How Social Purpose Makes Good Business Sense
Consumers and employees prefer corporations that create social good
The key to success for the modern business is about more than dollars and cents; it’s about defining and adopting a social purpose that transcends the bottom line. Some of the most successful and progressive Lower Mainland enterprises and organizations such as Van City Credit Union and Mountain Equipment Co-op have adopted social purposes as a key pillar of their business strategies.
A couple of years ago United Way of the Lower Mainland ( UWLM) realized that it could harness its vast network of relationships with social service agencies, corporations, labour and government to help make the shift from pure profit focus toward a greater overarching social purpose that not only helps build stronger, healthier communities but also builds better businesses.
“A lot of companies have identified social purpose as a goal but don’t know how to get there. We are giving them the tools and help them make that transition,” says Mary Ellen Schaafsma, UWLM’S director of social innovation and research, who has been leading outreach efforts with Lower Mainland businesses and organizations wanting to make this shift.
These efforts began with a workshop in 2016 that brought together a wide spectrum of business leaders from the construction, financial, retail and other sectors.
“By noon, everyone was saying, yes, social purpose is the next big focus for business,” Schaafsma says.
The next step was to build the business case. Why adopt social purpose today when the profit motive and bottom line have historically been the guiding principles for business? Over the past year UWLM dove into the topic, working with Strandberg Consulting. The result is the working document Social Purpose Business Case — “By future-proofing our communities, we’re future-proofing our business.”
The big picture takeaway is that companies focused on solving societal problems are performing well in terms of market growth, meeting changing customer needs and inspiring their employees. In other words, in today’s dynamic business world, having a social conscience also makes sense for the bottom line. When Schaafsma drilled deeper into the topic, she discov- ered that firms and organizations that embrace social purpose as a guiding philosophy typically realize six key benefits. First, a company with social purpose strengthens its customer base: consumers increasingly want more value for their dollar than simply the acquisition of products and services and they favour companies that make a positive social and environmental impact.
Increased employee engagement is another benefit. Put simply, businesses with social purpose attract talent: employees across the age spectrum are viewing social purpose at the workplace as being on par with financial remuneration and other traditional measures of job satisfaction. In recent years some of the world’s largest companies have blazed a trail in social purpose. For example, in 2009 Unilever, a massive transnational corporation that produces food, beverage, cleaning agents and personal-care products, shifted course when it adopted its Sustainable Living Plan: employee engagement rose from the low 50s to the high 80s on a scale of 100.
A fulfilled employee—one who feels they are helping address societal issues—tends to bring more to the office or shop floor in terms of productivity and creativity.
“Many employees—and not just millennials—want more than just a paycheque,” Schaafsma says.
Relationships with stakeholders also can be enhanced through social purpose, creating advocates for a business or brand, generating loyalty and fostering new partnership opportunities. Social purpose also builds social capital. Communities with strong social bonds are healthier and companies that contribute to community health also create “a strong ripple effect for this business,” Schaafsma says.
Then there’s enhanced financial performance. A 2015 study by the Harvard Business Review demonstrated that over a three-year period 42 per cent of non-purpose led companies showed a drop in revenue versus 58 per cent of purpose-led companies that showed positive growth. And along with improved financial performance, companies that build the trust that inevitably flows from a corporate culture grounded in social purpose enjoy easier access and often lower costs of capital.
“That was surprising me but we are seeing more and more investors looking for companies that embody social purpose,” Schaafsma says.
Another less obvious benefit of social purpose is its tendency to inspire innovation. As UWLM articulates in its business case: “Social purpose sets the parameters on how a company wishes to operate and grow, which encourages staff to be innovative and think outside the box to realize those broader aims.”
But how does a company get from A to B, from a philosophy focused on profit and shareholder return to one of social purpose that not only builds a stronger company, but also better engages employees, the community, s takeholders and partners in addressing society’s social and environmental challenges?
It starts with deciding to make a corporate shift followed by education and training across the company and identifying what your social purpose is. “Making this shift doesn’t happen overnight. It takes leadership, commitment and support.” Last June, UWLM signed a memorandum of understanding with the City of Vancouver that is aimed at engaging local governments to mobilize businesses to embrace social purpose within their jurisdictions.
“As the City of Vancouver grows and attracts more business—including head offices and startups, we strive to evolve and strategize to embed social purpose from the start. We are working to build in a sense of responsibility and work toward building resilient communities. If a community is thriving, we all thrive,” said Sadhu Johnston, city manager, City of Vancouver.
Schaafsma is excited about the role UWLM is playing in shifting businesses toward social purpose, and sees the potential for new solutions to social issues that have evaded answers so far.
“And this isn’t just altruism, it’s also good for business,” Schaafsma says.