In principle, many of us believe that bringing a social element into core business strategy is the right thing to do. However, it can often be difficult to understand and quantify the importance to the bottom line.
In a series of articles, we will develop the business case for social innovation. The first article explores how a company’s purpose can be unlocked by linking it to social issues and the associated benefits .
By Laura Baker
‘Purpose’ has been hailed the corporate buzzword of 2018 by the AFR and countless others (including myself!)
The company’s purpose highlights its foundation and reason for existence. This should create an identity that guides decision making, behaviours and the overall culture. Traditionally, businesses have viewed their purpose as purely profit-driven. Anything leftover would go to Corporate Social Responsibility campaigns or philanthropy.
However, now, the business world has reached a point in history where pursuing profits as the cornerstone of their company’s purpose is outdated and insufficient to drive competitive advantage.
A. The Business Problem
Businesses who do not focus on developing a purpose led organisation will lose out on attracting talent, growing the consumer base and leading to bottom line growth.
The purpose paradox is the concept that the pursuit of profit is not the foundation of a company’s purpose. However, having a purpose that looks beyond profit will often lead to an increase in profit.
Many companies are stuck in the purpose paradox. They are focusing their attention on short term profit and dollar figures rather than reframing the business objectives to understand the role they play in society, which can lead to new opportunities and growth from employees, customers and partners.
B. The Role of Social Innovation
Purpose often does not translate into day to day activities and remains a series of meaningless words. Social innovation creates an opportunity to delve into real purpose. Instead of merely having a few meaningless words on a page, the next wave of purpose led businesses are understanding the role of their business in society. We call this ‘social awareness.’ This is the ability for leaders, employees and decision makers to understand the role their business plays in society AND act on it.
Having a purpose doesn’t equate to being a purpose led organisation.
In order for this to happen the social purpose must:
- Align with the business’ core operations and role in society (Eg: a car tyre business probably shouldn’t get into creating nutritional programs in schools),
- Be defined and focused (hot tip: one company cannot solve all the world’s issues… Not even Planet B!),
- Have a series of measurable business and social outcomes,
- Be easy for people to understand and connect with.
C. The Business Opportunity
A purpose-led business attracts talent and consumers which translate to:
- Employee productivity: HBR found that 9 out of 10 American employees would be willing to trade a percentage (23% to be exact) of their lifetime earnings for greater meaning at work.
- Better stock price performance: Purpose aligned companies outperform competitors by a factor of twelve.
- Employee retention: Employees are 3 times more likely to stay with a company that elevates purpose.
- Customer attraction and retention: 63% of surveyed global consumers prefer to purchase products and services from companies that stand for a purpose that reflects their own values and beliefs, and will avoid companies that don’t (Accenture report 2018).
D. The Metrics
- Employee engagement levels
- % employees who believe in the purpose and see it as part of their day to day activities
- # of new products/services with social and business impact
- The overall performance of products/services with social and business impact
- Read through your company’s purpose. Do you connect with it? Why? Why not?
- Which social issues align with the industry you operate in? Look at the Sustainable Development Goals to understand the world’s most pressing needs and think of ways to align them with your company’s products, services or operations.
- Find a colleague, share your ideas and put together a ‘purpose pitch’ (See Tools and Resources for template) to help drive purpose in your team.