What Is the Social Purpose of a Firm?

Aditya Rau, Contributor

Aditya Rau (MBA ’24) reflects on the impact of a new RC course and argues for its expansion

This was the question on the lips of RCs as they stumbled back into Aldrich after winter break. Dusting off their boots after trekking to Patagonia and their skis after exploring Jackson Hole, first year students gathered to participate in the first-time offering. The course, “The Social Purpose of the Firm (SPF),”  was designed to help students reflect on both a firm’s purpose and their own.

Over two days, RCs read and discussed cases on companies working on clean energy and battery storage above the arctic circle (Northvolt), designing and managing responsible AI (Microsoft), producing life-saving drugs (United Therapeutics) and expanding financial access (Equity Bank). Discussions on the work of firms active today were complemented by a historical analysis of the operations and troubling legacy of the first publicly traded company (The Dutch East India Company). “We felt strongly that students should have an opportunity to engage with this fundamental question of purpose,” said Debora Spar, course head for SPF and Senior Associate Dean for Business and Global Society. In doing so, RCs considered issues such as the capabilities mismatch between the private sector and the public sector, the importance of delivering returns and impact at scale, the need for governments to provide market goods and address market failures, and the opportunities to do both good and bad that are inherent in scale.

It seems rather appropriate that the RC curriculum now includes a focus on the social purpose of the firm. Indeed, this is a theme that has always been central to a Harvard Business School education. Students of the school’s history will recall that its first mission statement was to train leaders who “make a decent profit — decently.” Today, it is “to educate leaders who make a difference in the world.” 

More than ever before, a study of the social purpose of business is critical for several reasons. First, there are new expectations of firms. The 2023 Edelman Trust Barometer, which surveys more than 32,000 people in 28 countries, illuminated the striking fact that businesses are now more trusted than governments. When this shift in trust is considered in tandem with employees increasingly looking to their companies and managers for values-based leadership, identity, and meaning, the social purpose of the firm becomes of paramount importance. And second, where governments are ill-equipped to act, business has both the capital and the capabilities to address seemingly intractable challenges and minimize threats to the welfare of people and the planet.

“Heed the words of Milton Friedman,” cries out my free-market espousing, shareholder-loving sectionmate, his voice booming from Sky Deck. I decline. And if you paid attention in LCA early in the semester, you’ll know that believing in shareholder primacy requires the willingness to accept premises that just don’t hold under scrutiny (ask me about my budding PhD proposal for a lengthier discussion of this topic). 

On the contrary, businesses do not exist independent of the societies in which they operate. And serving a social purpose isn’t simply the right thing to do. It’s also good business. “Fundamentally, business leaders create opportunities for other people,” affirmed Jan Rivkin, SPF instructor and C. Roland Christensen Professor of Business Administration. Firms can do well by doing good. This was readily apparent to me during my time at Mastercard, where the firm’s investments in financial inclusion at the bottom of the pyramid powered much of its growth over the past decade, and have set the firm up for sustainable growth over the next decade. Putting the firm to work in this way requires a consideration of its core assets, capabilities and competencies, and then pairing these with the kind of patient and risky capital deployment that a CEO can defend and evangelize. Commercially sustainable social impact can, and should, be business as usual.

But enough of my bleeding heart spilling over the pages of this paper.

Among the anchoring questions that students parsed during the course was: what is your purpose? Regrettably, the course design meant that far too little time was spent addressing this question. And that is a real shame, particularly as RCs presently grapple with their own sense of purpose as they consider summer opportunities, EC courses, and their personal and professional lives after HBS. “I think this is a great (point) to think about for future iterations of SPF, and indeed for future conversations across the RC and beyond,” said Spar. 

To be clear, a failure to address this question is not just a flaw of SPF but of the RC more broadly. Why is it that questions of personal purpose are squeezed into the dying minutes of a LEAD, LCA or TEM class instead of being given due space and attention? An alternative would be to offer more opportunities for deeper discussion on this topic, the RC equivalent of EC courses such as “Authentic Leadership Development” or “Crafting Your Life.” The benefit to RCs would be exposure to these topics at the start of their HBS experience, and the pleasure of engaging with sectionmates with whom they have already built deep trust and intimacy. 

But where might we find room in the crowded RC curriculum? I would argue that Inclusion should be merged with LEAD; if we’ve learned anything in FIN, it’s that the whole can be greater than the sum of the parts. This would free up space for a course on purpose in the RC year. Furthermore, such a course would provide space for atypical cases: imagine Will Guidara, former partner at Eleven Madison Park (one of the world’s best restaurants), discussing the purpose of hospitality; or Ben Zander, the conductor of the Boston Philharmonic, sharing his purpose to help realize the transformative power of classical music. Finally, instead of imposing three case days on a Friday, HBS could use one of the three class slots on Friday to offer this new course for personal and professional purposes. I assure you that I, for one, would happily take a later flight to Utah if this was the case.

Like all experiences at HBS, future iterations of SPF and broader discussions of integrating purpose into the curriculum will and must be co-created. Our responsibility is to lean in, as students of the social purpose of the firm. And, eventually, as leaders of firms with a social purpose.

Adi Rau (MBA ’24) is a Canadian who grew up on unaccustomed earth: the Middle East, Europe and Africa have all been home. He graduated from the University of Toronto with a degree in Political Science, where his research focused on the delivery of social services to hard-to-reach populations. This work led him to join Mastercard, where he advanced the firm’s inclusive growth and financial inclusion agenda. Prior to attending HBS, Adi spent the summer in France farming vineyards in Beaujolais. He can often be found on a hiking trail, rapping the Hamilton soundtrack or sipping on a glass of wine from a distant part of the world