Purpose and profits are now indelibly linked.
But company leaders weren’t satisfied. They wanted to hit the magic $1 billion mark. To get there, they created a novel strategy: reorganize the business model around saving Africa’s dwindling elephant and rhino populations. In other words, they used purpose as a powerful motivator to drive profits (see “What Is the Business Opportunity in Purpose?”).
“Our wild elephant population has dropped from millions to less than half a million in the last 100 years, and South Africa’s rhinos, which represent some of the last viable wild populations in the world, are down to just a few thousand,” says Allen. “The thought that in just a few years we might not see them anymore was a powerful thing.”
Other people might resign themselves to the relentless loss of wildlife or try to soothe their feelings of despair and powerlessness by writing a check. Not the leaders of EPI-USE. They took it on as a personal challenge.
Africa as a whole loses four elephants an hour to poachers, and South Africa alone loses five rhinos a day. Company leaders weren’t going to let that continue happening to their wildlife on their continent. They knew that taking action would boost their profile, motivate their employees, and inspire their customers—and they knew they had the expertise and resources to make a concrete, significant difference.
They understood what many other organizations are now beginning to understand: Customers are increasingly aware of the environmental and human costs of traditional ways of doing business, and employees are showing a powerful desire to work for companies that make a difference in the world. At the same time, the latest technologies create efficient—and profitable—methods of conserving resources and introducing more sustainable business models. As a result, purpose is no longer a siloed PR exercise. Instead, it’s something to embed into operations as a driver of growth.
So the company created an umbrella organization called Group Elephant and split itself into three parts under that umbrella. The first part is the organization’s for-profit side, comprising 11 enterprise resource planning (ERP) software, testing, engineering, and services companies.
The second part is also known as ERP—for “Elephants, Rhinos & People.” It’s a nonprofit that runs conservation and poverty-fighting initiatives. Initiatives include an app that Allen created, ERP Air Force, which repurposes the company’s existing systems, including drones and satellite tracking tags, to monitor the whereabouts and well-being of elephants and rhinos in real time. There’s also a project that returns land privatized by the apartheid government to the communities that once owned it and then works with those communities to develop ecotourism preserves where elephants and rhinos can live safely while attracting tourist dollars.
The final part is a private investment firm that funds like-minded “for good” initiatives until they can become self-sustaining and supports communities building ecotourism preserves by helping them manage their assets and the development process.
Traditionally, the sole purpose of business was to make a profit. Anything else was at best an afterthought and at worst a distraction from that singular goal.
In fact, governments and other regulatory bodies often had to push companies to consider the public good, either by compelling them with laws or by persuading them with tax credits and other forms of assistance.
Today, though, many countries are backing away from enforcing these institutional attempts to solve global challenges like education, climate change, migration, poverty, and hunger. At the same time, consumers are better informed and more insistent than ever about the need to address these challenges.
As Aaron Chatterji, associate professor at Duke University’s Fuqua School of Business, pointed out in a recent Harvard Business Review (HBR) webinar, “The New CEO Activism: What Leaders Must Know,” the public is calling companies to task to align corporate values with real issues. “You don’t have the option of buying time to think about difficult issues,” he says. “If you don’t respond, the audience perceives you as assenting to the status quo.”
Many companies are seeing the growing gap between what’s being done about global challenges and what their customers want done, and they recognize it as a business opportunity. By doing so, they’re staking out both ethical and competitive high ground. Unlike individuals, nonprofits, and even many governments, companies have the resources necessary to follow through on the opportunity: rich ecosystems of relationships; purchasing platforms and other tools that connect these ecosystems worldwide; and new technologies, from Big Data analytics to Internet of Things (IoT) sensors, to drive innovative solutions at unprecedented speed and scale.
In the HBR webinar, Chatterji and Michael Toffel, the Senator John Heinz Professor of Environmental Management at Harvard Business School, discussed their research into whether CEO activism helps or harms business. They found that being exposed to a CEO’s perspective didn’t make people with the opposite opinion less likely to purchase the company’s product, but it did make people who shared the CEO’s take on the topic more likely to buy. Meanwhile, hearing the CEO’s argument in instances where the audience was evenly split on a topic also swayed opinions to 60–40 in agreement with the CEO.
“Once you have [an issue] framed, you can sway public opinion,” Toffel says. “The question is who gets to frame the issue. CEOs are realizing they have that opportunity. And if it has no obvious impact on the bottom line, it comes across from a place of authenticity.”
Group Elephant’s for-profit businesses support the nonprofit by contributing 1% of their global revenues, free infrastructure support, and as many hours of volunteer time as employees want to give. Employees can also suggest ideas for new nonprofit projects—or turn an idea that originated on the nonprofit side into a revenue-generating product or service, as Allen has done.
“I started out thinking that if one of our solutions can run a massive petroleum factory, there’s no reason it can’t run a nontraditional conservation-related project,” he says. “Then I realized that if I was using it to track elephants, there was no reason we couldn’t use it to track valuable animals elsewhere, like racing stables, commercial game ranches, and livestock farms. So we’re going to introduce that and create a whole new for-profit market.”
The company keeps its purpose front and center by reminding everyone, from top executives to interns, that their daily tasks create the revenue for the ERP project. It’s a powerful motivator—and not just for employees. The project has enticed customers to hire Group Elephant to set up and help run their own conservation initiatives.
“The best way to grow your business is to get people to buy into your business, and one powerful way to do that is to get them to want to participate in your business for more than just financial gain,” Allen explains. “Our initiatives to save animals and create economic alternatives so people don’t need to poach them fascinate customers by showing them creative new uses of technology. They open new markets by inspiring new offerings for our customers. And they improve our retention and sales by giving employees a sense of purpose.”
In 2017 alone, Group Elephant conducted 7,500 hours of elephant monitoring and moved 130 elephants and 30 rhinos from places where they were endangered by humans to wildlife preserves and other safe locations, according to Allen. It also collared some of these animals for ongoing monitoring and funded reconstructive surgery for several rhinos injured by poaching attempts. Allen adds that the company has also helped turn 17,000 acres of community-owned land from low-income uses to high-income ecotourism. It leases the land from the community and involves residents in building, running, and providing services to ecolodges, where tourists can visit to see animals roaming safe and free.
There have always been small businesses driven by faith, politics, or some other sense of purpose, but their patrons tended to be willing to pay more for less attractive or functional products for the sake of supporting a cause. Combining purpose with profit at scale seemed impossible, at least not without buyer sacrifice. More recently, however, a confluence of trends has shifted the conversation.
In the 1970s, governments began passing regulations to better protect consumers and the environment. This inspired individuals and groups to leverage these regulations to push for the common good, leading to a flood of lawsuits in the 1980s about everything from pharmaceuticals to consumer goods.
Companies began to realize that they needed to become more invested in their impact on people and the planet. They took small steps at first. In the 1990s, corporate social responsibility (CSR) programs started to become common. They tended to be low-cost, high-PR activities, such as support for local schools or participation in company-wide days of service, with little connection to business strategy.
But even these small efforts, dismissed by most executives as marketing, showed business benefits. Customers and employees began paying attention to and distinguishing between companies that merely did well and those that did good. And they started giving more loyalty to companies that paid more than lip service to purpose.
Today, companies are starting to think about their business goals in the context of global parameters for sustainability. For example, more than 100 corporations worldwide have approved science-based targets to keep their business strategies aligned with the Paris Agreement on reducing climate change.
It’s not that companies can’t grow without purpose. They can, and they do. It’s that purpose seems to create greater opportunities for growth, as well as greater mindshare among customers.
Nielsen’s most recent Global Corporate Sustainability Report indicates that consumers consider sustainable practices to be a key part of their buying decisions. For one thing, Nielsen found that brands with a demonstrated commitment to sustainability grew 3% more in one year than those without.
Businesses are also finding value in creating new growth models based on purpose. This may mean creating better products that also happen to be more sustainable, like Nike’s Flyknit shoes, which have propelled Olympic athletes to medal-winning performance while reducing production waste by 60%.
It may also mean cutting costs by demanding that partners take less resource-intensive approaches to manufacturing, packaging, and shipping.
Decades of research indicate that motivated employees are more productive, more satisfied with their work, and more likely to remain at their jobs. Companies with purpose have an additional tool by which to motivate them—particularly Millennials and Generation Z, who say income matters less to them than meaningful work.
In fact, according to HBR, the single most important thing companies can do to retain these younger workers is to “create a deeply compelling vision of what the company or team is contributing to society.” But that isn’t exclusive to any one age group. The Future of Leadership Initiative has found that organizations in which employees perceive meaning at work are 21% more profitable.
Finally, investors are beginning to take an interest in the potential of companies that have the long-term literal health of the market in mind. In the United States alone, socially responsible investing hit $8.72 trillion in assets in 2016, a 33% increase from 2014, according to The Forum for Sustainable and Responsible Investment (US SIF), which surveys socially responsible investing trends every two years. Worldwide, global sustainable investment assets reached $22.89 trillion, a 25% increase in two years.
Investors are ensuring that their money yields return by exerting their influence at the board level. In March 2018, research from Northwestern University’s Kellogg School of Management discovered a 3% increase in company value among companies that tied their CEO’s compensation to CSR goals.
For an indication of the spreading acceptance of socially responsible investment, look no further than Larry Fink, CEO of decidedly mainstream asset management firm BlackRock. Fink sent a letter to BlackRock shareholders in late 2017 saying that as the $6 trillion firm decides where to invest, it will now require companies to account for their impact on society in their strategic plans for long-term growth.
As recently as 10 years ago, no one would have expected the head of a conventional investment company to issue a call to arms for corporate boards to begin linking profit inextricably with purpose—but businesses can’t serve markets if consumers in those markets are at risk. United Nations (UN) Secretary-General António Guterres warned in March 2018, “Scientists are now worried that unless accelerated action is taken by 2020, the Paris goal [of keeping the global temperature rise to well below 2°C] may become unattainable.” Meanwhile, the UN’s Office for the Coordination of Humanitarian Affairs predicts that in 2018, 131 million people worldwide will need humanitarian help and protection, primarily due to conflicts and natural disasters, but only 95 million will receive it. The need for enlightened self-interest has never been greater.
It’s difficult to identify the key components of a purposeful organization because as of now, there’s no centralized or consistent movement across companies or industries to support purpose. One move in that direction could be the UN’s 17 Global Goals for creating a better world. The UN designed its goals to incorporate multiple target key performance indicators (KPIs), such as “Provide universal and affordable access to the Internet in least developed countries by 2020” and “By 2030, double the agricultural productivity and incomes of small-scale food producers.”
Although the UN involved both government and business at a strategic level in developing these sustainable development goals, the specific targets are designed more for government. However, significant efforts are under way to adapt the targets into a more detailed framework for quantifying and benchmarking corporate progress in implementing purpose. In fact, thousands of companies worldwide are supporting this effort.
Until the world adopts a global standard, though, we need to look for other markers to indicate progress toward purpose. One broad indicator is technology-driven transparency throughout the product lifecycle. Digital tools that increase transparency in the value chain make it easier to track and trace internal operations and those of supplier networks to discover where components of different products are coming from and who’s making and handling them. This allows companies to assure stakeholders that, for example, products are made without additives or that the people at various points in the supply chain are paid fairly or that materials are being sourced sustainably.
Walmart, for example, uses a supplier assessment to determine the sustainability of hundreds of thousands of items sold in its U.S. stores. It shares the results with consumers so that they don’t have to choose between affordability and sustainability.
The retailer also ties its buyers’ annual reviews to their ability to reach specific sustainability goals. Vendors are encouraged to meet benchmarks that improve the sustainability of their products and processes. And the retailer has launched an aggressive program for suppliers to measure and report progress in reducing greenhouse gas emissions.
Walmart couches doing more almost entirely in language that a CFO, rather than an environmentalist, would understand. Retail Dive looked through five of Walmart’s Global Responsibility reports (780 pages in all) and found that the word business appeared 881 times, while phrases like climate change and global warming were in the low single or double digits.
This is in line with the broader trend toward integrated reporting, which links a company’s value creation over time with both financial and nonfinancial indicators. It’s also reflected in the rise of certified B Corporations, which embed purpose into their bylaws alongside fiduciary responsibilities. For these companies, doing the right thing is simply part of the daily work of running a company.
Another indicator of purpose is a move toward sustainable and circular design, which reduces waste and pollution by making it easy to upgrade, refurbish, and recycle products. For example, automaker Renault is redesigning its cars to be more easily taken apart. This supports a thriving market for certified rebuilt or second-hand Renault parts while keeping recyclable materials like copper, aluminum, and textiles out of landfills. (See “Circular Economy: Reshaping the Industrial Ecosystem” for more on circular design.)
Similarly, consumer goods giant Procter & Gamble has launched an initiative to recycle diapers by sanitizing them and separating them into cellulose, mixed plastic, and absorbent materials, which can then be reused in other products. Meanwhile, global “fast fashion” company H&M, which already uses recycled or other sustainably sourced materials of all kinds in 26% of its clothing, wants to increase that figure to 100% by 2030 while closing the loop by recycling all its own unsold clothing into new products.
By reducing the expense and broadening the possibilities for acting in a responsible manner, digitalization is helping companies find a path to profitable purpose. Here are some ways to do it:
Purpose isn’t limited to specific industries, demographics, or product lines. Any company can integrate making a difference into business strategy and leverage technology to create new purpose-driven business models, measure efforts, and demonstrate results. It also doesn’t have to be as flashy as a new business model. The right planning and the right technology can bring sustainable improvements to fundamental business processes like procurement or sales—efforts that can fuel a greater purpose as much as a new product or service can. It also should not be viewed as philanthropy—purpose is about finding new core business value while solving global challenges.
What matters is your company’s ability to demonstrate that it’s actively working to create new solutions to old problems, like the poverty and lack of opportunity that drive people to poach Africa’s precious pachyderms. In the process, your pursuit of purpose will earn you not just revenues but also respect and loyalty from stakeholders of all kinds.
For EPI-USE’s Allen, the elephants and rhinos are symbolic of a new definition of business success, one that makes going to the office each morning that much easier. “It definitely keeps up our enthusiasm and energy as we chase that $1 billion revenue goal,” Allen says. “I’m happier working with people I like and respect and who have a real sense of social responsibility, and I can tell that our clients feel the same. But also, for an hour every day, I can be on the phone with a ranger who tells me how my elephants are doing, and I can open up my app to see where they are, using the technology I work with the rest of my day. And that’s just plain old nice.” D!
Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.