Now that we understand different components of the new economy (detailed in Part 1), the almighty question is why? What’s driving these big businesses to embrace this new economy? It must be more than getting a warm, fuzzy feeling from it. Just like the old economy, there influential monetary factors behind this new movement:
It really is a competitive advantage
“85% of both current and future business leaders feel businesses with a focus on both societal, environmental and economic value will have a competitive advantage now and in the future”- Coca-Cola
There is a blatant demand. Consumers are becoming more educated, have more access to information and are being more conscious of who they buy from. Consumers now want to know how their food is sourced, who sews their clothes and how their coffee is grown, what type of environment phones are being answered in. They want products to be produced in a humane, sustainable way and they want half your profit to go into a social cause. Yep – consumers have seriously high expectations of products from toilet paper to beer.
83% of Australians claim it is important for businesses to address social and community issue – AFR, 2014
Having a certification also allows to differentiate yourself from the pretenders. If you aren’t reaching these standards you will lose customers to those companies who are.
It aligns with the new workforces mindset
A new generation is coming through, they are called the millennials (18-24), and everyone is studying there move into the workforce including The Pew Research Centre whom has noticed a large gap in values between the ones running the place (Baby Boomers aged 55-65) and the youngens.
- 75% of millennials believe that businesses are focused on their own agendas, and not on helping to improve society
- Millennials as leaders would focus on people, while they believe that today’s leaders are focused on profit and personal reward
- 6/10 millennials say that a “sense of purpose” is part of the reason they chose their current employer
As millienials start to enter the workforce, this value alignment becomes more and more influential in our companies on how they run their workplace but it is also the current generation moving up the ladder that think this as well.
Gen Y replied in a survey if they were CEO: 43% said their main daily focus would be renewing personal mission: ‘How do I make my organisation and world a fundamentally better place?’ Forbes
The new generations are coming through and changing the workplace alongside it.
They Attract The Talent
According to the Wall Street Journal, MBA graduates are seeking more than a good pay check with their career path, (well kind of) They aren’t willing to take so much of a pay cut to work the NFP sector (they do have excessive student loans after all), however they are requesting purpose in their careers. You could say they are seeking purpose and profit, the ability to contribute to the world in a positive way whilst getting paid a decent wage.
They are looking for companies that can provide both these elements.
Legal Benefits – Well soon
U.S Fact: 90% of Americans say that companies must not only say a product or service is beneficial, but they need to prove it. Cone Communication
Over half of US states have recently passed Benefit Corporation legislation. This means you can now choose from traditional corporation to B Corporation and there are no tax implications.
- Benefit corporations are not required to maximize shareholder value; instead they enjoy legal protection to balance financial and non-financial interests when making decisions
- The legal structure protects the mission as the company grows or as new management or new investors are brought in, or even as ownership changes.
Seeing a B-Labs and the B-Corp certification was only introduced late last year in Australia. The benefit corporation is not yet a legal status in Australia yet, but it is being advocated for hugely. Social Impact Hub presented a case study on the US and formed a well-articulated argument for the need for legislative change here.
If both your profit and purpose aren’t aligned and equal – you’ll soon fall behind in this new economy.
At Spark we come at it from both sides of the coin: for-profits should have more purpose, Not for Profits should have more profit. We create sustainable business models to act as the foundation to an impactful profit/purpose business.
It’s time to take hold of the profit/purpose movement: so embrace your 60s love child side, your profit mongering fat cat side, your red-taped bureaucratic side and allow them to make compromises to create real, tangible change in the world.