Traditionally, society and the planet have served businesses’ needs for the purpose of financial growth. But planetary and people issues as well as globalization and technological disruption drive a need for a new business purpose. Businesses will now have to prioritize serving the needs of society and the planet. They should create a sustainable strategy with a social purpose at its core.
Professor Colin Mayer defines purpose as “profitable solutions from the problems of people and planet, and not to profit from producing problems for people or planet.” We call this a social purpose, which is about producing solutions for both customers and the planet and measuring fair profits. Building a social purpose into your company’s DNA comes with enlightened self-interest. For by creating sustainable value for the environmental and social domain, businesses stay viable, securing their own survival — both in the long and short term.
Step 1: What value system are you a part of?
First and foremost, changing towards a social purpose for business entails a profound shift in perspective. When sustainability leaders like Paul Polman, the former CEO of Unilever, create a business strategy defining where to play and how to win, they adopt a valuesystems perspective. You should start with the following key question: What value system are we a part of? Whether the answer is food, energy, mobility, housing, education, or something else, the point is that you make your business activities’ impact transparent and measurable within your specific value system. The next step is to perform an outside-in analysis, determining which sustainability issues and trends affect your business strategy and performance or will even disrupt business continuity. Follow up with an inside-out analysis to understand the impact of your business activities on the outside world.
Car manufacturers, for example, will have to tackle greenhouse gas (GHG) emissions and the extinction of certain raw materials. Consumers are increasingly aware of this and might opt for different means of transportation in the (near) future. So, if such companies want to future-proof their business, they should investigate the possibilities for manufacturing vehicles that don’t emit GHG, are built in a circular way, and use other materials like hemp and flax as alternatives to glass fiber, saving up to 30%. They can even consider stepping into other mobility market segments, such e-bicycles.
Step 2: Double materiality approach: overhaul your purpose
The combination of inside-out and outside-in analyses is also referred to as the double materiality approach. Used properly, it reveals a company’s material issues. The latter significantly impact the business in terms of growth, cost, or risk and are highly important to all stakeholders (investors, citizens, NGOs, governments, consumers, customers, suppliers, employees, and, of course, the planet). And this is no longer a nice-to-have, since new corporate reporting practices within the EU demand this kind of measurement as of 2023.
Once you’ve identified your material — or significant — environmental and societal challenges, you should strategically connect them to your business’s purpose. If you have become aware that solving sustainability issues is crucial to your company’s performance, you will activate your employees’ collaborative, creative, and innovation skills in surprising ways. It will motivate your workforce like never before.
Toyota, which has focused on a societal purpose since it invented the Toyota Prius, states: “Toyota will lead the future mobility society, enriching lives around the world with the safest and most responsible ways of moving people.” It’s a true social purpose at its core.
Why this is good for you: how your company will benefit today
The good news is, companies with a value systems perspective and societal purpose at their core typically do better financially, too. They have higher returns on invested capital, attract top-tier talent, have a more engaged workforce, and build stronger, more innovative partnerships.
Our research has also shown that taking these bold steps can have an interesting side effect. As a senior executive told us, “Our real commitment to societal goals springs from the desire to inspire our own people. Since we have made fighting climate change part of our mission, our employee engagement has grown substantially. It encourages people to bring their whole selves into their jobs.” All this enables companies to be more innovative, sustainably profitable, and future-proof.
Want to see this approach in action? Don’t hesitate to contact us. We’re happy to organize a two-hour workshop for your company, go through two case studies together, and help kick-start your societal purpose journey.
Muriel Arts, CEO IMPACTING.today