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The Advantage of Family-Owned Businesses in Creating Shared Value

Family-Owned multinationals are achieving big wins against climate change, sustainable agriculture, infectious diseases, and many other issues in ways that also sustains their legacy of business success. They are ‘Creating Shared Value,’ shaping their businesses to be competitive AND to deliver against major social needs.

Creating Shared Value is by no means the unique purview of family-businesses, even if research shows they tend to be more socially responsible than their listed peers. Yet family-owned businesses do operate in ways that can unleash shared value creation, and perhaps even inspire all companies, investors, or governments in rethinking what “performance” should mean in the corporate world.

In particular, family-owned businesses have an ability to lead around values and commitments, mobilize efforts across the firm, manage different financial horizons, and learn from history – all of this is deeply aligned with what it takes to excel in Creating Shared Value.

  • Leading around values and commitments: At SC Johnson, for example, family values include social welfare and are translated into big sustainability commitments. The fifth generation business runs under the banner of “integrity, innovation and community,” which inherently ties business and society. As producers of household cleaning and air freshening products, they purchase, process, and sell thousands of active ingredients – which are more or less harmful to people and planet. For the last decade, the company has set standards in screening 95% of its ingredients to find better ones for performance, human health, and the environment, and pushes for a year-on-year increase in the number of products that are rated as least harmful. Innovation benefits the communities and families that are increasingly concerned about chemicals in their homes, and innovation benefits the family’s next generation who should inherit a viable business
  • Mobilizing efforts across the firm: Values and commitments are highly present in the hallways of family corporations. In meetings, the owners’ words are frequently used to add weight to the discussion. When family-owned businesses define ambitious commitments, efforts are likely to be shared and managed holistically across the company. When DeBeers says that the purpose of the largest diamond business in the world is to “Transform Natural Resources into Shared National Wealth,” investment decisions will consider the major development or health achievement they can deliver on top of a thriving diamond business, as DeBeers demonstrated in Botswana for example.
  • Managing different financial horizons: Financial liberty, of course, is a huge strength in Creating Shared Value. Family-owned businesses can chose to integrate the cost of externalities in their operations, even if regulatory standards do not require it, and most importantly, they can chose to invest and innovate today for longer-term economic and social returns. Mars, a leading chocolate and food company in the world, has “liberty” and “mutuality” as two of its core values. Not surprisingly, the family-owned multinational is leading an ambitious program to boost the productivity of the cocoa sector in West Africa which requires pooling vast investments around a tree crop and farm enterprises, which by their very nature, will take a long-time to turnaround. Similarly, Firmenich, a global leader in fragrances and flavors, is covering their plants with solar panels to reduce their carbon emissions in absolute, not just relative terms.
  • Learning from history: Family-owned businesses also have a deep sense of history, and of past achievements and hardships. It is not unusual to see “history” featured as a major component of their communication, or employees to emphasize their longevity at the company. Lessons from the past are handed over to the next generations, and to the firm as a whole. This in turns fuels a culture of long-term accountability and learning, which means that results will be tracked over the long-term. Boehringer Ingelheim, a leading family-owned pharmaceutical company, is a great example of this. The company’s motto is “Lead & Learn.” As they emphasize: “it is all about the people at BI and how they work together to deliver value through innovation.”

The same attributes of course do not prevent family-businesses from destroying value. In fact, their blanket of privacy may make those cases quite invisible. But those with strong social values and authentic ambitions to help the world progress can inspire others in Creating Shared Value. Investors can learn to accept ambitious shared value commitments and set aside short-term perspectives against the anticipated value of those commitments, managers can carry values and commitments to all employees and orchestrate efforts that cross functional boundaries, and they can put systems in place that ensure not just “doing” but “learning” so that efforts have a chance of being recalibrated and leading to significant change.

Marc Pfitzer

Managing Director