How purpose-led business is redefining ways of working
There’s a growing realisation that purpose-led businesses are more than a fad or a buzz word. However, for the hardened capitalists, this might be a tough pill to swallow. For decades, businesses have been built on the concept of profit, delivering value to shareholders and being as efficient as possible when it comes to costs and margins; sometimes at any price.
However, there’s a growing drumbeat that is starting to redefine how business, industry, commercialism and the financial sector operate: purpose-driven business. As much as it might be described as a new business model that redefines capitalism, it is in fact a new iteration of some very successful models – creating a capitalism that can be considered fairer, more ethical and considerate, with a longer-term view of supporting humanity and our planet.
Business with added values
After all, businesses serve a wide array of stakeholders and have a responsibility to make sure the communities in which they operate, interact with, and serve are considered in all that they do. Whether that’s the environment, living conditions, access to health care, poverty, or human rights violations in the countries where components or ingredients are sourced – there are many areas to consider.
Being purpose-led does not mean that the business now operates as a charity or global non-profit trying to solve the world’s problems. It simply means creating a strong set of values for the company that become a North Star for decision-making and how the organisation does business and interacts with its stakeholders. It’s creating a living conscience for the organisation that includes actions – not just rhetoric.
New research and figures are starting to provide evidence that purpose-driven companies really do work. For example, a Korn Ferry study revealed that, from 2011 to 2015 purpose-driven companies in the consumer sector achieved a compound annual growth rate of 9.85% compared to their peers’ rate of 2.4% in the S&P 500. Korn Ferry also found that 90% of executives said a commitment to purpose-driven leadership produces long-term financial benefits.
Learning from the past
Being purpose-driven isn’t new. Looking back through British history to some of the pioneers of industry, consider William Lever who built Port Sunlight for his employees with the aim of ‘getting back to close family brotherhood that existed in the good old days of hand labour’. Or John Spedan Lewis who famously formed the John Lewis Partnership in 1929 and began distributing profits to his employees.
As far back as 1884, The Co-operative Group which was founded to serve a social purpose, as well as a commercial one. The Co-operative Movement guides the group through its values which include self-help, self-responsibility, democracy, equality, equity and solidarity, alongside a commitment to ecological sustainability and social responsibility.
More recent example include Unilever which disbanded its CSR department in a bid to embed sustainability in every corner of the business; Timpson’s which focuses on employees and culture first including employing ex-offenders; and Lush Cosmetics’ belief that all business should be ethical and all trade should be fair.
This shift isn’t just about appealing to the end customer– it’s also about attracting the best talent they can, and this talent is now the Millennial and Generation Z cohorts. According to a recent 2018 Deloitte report, “there continues to be a stark mismatch between what Millennials believe responsible businesses should achieve and what they perceive businesses’ actual priorities to be. Young workers are eager for business leaders to be proactive about making a positive impact in society—and to be responsive to employees’ needs”. After all, the end users of B2B products are ultimately often the general public.
Small business can make a big difference
However, it’s not just larger businesses which are trailblazing new models of purpose-led business – a surprising number of smaller businesses are cropping up that are underpinned by a purpose-led philosophy.
These are the businesses that are challenging the status quo and emerging as successes. For example, there’s award-winning Hydrologic – dedicated to giving people access to clean water in even the most remote parts of Cambodia – and doing it in a sustainable way. It makes, distributes and sells ceramic water purifiers to customers across rural Cambodia to remove bacteria without the need for boiling. It creates jobs, solves a huge societal problem and makes a profit. As the Chairman Michael Roberts states: “the core mission is to deliver products with high social, environmental, and economic benefits to rural Cambodian households – and the more successful we are at implementing our business plan, the more positive impact is created.”
There’s also Bottle4Bottle – recently showcased in the Huff Post – which is an Australian family-owned business that invites customers to shop for a cause. Each time it sells a bottle of lotion or spray tan solution, it donates a bottle of premium baby-milk formula to an orphaned or abandoned child in need.
Then there’s TOMS, an inspirational young company that is also a Certified B Corp. TOMS’ business model is based on a One for One® premise – that with every product you purchase, TOMS will help a person in need. TOMS helps provide shoes, eye-care, clean water, safe maternity services and bullying prevention projects to people in need.
Putting purpose at the hear of business
This growth in purpose-led startups is perhaps less surprising when you consider older Millennials are now in their late thirties and Generation Z are in their early twenties, and these cohorts are now yielding entrepreneurs and visionaries wanting their businesses to look and behave differently.
For example Leigh-Kathryn Bonner, a 26-year-old whose mission is to convince companies with massive headquarters to host beehives and, in the process, help rebuild the bee population. Her company Bee Downtown works with the likes of Burt’s Bees, Delta, Chick-fil-A, Intercontinental Exchange, and IBM to host hives
Another individual is Emellie O’Brien who founded Earth Angel to help film production crews become more sustainable by educating them about best practices, using eco-friendly products on set, minimising waste, and tracking carbon footprints. These start-ups have put societal good at their heart and, as a result, have got noticed.
However, for each purpose-led business that achieves recognition, I’m betting that there’s another hundred that are struggling for funding and attention in order to achieve their mission. That’s why we have a duty as a community of investors, suppliers, customers, academics, policymakers and industry partners to showcase Britain’s entrepreneurial talent that is emerging in the area of purpose-led business.
It’s a big opportunity for our economy while also addressing societal and environmental issues with innovative, refreshing approaches. When one of the greatest financiers of our time – Larry Fink, CEO of Black Rock – is telling us that purpose is a company’s fundamental reason for being, then we need to sit up and take notice.
The power of challenge prizes
In the same way that being purpose-led requires a new approach, unlocking the socially responsible innovators of the future also requires a refreshed approach. At Nesta Challenges, we have been utilising the power of challenge prizes to uncover innovative solutions to some of society’s greatest challenges – and helping the organisations behind these ideas to become sustainable, commercial entities.
Challenge prizes are nothing new, but they have recently gained considerable focus because of their success in spurring new thinking and products that are addressing a varied array of issues such as living with dementia, antibiotic resistance, regulatory changes across industries, mobility, and imagining the cities of the future.
Because challenge prizes are open to anyone, they yield ideas from non-traditional sources and we see highly innovative ideas developed. For example, Guillem Singla Buxarrais and Dimitris Athanasiou, both millennials, co-founded Neurofenix to support stroke sufferers with rehabilitation of their upper limbs through smart games. Their NeuroBall intelligently adapts to the patient and becomes increasingly challenging as the patient progresses.
This purpose-led start-up is an excellent example of a company that is solving a societal problem while also delivering against commercial objectives. Then there’s Edward Maslaveckas and George Dunning who created Bud – the ‘universal banking platform’ where you can manage all your finances (be it a current account, credit card or savings account) in one place. Driven by a passion to make banking personal again, Edward and George, both Millennial fintech entrepreneurs, have successfully built the business while self-funding the project alongside support from the Open Up Challenge. #
Starting a new conversation
However, despite their success, challenge prizes alone will not be enough. We need to encourage schools and universities to understand the value of promoting social innovation so that new generations of the workforce, of entrepreneurs, future CEOs and leaders embrace the power of purpose-led business.
We need to change the conversation and adopt new ways of teaching that embed social values at the heart of business studies, showcasing successes and inspirational entrepreneurs. As the trailblazers are demonstrating, doing good and making money are not mutually exclusive; they just require a different mindset. With so many purpose-led businesses taking off, it’s clear that it’s no longer good enough to simply talk about being purpose-led – companies must put words into action or risk being left behind.