Why the rise of ‘better business’ means start-ups can no longer avoid embedding purpose (and positive impact) from the outset
x+why CEO, Rupert Dean, talks exclusively about what he believes the rise of ‘purpose’ on the global and local stage really means for the next generation of start-ups.
August saw executives from the Business Roundtable, including the leaders of Apple and JPMorgan Chase, announce that they are redefining the purpose of the corporation to work towards ending shareholder primacy, and creating a ‘fundamental commitment to all stakeholders’.
This declaration breaks with decades of long-held corporate orthodoxy, and marks an undeniable sea-change in the way that businesses, old and new, are thinking about their people and the planet, as well as their profits.
Andrew Kassoy, the co-founder of B Lab, the charity tasked with growing the B Corp movement, said the BRT statement had been a “moment to celebrate”.
He said: “It’s a significant cultural shift and represents some of the biggest multinationals in the US recognising the problem with shareholder primacy [making as much money as possible for investors]. That it is not producing the right kind of economic progress or addressing inequality or climate change in the way we would like it to.”
As CEO of x+why, a flexible workspace dedicated to purpose-driven business, I am surrounded by inspiring businesses already committed to this ‘progressive’ approach to their bottom line, every day. We have members such as LIS (London Interdisciplinary School), Legal Geek, Ananda, Bethnal Green Ventures, and B Lab themselves under our roof. Every day I see these individuals and groups working towards ‘better business’. It’s second nature to them.
And it has to be. Escape the City’s ‘The Escape 100’, a campaign to find the best companies to escape to in 2019, is the perfect example of how the most successful businesses of the future will be measured. Bottom-lines and shareholder primary have been replaced by markers such as ‘environmental impact’, ‘mission’, ‘people-policy’ and whether they are B Corp certified. This is how success will be measured going forward, and start-ups and even established businesses will need to sit up and take note in order to make sure they’re fit for the future.
So what does this really mean in reality?
With 425,279 start-ups launching this year alone, competition is fierce, and this competition impacts a young business’ ability to raise investment, hire the right talent, and appeal to consumers. These big challenges for start-ups and small businesses often leave founders sceptical about the need to embed authentic purpose and mission from the outset. At the beginning, generating economic value is the aim of the game. Achieving a higher, aspirational purpose is not a priority.
Except now, it absolutely is.
The seachange is anecdotally and theoretically supported by the above, but even more compelling is the data itself. Joint research by Harvard Business Review Analytics and EY’s Beacon Institute shows that companies focusing on purpose to drive performance see higher profitability. In addition, it’s estimated that B Corp certified businesses grow more quickly than their non-certified counterparts. In February 2018, year-on-year data showed that UK B Corps grew at a rate of 14% compared to the country’s GDP growth rate of 0.5%, which suggests customers are actively choosing to spend more money with ethical businesses.
A strong purpose is what will help startups (and established businesses) overcome the challenges of investment, talent, and sales, and ultimately drive healthy profits – and here’s how.
Money. It’s the most pervasive problem that young businesses face. If you’re going after investment, seriously consider where investments are being made.
Why purpose? Last year, investors put almost $1 billion into purpose-driven corporations in just six months alone. In fact, nearly every major Silicon Valley venture-capital firm has invested in a B Corp. They are investing in them because they believe these businesses will earn VC-level returns — and satisfying B Lab’s rigorous standards of environmental, social and governance performance are part of these companies’ formulas for success.
Purpose is no longer a CSR checkbox that VCs occasionally tick. Investing in businesses that have purpose at their heart, is a mainstream strategy. And a good one at that.
Finding suitable candidates, and hiring team members who not only have the required skills but also are the right cultural fit, is an ongoing challenge for start-ups. But on top of this is the added problem of being able to attract and woo the candidates you want.
Why purpose? It’s no longer a one-way market, with millennials and Gen Z’s now being increasingly discerning when it comes to who they are willing, and want, to work for. According to a PwC study, millennials who have a strong connection to the purpose of their organisation are 5.3 times more likely to stay. And it’s no longer just about pay and perks, they want to know that you espouse the same morals and principles as them. That you say something positive and worthwhile about them.
No matter what your skill-set, or what you personally bring to the table of your business, you will soon realise that you simply can’t do everything alone. Visionaries like Jeff Bezos and Elon Musk might appear to be superheroes, single-handedly steering the ships of the world’s most exciting companies – but the truth is that it takes a village. And you need to fill that village with people who are as passionate about your vision, as you are.
Success means being able to sell your product and to attract new consumers or suppliers. More often than not money is ploughed into marketing, which isn’t necessarily wrong – but what message are you touting? Is it a desperate short-term message about price? Or a brand-building, pervasive and authentic message about the kind of business you are?
Why purpose? According to Deloitte Global Millennials Survey 2019, 40% of consumers say a business’ goal should be to improve society, and New York Times bestselling author Simon Mainwaring suggests that 91% of consumers would switch brands if a different one was purpose-driven and had similar price and quality.
The data speaks for itself. Purpose sells.
This should be the starting point for any startup founder, but it’s often overlooked. Too often people dive straight into their shiny solution ideas without thinking about their “why”. Without a clear purpose, a startup can meander along without much momentum, and caught up in the day-to-day dramas of running a brand new business, it is easy to take short-cuts and forget steps in order to get stuff done.
But it’s these corners and forgotten steps which can often define what a business really is; its culture, ethos and beliefs. It’s common for these things to be put on hold until the business is much larger, by which time, much of the initial passion for purpose has been eroded, and it’s far harder to make u-turns and start making new promises that feel authentic.
Why purpose? In support of your purpose, you’ll probably create a plan – but it’s likely to be knocked off course regularly by world events, new technologies, or anyone of a million factors in your industry that are outside of your control. Your purpose, whether that be for your people (current and future), the planet, your suppliers, or your consumers, won’t waver and will keep you focused.
Furthermore, having an intrinsic and unmovable belief in the importance of purpose, embedded from the beginning, forces young businesses to be just that – businesses. Not just little side-projects. The policies that shape your purpose will be the things that generate ongoing trust and likeability, that differentiate you from the crowd and give you the guiding beacon you need to achieve your long-term mission.
As exciting as it is to hear executives from the Business Roundtable make orthodoxy-breaking statements, it will take time for big business to adopt and actively implement the theory. In the meantime, it is the responsibility of the businesses of the future to make sure they are leading the way in responsible business. And that starts with a strong purpose.
x+why is a tech-forward, wellness-focused, thought-provoking co-working environment for responsible and purpose-driven businesses.
Their space helps nurture happy, healthy and inspired people who create more value for their businesses. Visit their website or pop into their office to book a tour. You could also win a month’s co-working membership absolutely free. Enter via the @escthecity Instagram.