Entrepreneurs don’t have to wait until business is booming to make a positive difference in the world.
You’ve likely noticed that “corporate social responsibility” or “corporate social impact” are gaining speed as business buzzwords. In contrast to the 9-5 workday boomer generation, millennials don’t just want a consistent paycheck, they also want to participate in a social mission,. Similarly, many business owners are debunking the Friedman doctrine preached at business schools, that a business’s only social responsibility is to maximize profits for its shareholders. Organizations like B Corps, Oxford’s Economics of Mutuality, Harvard’s Shared Value Initiative, Conscious Companies, and many others are not only actively poking at and enlarging the manifesto’s theoretical holes, but also waking up to private industry’s unique position to do more good in our societies than perhaps any other type of organization.
As an entrepreneur myself, I’ve dreamed that my own business will grow large enough to impact the world, but quickly felt discouraged about how far I have to go before I open a non-profit for the homeless or donate millions to cancer research.
Until recently, I didn’t realize that I’d fallen into what I’ll refer to as the “Friedman Trap,” referring to the famous Milton Friedman whose ideas still fill the minds of MBAs today. Friedman advocated that a business’s only social responsibility is to maximize profits for its shareholders, and leave the do-gooding to individuals however they saw fit. This notion breaks down on a few levels, but perhaps the biggest is Friedman’s assumption that we exist in a perfect market with no market failures, no imperfect information, and no irrational stakeholders. All these factors call for something more than simply maximizing profit.
Private industry is generally cast as the bad guy in social-good circles. After all, aren’t they the ones that cause the pollution, the massive power grabs, and the corrupt policies? I don’t disagree that businesses have misused their power to damage our economies, societies, and perhaps the planet at large, but it’s precisely that power that could be also harnessed for good. In fact, in light of the current social reality, a business’s power must be mobilized for good.
What if businesses didn’t have to wait until they were wealthy or even in the black to do good? What if I told you that there are millions of businesses today that are maximizing their social impact and still gaining more and more of the market share each year? In effect, they’re demolishing Friedman, and not just in theory, but in practice.
Along with organizations like B Corps and Oxford’s Economics of Mutuality, a group of researchers at Brigham Young University have studied what they have currently termed “virtuous organizations” — businesses that combine their core competencies with their social good missions. They strategically mobilize and align their signature strengths to create social value. The vision is thus— that for-profit organizations make a significant social impact without minimizing profits, if not generate greater profit as a result as customers reward ethical and social value-creating companies. We’re talking about something deeper than charity campaigns or even non-profit partnerships. We’re talking about creating businesses who do good through what they do best–business.
The research into these businesses is continuing, but the following is a synthesis of the common threads we’ve seen though virtuous organizations. Even better news, is that these are things you can likely put into practice in your business today.
Now, a huge disclaimer: These practices will only work if your business has something that many businesses claim they do, but they really don’t—a mission reflecting their deep purpose. A company’s deep purpose is typically articulated through their mission, vision, and values. When a company rigorously and strategically aligns to their deep purpose, they can create more social value through their typical business actions and additional strategic initiatives.
And without further ado, how to embed social value creation into your business even before it’s profitable: how to make a significant social impact even if your business isn’t profitable yet.
Identify the Needs in Your Own Business
A few years ago, Jeff Bezos posted on twitter asking for suggestions on where to donate money to charity. The great irony is, many of the thousands of comments responsed lashed back at Jeff Bezos himself for not taking care of his own workers. Perhaps if he paid his employees a better wage, they’d be able to send their children off to college, for example. With Amazon’s far reaching influence over quite literally the whole world, improving the lives of the people Jeff’s directly responsible for would likely make a bigger, more responsible, and more lasting impact than a one-time (abiet hefty) donation to a 3rd party organization.
Probably due to the Friedman doctrine, many businesses’s first instinct is basically to look everywhere but their own operations when considering advancing a social cause. However, from our research, evaluating one’s own businesses is exactly the right place to start. Imagine if businesses everywhere reinvested their charity budget into first making sure they’re not actively perpetuating the problems they’re donations are meant to solve. Amazon’s workforce impacts how many families exactly? Walmart emits how much carbon annually? How many clothing brands still outsource to sweatshops? No wonder business is the bad guy in so many social good circles. And then these same businesses try to support organizations solving problems the businesses themselves are actively contributing to. It’s like frantically failing to sponge up the drips faster than the jug can spill. Just stand up the overturned jug. Charity initiatives that do otherwise by reaching outward first before acknowledging the problems within reek of hypocrisy and empty virtue signalling.
Fortunately, entrepreneurs can start the habit in the initial stages of their businesses to minimize social damage and even maximize social impact. Here are a few businesses who have taken the challenge…
Patagonia is an outdoor apparel company who, from the beginning in 1973 actively committed to honest corporate social responsibility with the montra, “you can’t make good products in a bad factory.” Patagonia was and is fighting an uphill battle with such a resolution, as the clothing industry is known for outsourcing their production to factories or “sweatshops” in developing countries, even still today in 2020. Such sweatshops relying on inhumane working conditions, and inexcusable wage minimums, and even child labor in some cases.
Patagonia seems to be setting a new trend by both outsourcing to ethical production entities as well as even making such entities more ethical through training, and other resources. They, like any organization, they aren’t perfect, but they’ve made a step in the right direction toward integrating their core business processes and competencies to a social cause.
Examples such as these might be inspiring, but it’s unrealistic to assume that we can all incorporate such principles into our own businesses right-off-the-bat. In a perfect world, every process and procedure of our businesses would be designed to do more good than harm. However, at the risk of biting off more than we can chew, here are some good first practices the team has found, a sort of level-one starting ground that all businesses can incorporate to identify needs in their own businesses:
Allow Uncompromising Transparency
Economists will tell you that information asymmetry (when the seller knows something the buyer does not, or vice versa) might temporarily profit the party in the “know,” but is said to eventually lead to market failures. In our economy, the blame rests more on the business, because It’s more often that sellers know more about their products and its strengths and deficiencies than buyers do.
Economists suggest a few broad means for minimizing information asymmetry to achieve more honorable and sustainable transactions. These suggestions include the following:
- Provide honest information about your product offering.
- Provide warranties, guarantees, and refunds in case of defective products
- Participate and promote crowd-sourced ratings such as google reviews, Yelp, or other review engines.
These suggestions are easily-implementable for most businesses, and if executed thoroughly, contribute to a groundwork of honesty and fairness that promotes long-term economic prosperity. Not to mention, they also generate good will for your own institution, which in this day of increased buzz around corporate social responsibility, is invaluable.
If you’ve ever gotten a Christmas card from your dentist or realtor, you’ll know the opposite of what I’m talking about here.
Although businesses would literally wilt and die without people, it’s easy to see people as objects or means for an end, both with employees and consumers. Seeing people as individuals requires a conscious effort, especially when personal contact is minimal, or if there are many stakeholders to consider in an organization.
However, brands who make the effort to humanize their interactions often reap financial and economic benefits, and very likely more so in coming years. For instance, many corporations now incorporate principles of what’s called “brand humanization” when interacting with the public. Brand humanization is exactly what it sounds like: the act of creating and promoting content to seem as human and relatable as possible. Brand humanization is especially apparent in social media content, serving to remind the customer (and the cooperation) that there is a real person on the other end of the line.
Brand humanization more effectively appeals to a generation who actively hates being advertised to. Millennials are growing tired of and ultimately rejecting overt, unauthentic, or self-serving brand advertising, and it’s a growing trend. In fact, many unfollow corporate social media accounts or drop off social media entirely so as not to be constantly advertised to. Therefore, authentic, person-to-person advertising is likely the ticket to wide-spread and effective brand exposure in the coming years. Either large corporations figure out how to become personable, or they risk losing an entire generation of consumers.
Humanizing interactions in regards to in-house employees is shown to make workers more productive, profitable, and likely to attract better qualified candidates. People in this day and age have the luxury of not only working for a living, but working at a living they enjoy. In contrast to boomer generations, millennials don’t just go to work for the paycheck, but rather the environment and the cause. If companies want to attract the most high-performing talent, then they’ll have to satisfy their desire to be needed, part of something bigger than themselves, and other benefits outside of the paycheck and regular benefits. Companies who don’t invest in their employees might be perpetually scratching their heads, wondering why their employees offer sub-par work and why their top candidates get lured away by other corporations.
Our research has uncovered a few key practices businesses could incorporate to humanize interactions:
- Business to consumer:
- Be human in ad and social media content, for instance, many brands have found behind-the-scenes content to help humanize their cooperation and create a more authentic relationship with their customers.
- Treat your consumers with the highest level of respect. A popular leading internet marketer challenges his followers to view their customers as a “mysterious stranger” financing your and your family’s purchases, home, car, recreation, and literally everything else, because in a very real sense, they are.
- Avoid needless token acts of goodwill that don’t have the customer’s needs at heart, such as fluffy christmas cards or impersonal birthday greetings.
- Business to Employees
- Consider retention factors for modern day workplaces, and incorporate such into your processes. Some of these include providing schedule flexibility, work-life balance, opportunities for personal fulfillment and growth, and a positive work environment.
- Offer competitive compensation. Studies show that wage hikes not only increase employee satisfaction, but also overall productivity.
Align your business with a social cause thus offering employees the personal benefits that accompany charitable donations and service.
My team, hundreds of other organizations, and myself are essentially calling for a reconceptualization of the private industry, and you as an entrepreneur are on the forefront of that change. All too often, for-profit businesses are cast as the bad guy instead of the hero. For-profit business is not the enemy, it’s our greatest chance at change. Not to minimize the damage for-profit businesses have done in the past, but conceptualizing business as the greedy monster polluting our rivers and oppressing the poor is to fixate on the darkside, a dangerous characterization. Dangerous for not only our society, but you—you as a business owner. Divorcing social change from your business would not only squander your own potential to be an active part in social impact and the personal benefits that would enrich your life through service, but also squander the massive potential your business has to do good in the world, even if your business isn’t yet profitable.
The truth is, we’re cheering you on. We hope to be a positive voice in your favor amidst the slander against corporations, and the rampant disbelief that businesses can do any good in this capitalistic society. The truth is, they can, and now they must.
We need entrepreneurs like you to join us in not only creating profitable, honest institutions, but also fundamentally good ones, healing ones, that are an asset to our communities instead of a burden.
Dive Deeper into the Initiative
This is our passion. We study how businesses can make a positive difference in the world. Stay on board with us to learn more about how your business can contribute positively to the world.