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Social Enterprise: The Opportunities of a Purpose-Driven Bottom Line

“We have become disintegrated. Our lives are split up so that when we go to work, our task there is solely economic. We’re told to leave our values at the door. The irony is that the people who run large corporations are caring people who have the same social concerns that you and I have. […]

“We have become disintegrated. Our lives are split up so that when we go to work, our task there is solely economic. We’re told to leave our values at the door. The irony is that the people who run large corporations are caring people who have the same social concerns that you and I have. The solution is to reintegrate, to view things in a more holistic manner, to integrate our social, spiritual and economic work together.”

 - Ben Cohen

This is the wisdom (and warning) that the co-founder of Ben & Jerry’s chose to impart in his commencement speech at my graduation from Vassar College. Cohen depicted business as acting in a win/lose fashion: business vs. the environment, business vs. employees, business vs. morality etc. with profit prioritized at the expense of everything else.

He talked about a different model that they had been experimenting with at Ben & Jerry’s, which he summarized as a two-part bottom line that measured both profit and positive social impact. Cohen’s progressive approach to business is the predecessor of today’s Social Enterprise, now such a part of the mainstream that it is the title and theme of Deloitte’s 2018 Global Human Capital Trends report “The rise of the social enterprise”.

So why are we seeing this trend towards responsible, purpose-driven business? How did we get here?

One reason for the change is that our trust in all forms of institutions has plummeted: media, governments, businesses and even NGOs. We have “lost faith in the system” and in our increasingly transparent world consumers are holding businesses accountable for the impact of their operations. This opens up an opportunity for businesses that can establish trust.

Another reason for the change is the increasingly global scale and reach of businesses today. 50 years ago, businesses were primarily local or in-country. Compare that to the reach of today’s global businesses. Take Unilever as an example: seven out of 10 households worldwide contain a Unilever product and 2.5 billion people in over 190 countries use a Unilever product every day. Unilever employs 170,00 people and we haven’t even begun to quantify their shareholders and suppliers. There is no bigger reach in the world today than big businesses.

Our most pressing social concerns are also global and cannot be managed on an individual country level: climate change, plastic pollution, ageing populations, mass immigration, displacement of workers by automation/AI/VR/new skillsets, and the Sustainable Development Goals. In order to achieve the scale necessary to tackle these global issues, there is a need for a socially and environmentally responsible private sector. As stated by Unilever CEO Paul Polman, business cannot be a bystander in a system that gives it life in the first place. The reach, methods and resources of business must be a part of the solution.

In fact, this move to values-based, sustainable responsible business is now essential to a companies’ survival and success. It may also be essential to addressing our most pressing social concerns, however “doing the right thing” is not always a strong business case for change. Companies do what makes good business sense, and we are now at a tipping point where it is essential for companies to be values-led and put social concerns into their core mission. Those who do not make the shift will be left behind.

There is a demand and expectation from employees, consumers and increasingly investors for a socially and environmentally responsible private sector. Responsibility is becoming as important as productivity, and social capital is becoming as critical as financial capital. Companies who do not address them together will find out that they are losing the war for talent and losing customer loyalty. Today, trust is replacing convenience and price as the ultimate competitive advantage for businesses.

It is no longer considered a conflict to want to create shared value by both improving society and making money. It is a business opportunity and competitive advantage that engages people at work, attracts talent, and drives long-term success of the business. It builds trust with employees, partners, customers and it builds your reputation.

There is no better marketing than helping your customers to actualize their own values. That connection is strong and deep compared to the connections that companies try to make through advertising. Connecting with your customers based on shared social concerns builds your brand more than billions spent in advertising.

As Cohen pointed out in his commencement speech to my graduating class, there have been issues due to the excesses and abuse of capitalism. However, capitalism has also brought many benefits and if you are reading this, you are probably living in a democratic capitalist country. Capitalism has given us choices, growth, employment and a world where you have the opportunity to own or be almost anything you want, as long as you can pay for it.

But a capitalism driven by financial profit alone is no longer sustainable, and businesses are turning to a Plan B. Companies are shifting from an internal, enterprise focus to an external, ecosystem focus and redefining the notion of profit in their business models. Cohen’s two-part bottom line has evolved into three: people, profit and planet - social, financial and environmental.

It's not just the right thing to do. Enabling employees, customers and shareholders to actualize their values also makes good business sense.

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