Business with a social purpose – a contradiction or the way of the future?
On the face of it, the line is clear-cut between commercial for-profit businesses and not-for-profit enterprises aiming to do social good. Maximising profit and serving the interests of shareholders first and foremost is a fundamental obligation of business managers, directors and owners.
Business by definition is self-interested. Business enterprises, it is argued, only serve the wider public interest by being good at doing business, and thus providing jobs, paying taxes, and contributing to a robust and prosperous economy.
Now, there are signals that the boundaries are blurring, and driving the social purpose of a business is becoming more central for business success and longevity.
The case for corporate social responsibility and environmental sustainability is not new, but there is evidence that such business practices are becoming more sophisticated and rigorous. Greater exposure of and community disquiet about corporate misconduct and unfair treatment of customers, together with rising shareholder activism, is fuelling demands for businesses to meet social standards over and above expectations of healthy bottom line returns.
There are signs that this is more than a momentary trend. Millennials (Generation Y born between 1981 and 1996) and post-Millennials (Generation Z born from 1997 on) are the emerging consumers, investors and decision makers of tomorrow, and they have lost faith in the ability of business and politics to impact positively on society.
The seventh annual Deloitte Millennial Survey for 2018 found that confidence in business and loyalty to employers has deteriorated. Both Millennials and Generation Z doubt the motivation and ethics of business and the priority focus on profits and efficiencies. Rather, those surveyed overwhelmingly felt that business success should be measured beyond financial performance.
They believe business priorities should include job creation, innovation, enhancing employees’ lives and careers and making a positive impact on society and the environment. Deloitte comments that these concerns make it an ideal time for business leaders to prove themselves as agents of positive change.
Fresh ideas are appearing about how to build-in and accelerate the social purpose of business enterprises. These range as follows from:
- Online, peer to peer, ‘guerrilla lobbying’ and activist platforms like Change.org;
- New ways of mobilising flows of capital to tackle large intractable social and environmental problems through entrepreneurial social impact investing;
- Research-rich strategies for businesses to compete on social purpose by building on a brand’s key attributes or new adjacencies and investing in authentic actions to win stakeholder acceptance.
One pathway worth consideration, though in its infancy in Australia, is seeking certification as a B Corp. B Corps (or Benefit Corporations) aim to redefine success in business. B Corporations are established for-profit companies that also look to have a positive impact on people and the planet.
Companies must pass an assessment to become a Certified B Corporation, which gives assurance that the company has committed to meeting the highest standards of overall social and environmental performance, transparency and accountability, and aspires to use the power of business to solve social and environmental problems.
B Corps are part of a global movement which includes over 200 certified B Corps in Australia and New Zealand. (See http://bcorporation.com.au).
In short, the message is that being a business with a genuine and well-thought out social purpose is becoming an imperative. To do well in business means that the business must also do good.
2018 Deloitte Millennial Survey, May 2018, (see deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html )
Anna Patty, ‘Pessimistic’: Millennials lose faith in the economy, Sydney Morning Herald, 16th May 2018, (see smh.com.au/business/workplace/pessimistic-millennials-lose-faith-in-the-economy-20180515-p4zfd0.html)
Nick Bryant, Power to the People, Good Weekend, 3rd March 2018, (see smh.com.au/business/companies/why-change-org-s-army-of-davids-is-neutering-more-global-goliaths-20180228-p4z24h.html)
Danielle Logue, Explainer: the rise of social impact investing, The Conversation, 31st March 2017, (seetheconversation.com/explainer-the-rise-of-social-impact-investing-73357)
Omar Rodriguez Vila and Sundar Bharadwaj, Competing on Social Purpose, Harvard Business Review, September-October 2017, (see hbr.org/2017/09/competing-on-social-purpose)