Businesses must embrace ‘profits with purpose’
While trust in our key institutions has eroded over the past few years, people have higher expectations of business than they had in the past. They believe that businesses can, and should, play a positive role in society, focusing on a broader purpose, while making profits.
This sentiment was expressed frequently at the 2019 World Economic Forum in Davos, Switzerland. In the words of the CEO of Unilever, consumers want to know how brands are “making society and the planet a little better.”
Responsible investing is also gaining traction as investors are putting their money toward companies that show a high level of corporate social responsibility. In his annual letter to CEOs, the head of Blackrock, a large investment firm, opined last month, “Purpose is not the sole pursuit of profits but the animating force for achieving them. Profits are in no way inconsistent with purpose.”
Today’s customers and employees alike assign their loyalties to organizations that contribute to making the world a better place and to improving people’s lives. Businesses, in turn, are responding and embracing the concept of “profit with purpose.” What was once seen as the purview of social enterprises and non-profit organizations is becoming the mantra for businesses of all types.
While a myriad of functional and emotional motivators drive our purchasing decisions, we also expect businesses to be proactive in solving long-standing societal issues, ranging from gender and income inequality to access to clean water.
At the Gustavson School of Business, we are firm believers in the principle of responsible management — the idea that businesses benefit from being accountable to communities and society, as well as to investors. To understand Canadians’ perceptions of trust in more than 300 different brands, and how those perceptions are shifting, we conduct an annual survey. We measure the beliefs that brands deliver on their promises of reliability, quality and good value, that they communicate with us fairly and treat us well as customers and that they play a positive role in society.
Every year, the index provides new insights into consumer behaviour and interactions with brands. The results of the most recent index highlighted that besides the functional performance of a brand (quality, reliability, value for money) and the way it relates to its customers, consumers also pay close attention to a brand’s values and its social responsibility. In other words, consumers embrace brands that reflect the values they hold high and they shun those that fall short. Brands such as MEC that translate individual feedback into tangible improvements consistently earn our trust. On the other hand, brands that violate our trust through active malfeasance or a lack of transparency remain mired at the bottom of our rankings. The key indicator of a business’s success isn’t what it takes from society, but what it gives back.
The good news is that more organizations are recognizing that the revenue-generating side of a business and the socially responsible side are inextricably linked. Many brands have started to leverage the power of innovation as it relates to both product and social impact.
For instance, U.S. waste-recycling firm TerraCycle recently announced a waste-free shopping platform called Loop as a way to address the large volumes of plastic waste that is being dumped into our oceans. Eight of the 10 companies that Greenpeace has listed as the world’s largest contributors to the plastic waste crisis are to run a pilot Loop scheme, aimed at reducing the use of disposable containers.
Brands that confront our anxieties and address them in honest and authentic ways will forge more meaningful relationships and earn the loyalty of consumers.
With the emerging trend for investors to buy into companies that deliver positive social change alongside financial returns it will be interesting to see which businesses embrace the concept of profit with purpose.