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Hanging In The Balance: Purpose-Profit ‘win-win’
Read Part 1 in our Transformative Purpose series: Purpose X Profit report.
For a long time, profit has been the guiding force for firms, driving growth and prosperity. But what happens when excessive growth is the exact thing preventing our planet and society from thriving in the future? With 55% of consumers expecting businesses to be more accountable than national governments for solving the climate crisis, ‘purpose‘ (the north star that ignites passion in people and guides all actions towards wider impact, rather than just growth and profit) is rapidly becoming the inevitable game-changer for brands that want to ensure sustainable future-proof success. The question is: how can purpose drive a win-win situation for both society and the firm’s profits?
Combining profit and purpose can sound contradictory. We’ve come to think of one as greed and the other as selflessness, but the truth is that purpose can be good for a business’ bottom line. Beyond being the aspirational North Star for the brand’s activity, purpose is also a way of ensuring long-term wellbeing for all stakeholders and mitigating business risks.
2. Creating shared value
Co-creating value is an attractive prospect for the business world, mitigating the need to choose between growth and good. B-corporations are a good example of businesses balancing purpose and profit: they are experts in integrating social innovation into every stage of their business models, upgrading corporate responsibility programmes and collaborating with other organisations (within this network and beyond) to multiply both financial and social impact. These ambitions are often rewarded: research shows that accounting for sustainability progress leads to cheaper capital costs, better employee engagement and increased innovation capabilities, higher stock prices, and, eventually, growing business value.
Yet, if a ‘win-win’ seems to be the best option, what’s the catch?
The problem is that going big with changing business models or launching new social initiatives is not always a realistic opportunity for every business. Corporate responsibility programmes often gravitate towards ‘easy wins’ – little production adjustments or small cuts of energy consumption – leading to 98% of firms not achieving their own sustainability goals despite presenting their easy wins as integrally transformative. Imagine a situation where a business chooses between two solutions: a smaller environmental impact with higher financial gain OR a big eco-conscious win with more limited business value. Both are a win-win situation. Whereas the traditional business thinking would be to opt for the higher profit gain, there are environmental and reputational risks involved that might drive a longer-term loss. Other companies, however, are already shifting their mindsets and product roadmaps towards the longer-term bigger wins, with Unilever recently announcing that the company might sell off brands such as Marmite and Magnum that negatively impact the planet and society, regardless of whether they are profitable.
To tap into the opportunity of purpose driving profit, businesses need to adopt an agile mindset that embraces experimentation and a deeper sense of accountability, being ready to make bold choices and stand by them. This is the path forward to secure a prosperous future not just for the business itself, but also for everyone. Win-win.
Explore more insights into how businesses can create shared value for all stakeholders, from investors to consumers and the planet in the Purpose x Profit chapter of our Transformative Purpose series.