I have had differing views on the purpose of a corporation – first, one month ago as I blogged about business ethics, and then as I read Mark Kramer and Michael Porter’s article about creating ‘shared value’. Grace Cheng’s blog post on Tiffany and Co’s corporate social responsibility strategy captures my view that businesses can create societal benefits and simultaneously drive productivity and growth. Here are some of my comments:

Profit maximization. I agree with Grace that growing competitive pressure saturate global markets and consequently, businesses have been narrowly focusing on maximizing profits. I say this as someone who – just one month ago – held the belief that business ethics is often justified within a corportation’s own self-interest. In addressing this view after learning about ‘shared value’, I realized that successful businesses requires more than maximizing profits and investing in philanthropic activities.

One company that understood the value of connecting social impact with economic interest, as Grace identified, is Tiffany & Co. Instead of focusing on expanding investments in charitable organizations, the company takes opportunities that create growth and also greater benefits for society. Grace made it clear in her post that Tifffany & Co. craft high-end jewelries using recycled metals from mines and engage in responsible mining. And in my view, every business should not limit its impact of ‘doing good’ to an annual CSR budget.

Shared value and productivity. Grace pointed out, “if you just focus on financiers, you miss the big picture of what can be done when all stakeholders work together”. I agree with her. But in reality, many businesses miss the point and argue that the best solution to maintain long-term competitive advantage lies in maximizing profits. I see this as the root problem of business operations today. For instance, back where I come from in Indonesia, many pulp and paper producers are allegedly involved in illegal logging. These companies, unlike Tiffany & Co., overlook the fact that deforestation will deplete supply and affect future financial success.

The greatest challenge now is to introduce the concept of creating shared value and urge companies to focus on profits that maximize societal benefits. I don’t think this will be easy – too many businesses view social purpose as a form of charity. But if more businesses like Tiffany & Co. integrate profit maximization with community value creation, there will be a new era for capitalism and profitable growth.