Can a business be both purpose-driven and profitable?
The phrase ‘purpose-driven’ is thrown around in business parlance, but what does it mean and can it go hand-in-hand with growth and profitability?
The two may sound mutually exclusive, with ‘profit’ in moral conflict with ‘purpose’. But they can, in fact, make a lucrative combination. A profitable business will be able to do more to support a movement or cause and in turn, such commitment can drive profitability.
Patagonia, the highly successful outdoor gear and clothing retailer, is often held up as a prime example of this, having had a social and environmental commitment since it was founded in the 1970s, propelling its ‘purpose-driven profitability’.
Rewiring business for good
We are all operating within a capitalist system, and we can harness the positives from this and use the business-customer relationship for the greater good. The first step could be as simple as a charity partnership.
For example, in reward schemes, online retailers often offer discounts at checkout to encourage customer loyalty. Instead, giving customers the option to donate the value of their discount to a chosen charity, or offering to round up to the nearest full pound with the round-up going to charity, provides immediate wins for the charity at no cost to the business.
Equally, where business suppliers throw in a gift such as a mouse mat, pen or pack of sweets, this budget, which has already been allocated, could be redirected into charitable causes and make an instant difference. These are simple ways of using ‘business for good’ without significant financial impact on the bottom line, and yet with the potential to boost the brand and customer loyalty by being a business with a conscience.
For businesses with the resources to do more, committing a percentage of total revenue, or profit, to a cause is a way to take even greater positive action. To use online retail as an example, in the UK, online retail sales are responsible for more than £2 billion of revenue in an average week. If retailers donated just 1 per cent of online sales revenue to charity, this would amount to more than £20 million every week.
Where the financial support a business provides rises in line with its profits, business growth itself becomes a force for good. If the business grows, so will the impact it has. This can incentivise stakeholders to remain loyal, including customers and employees, which is, of course, good for business.
True purpose requires true commitment
Becoming truly purpose-driven requires full commitment from business leaders. Purpose needs to permeate the entire business, from its labour and financial practices to its culture and the organisations it chooses to work with, backed up by transparency and accountability.
One approach is the advocacy-based business model, by which a company takes a stance on a socioeconomic or environmental issue. For example, an automotive part supplier could set a mission to reduce the environmental impact of the automotive sector. This underlying purpose would then influence every business decision, from choice of materials and how they are disposed of, to new hires, premises and partnerships. Each area of the business would need to factor in this fundamental purpose, including the company culture.
This model is one approach to building a purpose-led business, but there are other ways that leaders can make their business a force for good. Having a clear and positive purpose is an effective way to enhance stakeholder trust and commitment and thereby improve business resilience through tough times.
B Corp – is certification worth it?
B Corp certification is another hot topic, often mentioned in the same breath as ‘purpose-driven’. Is it just a prolonged fad, or is there real value in pursuing certification?
The answer is entirely down to the individual business and its approach to certification. By way of definition, certified B Corps are businesses that have been verified by global non-profit network B Lab as meeting high standards of social and environmental performance, public transparency, and legal accountability to balance profit and purpose.
Becoming a B Corp is not an end goal but, instead, it is the declaration of an ongoing commitment by a business to reduce its impact on the environment and operate in a sustainable and ethical way.
People’s perception of B Corp status peaks and troughs, but with 1,500 B Corps in the UK, and more than 8,000 across the globe, certification provides a growing network of like-minded businesses with which to connect, collaborate and raise awareness of the movement to bring more businesses into the mix for the greater good.
For a business looking to adopt a more purpose-driven approach, going through the B Corp certification process could be a good place to start to uncover that purpose.
The bigger picture
Becoming a purpose-driven business is a journey that will not be completed overnight. It’s also not about giving away all your profits, or side-lining your customers’ needs for a grander purpose. Instead, it’s about keeping the broader picture in mind and continuously making conscious decisions that will benefit the people you work with and the planet you live in, and choosing to work with other organisations that feel and act the same way.
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Can a business be both purpose-driven and profitable?
