During the month of December 2021, AMBITION will be highlighting its top 25 most-read articles of the year in reverse order, in the form of a thought leadership advent calendar. Here’s what is behind today’s door.
Donald Moore discusses how a people and planet approach to business is not only the right thing to do, but is the only way of achieving long-term commercial success and a sustainable economy
Originally published 21 October 2020.
Few go into business without the objective of making money. It’s accepted that businesses need to focus on profits and growth to survive. However achieving commercial success doesn’t have to be at the expense of people and planet. A new way to do business is emerging – purposeful, ethical and sustainable. It’s disrupting our thinking around traditional profit-based models with a focus on business as a ‘force for good’. But is this new business model viable?
The traditional profit-focused business model must be turned on its head
For decades, organisations have been focused on maximising profits and keeping shareholders happy. Many companies remain blinkered in this approach, with a laser focus on cutting more and more costs out of their businesses while keeping wages low, so that shareholders can enjoy an extra dividend or two. This profit-driven capitalist approach is relentless, leading to a glut of organisations with disillusioned employees, unhappy customers and unsustainable processes. After all, stripping a company bare while trying to suck more productivity out of the ‘workforce’ year-after-year, is not only counterintuitive but is self-destructive. So what’s the alternative?
Why putting people and planet first is best for business
Shareholder primacy isn’t (and has never been) a viable long-term business strategy and more organisations are recognising that it’s simply unsustainable. Add to this the new generation of customers who examine the values and ethics of a brand before purchasing, and leaders are beginning to recognise that they can no longer focus purely on achieving a fat balance sheet. Change is happening. Companies driving profits at the expense of their people and the planet are being ‘called out’ and shamed. And if they aren’t prioritising purpose over profit, and acknowledging their responsibilities towards colleagues, customers, suppliers, other businesses, the local community, the planet and so on, they’re on very shaky ground! Engaging ALL stakeholders rather than just a handful of shareholders is now vital for commercial success.
Such an approach is about focusing on business as ‘a force for good’. This may seem an unattainable idealism as businesses still need to make money to be viable. However, a ‘force for good’ business model is proving far more successful than a profit-driven approach, with the most forward-thinking organisations actively putting people and the environment first to achieve a fairer society and a more sustainable economy. After all, measuring economic success in terms of resource stripping is a ticking time bomb.
So why is a ‘force for good’ model so effective at delivering commercial success? Here are just a few key reasons.
‘Conscious’ customers are attracted by a company that cares
Customers are responding to values-driven brands that can demonstrate verifiable credentials. According to several studies, such as Nielsen’s The Sustainability Imperative, global consumers say they will pay more for sustainable consumer brands. Sales of consumer goods with a demonstrated commitment to sustainability have also grown more than four per cent globally, while those that can’t claim sustainability, are growing by less than one per cent.
Employees are more engaged and top talent is drawn to the business
Organisations with a clear and engaging purpose that resonates with their people, are more likely to attract top talent, especially among younger employees who seek meaning in their careers. Employees are also more engaged and loyal, and feel a greater connection to their organisation. In fact, employees who find a meaningful purpose in their work are twice as satisfied with their jobs and are three times as likely to stay with their organisation and contribute to its success (O.C. Tanner’s 2019 Global Culture Report).
Cost savings and efficiencies
There’s a clear difference between stripping a company simply to cut costs and finding cost savings through more sustainable and less wasteful solutions and processes. From introducing solar panels and going paperless through to cutting single use plastics from the supply chain, it’s those companies that can find more environmentally friendly ways of working that will ultimately enjoy long-term efficiencies.
The B Corp model – why this must be the future
There’s a sea change in organisational priorities which is being driven by powerful movements and initiatives. One such movement – the Global B Corporation (‘B Corp’) – puts business as a ‘force for good’ at its very heart, verifying and certifying companies that balance people and planet with profit. With robust assessments to ensure only the very committed organisations receive accreditation, it’s creating a new wave of organisations that are redefining success in business. Creating a positive impact on employees, communities and the environment is now equally as important as profits.
The arrival and growth of B Corps, of which there are now over 3,564 in 74 countries (including Rowlinson Knitwear), is a watershed moment. It reflects the growing expectation that companies need to operate responsibly in everything they do, and excluding social and environmental considerations from their operations, will simply open them up to the risks of losing market share and destroying shareholder value. Many see B Corps as a much needed reboot for capitalism in the modern age, ensuring that the social responsibility of business is not only about profits, but also about contributing solutions to the world’s most pressing problems.
The assessment for achieving B Corp status is meticulous and is the only certification that measures a company’s entire social and environmental performance. The in-depth ‘B Impact Assessment’ determines how the company’s business model impacts workers, community, environment and customers. It looks at the finest details of a company’s supply chain and input materials through to charitable giving and employee benefits, ensuring every business it assesses meets the very highest standards of verified performance. Plus B Corp certification commits organisations to consider stakeholder impact for the long-term by building it into the company’s legal structure.
By committing to being B Corp, organisations are joining one of the most important movements of this generation that will drive a ‘B Economy’ – a global economy that looks to a shared and sustainable prosperity for all.
The link between people, planet and profit
Many organisations view initiatives and movements, such as B Corp, as a substitute for generating profit, taking time and energy away from the day-to-day goal of growing the balance sheet and driving growth. In fact, the vast majority of organisations that are committed to movements such as ‘B Corp’ are growing and increasing their profits (research by O.C. Tanner reveals that purpose-driven companies outperform their peers in stock price by twelves times!). The choice doesn’t have to be people and planet OR profits, they are all intrinsically intertwined. So, beyond the desire to act responsibly, a focus on fairness and sustainability actually delivers significant benefits to aid commercial growth – for the long-term.
It’s fairly obvious that organisations can’t continue with traditional business models of shareholder primacy, and indifference to environmental impact. A new model is necessary, and with the arrival of movements such as B Corp, organisations are recognising that profits don’t need to be at the core of business. Instead, companies can readdress the balance and have a marked impact on changing the treatment of people and planet. But more still needs to be done. A greater number of companies need to recognise that they have the power to influence change – to develop a fairer and more caring economy where success is redefined beyond making lots and lots of money!
Donald Moore is Chair of employee-owned B Corp Rowlinson Knitwear