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The coronavirus crisis is a devastating and deadly social problem. Unfortunately, this is nowhere near the only social problem the world will face in 2020. Climate change, income inequality, population growth, resource use, automation – the list is endless. Who should solve these social problems? We usually turn to governments – or maybe NGOs and foundations established by wealthy philanthropists. All of them play an important role. But perhaps the most important role can be played by an unlikely source – business.

Is it realistic to believe that companies can solve social problems? Isn't it your goal to maximize profit? In reality, however, purpose and profit are much better matched than is often assumed.

How Merck found profit in intent

Let's take an example. In 1987, after 9 years of expensive research and clinical trials, Merck successfully developed a drug, Mectizan, that cured river blindness. But the 34 countries affected by the horrific disease could not afford to pay for it. Merck turned to governments, NGOs and wealthy philanthropists, but to no avail. So it was the extraordinary decision to give it away for free – "as much as necessary, as long as necessary". The Mectizan donation program is still running today and currently reaches 300 million people a year. Thanks to the program, four countries have completely eradicated river blindness. Surprisingly, even though Merck cost hundreds of millions, the CEO hasn't received a single shareholder complaint. Merck is still highly profitable and countless employees have told Merck that they have joined the program-inspired company.

Doing the right thing was good for business. So is this just one beautiful story? Is it desirable to imagine that it is good for investors to be good for society? You can find an anecdote that supports almost anything – so we need extensive evidence. That's what I sum up in my new book, Grow the Pie: How Great Companies Deliver Both Purpose and Profit. It presents the results of several studies – across industries, countries and decades – on the long-term performance of companies that add value to society. You find that such companies tend to outperform – and that purpose translates into profit rather than profit that enables a company to pursue its purpose.

Additionally, they show that purpose is especially valuable in a downturn – it's not a luxury that should be scrapped in troubled times. The business implications are profound. Many executives conduct their business with the "pie-splitting mentality". This shows the value a company is creating as a solid cake. Every piece of cake given to society reduces the piece that shareholders consume. So they maximize their profits by exploiting society – lowering wages, praising customers or polluting the environment. However, the evidence supports a new approach to business – the "pie growth mentality." With the primary goal of creating social value, a company does not sacrifice investors, but rather builds the cake, which ultimately benefits shareholders.

Grow the cake on purpose

Profits remain important, but arise as a by-product of serving society rather than an end in itself. How does a company actually grow the cake? The starting point is to define its purpose – why it exists, its reason for being, and the role it plays in the world. Purpose is to answer the question, "How is the world a better place when your company is here?"

It is important that a purpose is focused. Many companies have sweeping statements such as "serving customers, colleagues, suppliers, the environment and the communities while generating returns for investors" because they sound inspiring. But a purpose that is everything to all humans offers little practical guidance as it sweeps under the rug the harsh reality of compromise. Executives have to make difficult decisions that benefit some stakeholders at the expense of others. The closure of an environmentally harmful plant protects the environment, but harms the employees. In a specific declaration of purpose, it is highlighted which stakeholders are the first among the equals in order to steer such a compromise.

Of course, a declaration of purpose is not enough – it has to be put into practice. In addition to renaming itself CVS Health, CVS stopped selling cigarettes – even though it was a $ 2 billion revenue stream – because they were inconsistent with the goal of "getting people on their way." to help improve health ". Here, too, a specific declaration of purpose helps to provide clearer instructions for implementation.

Business leaders today are in a privileged position as technology and its global reach give them more power to create social value than ever before. And they can rely on the highest quality evidence – not wishful thinking – that concludes: To reach the land of profit, follow the path of purpose.

Contributing to Branding Strategy Insider by: Alex Edmans, Professor of Finance at London Business School and author of Grow the Pie, How Great Corporations Deliver Both Purpose and Profit.

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