In contemporary society over the past decades, many private organizations have started taking on responsibilities and commitments to serve social and environmental goals. This is remarkable, as individual citizens have realized that pursuing a common cause through a for-profit organization is not only possible, it can also be highly effective. For a long time, any person wishing to use hisher private organization to follow a great cause had to clash with two misconceptions:
- That it can’t be done. In other words, investors, donors, customers and employees would find it hard to understand what goal has the priority: generating profits of creating social impact. Moreover, it is not desirable to blend together two goals that have been traditionally pursued in completely different ways.
- That it’s hard to create a win-win scenario. This is due to the fact that identifying a balance between these two goals is almost impossible. Purpose-driven leadership however can go a long way in making the capitalist and idealist nature of business go together.
The usual go-to term whenever addressing this balance of private and public interests is corporate social responsibility or CSR in short. This concept relates to a managerial orientation whereby companies include social and environmental concerns in their business operations and ongoing conversations with their stakeholders. This model however is far from exhausting the topic, which presents itself in a much more multifaceted manner.
The fact is that the way in which business has evolved in the past decade has allowed the creation of a wide variety of trade-offs between pursuing solely a business goal or instead sacrificing business sustainability for a greater public interest.
In this post, we’re going to explore this topic in further detail and identify 5 different models that can be followed by organisations that desire to pursue social and environmental causes. Here’s a breakdown of the topic to help you navigate the post further.
- Profit Maximisers.
- Generous Contributors.
- Impact Innovators.
- Impact First.
- Impact Investors
1. Profit Maximisers
Starting from the more old-school models of business, profit maximizers are those organizations that may be defined as entities that will always choose profit over impact. In any given situation, the goal of the business will always be that of maximizing profits.
There are still organisations that fit this model, but at the same time, current business trends are showing how companies who are not able to see beyond the scope of the income statement are losing attractiveness towards the younger generations, as well as to many other customer segments which are consistently showing how they intend to spend their ‘shopping votes’ on firms that show an ability to respond to pressing social causes.
In this sense, we can expect the number of companies ascribed to this group to shrink steadily over the next few years. On the contrary, many more companies will start to develop initiatives to address these new trends and customer paradigms, these companies are called generous contributors and we’re going to address them next.
2. Generous Contributors
These organisations still fit into the traditional profit-oriented mindset typical of traditional business organisations but at the same time, they realise that change is necessary in order to maintain a degree of attractiveness that is heavily influenced by new customer demands.
As we anticipated in the introduction, these organisations are developing new corporate social responsibility initiatives to explore social causes that can benefit their brands as well as the communities. In this sense, this category of businesses are still motivated primarily by self-interest, but at the same time, they’re moving in the right direction. Even if the first move can be connected to market demands, the benefits of being a purpose-driven company could make these organisations become impact innovators. This is the category of organisations we’re going to address next.
3. Impact Innovators
Impact innovators are where businesses start to draw the line and realise that we just can’t go back to business as usual. The way our world has evolved compels us to consider ‘giving back. In this sense, organisations realise that the goals to make a social and environmental impact cannot be relegated to a business division, or to a single office, but need to become fully-pervasive. In this sense, the balance between profit and social goals may be still tipped towards traditional business revenue, but at the same time, the social goals pursued have become core attributes and defining elements of the business.
This is probably where most organisations would stop, but some still feel like it’s necessary to go an extra mile and be, as they say: impact first. This is a pioneering model of organisation, and we’ll talk about this next.
4. Impact First
These businesses, by design, turn the tables on the problem and choose a social or environmental goal first. The decision to start a business comes later, as they may see how entrepreneurship and more traditional business structures can provide a set of tools that are perfectly attuned to solving socially-relevant issues. This is when the scale really needs to find the perfect balance between operating as a sustainable business and creating an impact on the cause pursued by the firm.
This is when a company goes after what Porter and Kramer call Shared Value. As we discussed in the introduction, it’s really challenging to find that perfect balance, but those companies who are able to strike an equilibrium between this profit and purpose, can really obtain lasting, sustainable change and establish a meaningful connection with your customers which will be really hard to overcome for your competitors.
If instead, you think of yourself, not as a traditional business but more of an investor, then don’t feel left out, the next section is about you!
5. Impact Investors
An impact investor is an individual or an institution that invests in purpose-driven companies. The idea is simple, you don’t want to choose between monetary returns or social returns, you want both. In this sense, impact investors are to be considered a new strand in finance which is taking on the responsibilities of investing in organisations that carry out a social cause, while being profitable.
So there you have it, these are the 5 models that you choose in business to pursue a social or environmental cause. Let’s try to wrap up the topic by delving into a few conclusions.
As discussed, the first thing to realise is that using private companies to pursue communal goals is slowly but steadily becoming the rule and not the exception. As the threshold to entrepreneurship has lowered, many more people find it possible and economically viable to develop social impact initiatives through the means of a profit-oriented business.
To some extent we can say that entrepreneurs need to look for problems if they want to develop a solution through their company, and socially-relevant problems are certainly useful problems to address, as to be solved they need the creativity and innovative mindset that smaller organisations can bring to the table.
As we’ve seen in the article, in the pursuit of socially relevant causes, many perspectives and angles can be pursued, and this will allow the business world to host a diverse and varied community of organisations whereby social issues will – in most cases – be a cornerstone of any business plan.
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