominent role in addressing critical challenges such as economic inclusion and climate change. In particular, there is recognition that meeting the UN’s Sustainable Development Goals (SDGs) will not be possible without the private sector’s involvement. Second, investors are increasingly focusing on companies’ social and environmental practices as evidence mounts that performance in those areas affects returns over the long term. Third, standards are being developed for which environmental, social, and governance (commonly referred to as ESG) topics are financially material by industry, and data on company performance in these areas is becoming more available and reliable, increasing transparency and drawing more scrutiny from investors and others.
As these trends gain momentum, companies need to add a lens to strategy setting, one that considers what we call total societal impact. TSI is the total benefit to society from a company’s products, services, operations, core capabilities, and activities. (See “What Is Total Societal Impact?”) The most powerful—and most challenging—way to enhance TSI is to leverage the core business, an approach that yields scalable and sustainable initiatives. If well executed, this approach enhances TSR over the long term by reducing the risk of negative events and opening up new opportunities. In the end, such an approach allows the company to survive and thrive.