The Future of Business: Profit or Purpose? Or Both?
Gone are the days when a business can solely focus on maximising profits and satisfying shareholders without thinking about its broader societal and environmental purpose. The role of business is rapidly evolving and many companies and organisations today are discovering newer ways of highlighting true purpose and enhancing social impact through their operations.
Most economies organise themselves into three key sectors within which they function – the public sector which includes government bodies; the private sector which includes private businesses; and the non-profits sector, which includes charities and charitable organisations. In recent times, a fourth sector is emerging out of necessity for societal and environmental change.
This fourth sector includes for-benefit and impact enterprises that use market share, influence, and specialised expertise to create sustainable solutions to pressing environmental and social issues. These enterprises are the perfect blend between the private sector and the non-profit sector, seeking to accelerate social good while also making profits. Businesses and organisations in this sector are developing novel ways of doing business by creating positive changes while ensuring continual business prosperity.
So, how is the role of business changing from profit to purpose?
In 1970, Nobel Prize-winning economist Milton Freidman argued that the social responsibility of a business was to “make as much money as possible while conforming to basic rules of society”. However, the true purpose of today’s business is changing and is influenced by common underlying themes like minimal environmental and societal harm. No longer is it acceptable for businesses and corporates to solely focus on shareholder satisfaction and profit maximisation without addressing pressing environmental and social issues like climate change, poverty, child labour, gender inequality and environmental degradation, through their operations.
Businesses are realising that ignoring these pressing issues while operating would threaten their future existence and prosperity. These fresh perspectives on a purpose-driven business are also reflected by growing conscious consumerism and stakeholder awareness. Here are some of the growing avenues that businesses are using to accelerate their social impact:
NFPs are organisations that do not operate for personal gain or profit. Profits made by NFPs, if any, must be used to further their cause and purpose by saving for future projects. NFPs include charities, charitable organisations and other community-based organisations, cultural/social societies, sports clubs, etc. Benefits of an NFP include financial gains through tax concessions and social gain by using profits to influence societal development. You can learn more about NFPs here.
Social enterprises are a hybrid between a traditional business and an NFP, and can operate on a for-profit or not-for-profit basis. These organisations make profits and operate with an underlying environmental/social/economic/cultural purpose. Benefits of a social enterprise include strengthened community relationships, income from trade and operations, and positive changes in the community. Learn more about social enterprises here.
B Corporations (B Corps):
B Corps or “Benefit Corporations” are for-profit businesses that commit to creating a material positive impact on society and the environment through their operations. Businesses can achieve B Corp Certifications once they meet rigorous standards of social and environmental performance, accountability, and transparency. Benefits of B Corps include building relationships, improving positive impact, cost savings and much more. Read more about B Corps here.
Patagonia Outdoor Clothing & Gear
Social Impact/ Sustainability Consultancy Firms:
Many corporations have begun to develop expertise in impact and sustainability strategies and consulting. These companies use profits and expertise to conduct research and analysis on businesses’ social and environmental impacts, and provide detailed plans and strategies to execute and scale their impact. You can learn more about this growing sector here.
Each new approach to doing business has its own set of benefits and limitations, but what is important is that businesses and organisations are now beginning to drive positive changes and accelerate social impact through their operations and services like never before.
Do you know other ways in which companies are doing business to engage in social impact and sustainability? Let us know in the comments below!