Having studied economics and theology, Bruno Roche knows that some questions can only be answered by other questions. Such was the case in 2006 when, as chief economist of Mars, he was asked to intervene in a conversation that the management team, the Mars family and the board of directors were struggling to resolve: what should be the right level of profit?
“Some people have said that more profits are needed to fund growth, while others have argued that if we make too much profit we will weaken the supply chain we sit in because each chain does not is only as strong as its weakest link,” he said. CEO magazine.
Immediately, he was intrigued. “I told them that of course we could provide a quick and easy answer, a benchmark on where Mars stands against the competition,” he recalls. “But it was a fundamental question about what the business was for – its purpose – so I asked for more time to come back with more questions.”
As Roche walked away to think, he discovered to his surprise that it was something that had never been studied before in economics or management. “The only answer could be found in philosophy or sociology,” he says. “So I knew we had to test a number of hypotheses.”
He reveals that two initial thoughts came to mind. “We know that businesses need financial capital, but they also need other forms of capital, such as human, social and natural capital. So why would we maximize the production of financial capital at the expense of others? We also know that the creation of financial capital is based on a balance of power. But what if we instead tried a system where the relationship is based on mutual relationships? »
“The creation of financial capital is based on a balance of power. But what if we instead tried a system where the relationship is based on mutual relationships? »
Would a system that manages more than one form of capital and one form of stakeholder lead to a higher level of efficiency and performance?
Nearly 15 years later, the conversation gave birth to the Economie de la Mutualité (EdM). As founder and executive director, Roche leads the early adopters of a movement that promotes a more complete form of capitalism.
“EoM is both a new school of thought that we teach at universities, write books and hold conferences about, and it is also a very practical business model that companies are adopting to create increased mutual value by putting the ‘goal at the center’, he shares. Currently, a core team of 20 salaried staff is complemented by a network of paid and pro bono fellows.
While EoM was officially incorporated in August 2020 in Geneva (with offices also in Hong Kong, Brussels and Washington, DC), Roche says it took 18 months to transform the team from an internal think tank at Mars into a functioning public benefit foundation. and management consulting with a global reach.
And although Mars, the fourth largest private company in the United States according to Forbes, invested heavily in the creation of EoM, the foundation was incorporated as a completely independent entity. “Mars does not claim the name or claim ownership,” Roche explains. The connections remain, of course – with Roche, EoM Chairman Stephen Badger is the former Chairman of the Mars Board.
Currently, 40% of EoM’s revenue comes from outside of Mars, as more companies seek a methodology to create enhanced mutual value by putting purpose into practice. The news is spreading through its Oxford Economics of Mutuality Forum, now in its seventh year (attracting more than 30,000 views since going live in 2021), as well as various seminars and executive education programs.
“We are developing a comprehensive offering,” says Roche. “If you want a complete transformation of your business, we can support you in a robust turnaround process that can last from a few months to 12 to 18 months.” To dip a toe in the water, a suite of tools has been developed, including the recently launched Purpose Scanner, designed to equip companies of all sizes to begin their journey of creating mutual value with purpose at heart.
Roche emphasizes that at its core, EoM was meant to be a managerial innovation rather than an economic innovation. “Half a century ago, nation states were too powerful compared to corporations. Today, it’s the opposite,” he says. Companies like Apple have a market capitalization greater than the gross domestic product of most G7 countries.
“These big companies are no longer just economic agents, they have become political actors; however, they are ill-equipped to handle the responsibility and influence that size brings. This is a real change that has radically changed the value creation equation. »
Naturally, the project attracted the interest of external organizations, even before the official creation of EoM. Roche explains that it has been collaborating for more than a decade with the European Union, which is preparing to launch a new taxonomy obliging companies with more than 250 people to report on their extra-financial performance.
“Our vision for the foundation is to influence regulation, influence practice, influence education and influence research.”
The United Nations has also reached out to discuss the adoption of the EoM curriculum at thousands of universities, in addition to where it is already taught at Oxford University’s Saïd Business School and Sciences Po in Paris, among others.
“Our vision for the foundation is to influence regulation, influence practice, influence education and influence research,” he says. There is even a project to create a new investment company to practice capital investment in the manner of EoM: “Buying companies, transforming them, and reselling them once they have been transformed.”
So, after all these years, is there a single answer to the question that started it all? “I see it more as the start of a journey,” Roche reveals, using a new integrated accounting methodology that redefines profit, internalizing positive and negative externalities for the first time into a single outcome it calls mutual profit. . “If your mutual profit is greater than financial profits, you are a net investor in the ecosystem in which you operate and your performance will eventually increase.
“When mutual profit is less than financial profit, it means that the company is taking more than it should from the ecosystem in which it operates and, over time, there is indeed a loss in performance. This concept of mutual profit is a fair measure of the value a company has created or destroyed over time.
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