Ethical Entrepreneurship: A Handbook For Businesses Wanting To Stand For Profit And Purpose
Sustainability, social impact & profitability are not mutually exclusive
A deep dive into the best practices for businesses & entrepreneurs committed to recognising & solving the world’s biggest problems
Now more than ever, businesses and entrepreneurs must commit to a greater purpose
The world continues to be plagued by sizable inefficiencies and inequities. Humankind is long overdue for the kind of revolutionary innovation that increases and promotes the importance of collaboration amongst different groups to achieve collective wellbeing. It will take the next generation of entrepreneurs and socially conscious business leaders to shift the focus toward profit and purpose.
organisations are judged for more than their business acumen
A Global Human Capital Trends survey from Deloitte supports the notion that organizations are judged for more than their business acumen. “Organizations are increasingly judged on the basis of their relationship with their workers, their customers, and their communities, as well as their impact on society at large.” A combined mission focusing on revenue growth and profit-making whilst respecting and supporting the trends shaping today’s world is encouraged and expected.
the purpose of business is to have an impact on society
A report by nonprofit CDP offers a solid link between business leadership on climate change and a company’s profitability. CDP’s findings state that “Companies that build sustainability into their core strategies are outperforming those that fail to show leadership.” Leadership community YPO, known for providing insights from global leaders for global leaders, asserts that a recent survey revealed 9 out of 10 business leaders agree the purpose of business is to have an impact on society, beyond pursuing profits and wealth.
Profit and purpose are not at odds with one another
Profit and purpose are not at odds with one another in a business model that places sustainability and social impact above all else. Committing to and documenting a strategy for promoting sustainability within a small business or corporate structure is the key to outperforming those that fail to show leadership. Business leaders and entrepreneurs who are inclined to be impactful through their organizations realize they must prioritize a broader set of stakeholders beyond shareholders.
Contents
1. Defining Sustainability And Social Impact
2. Profit, Purpose And The Pragmatist
3. Stating The case for profitability with purpose
4. Why should impact matter to my business?
5. How do I integrate impact into my business?
6. How do I measure my business’ impact?
7. Sustainability as a business strategy
9. Reaching a sustainability “sweet spot”
1. Defining Sustainability And Social Impact
Tamara Loehr, global entrepreneur, YPO member and advocate for change believes business is one of the greatest platforms for change. “Corporations are beginning to get it, future generations already get it, which is important for the future,” she said.
Before businesses and entrepreneurs can embrace sustainability and social impact, they need to define them. According to Ryan Villanueva, the Entrepreneurs Organization - United Nations Champion (EO-UN), a widely accepted and used definition of sustainability comes from the 1987 United Nations Brundtland Report. It states:
“Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
The UN’s definition embraces what is known as the 5 Pillars of Sustainability (5 Ps). They include:
1. People
This pillar is dedicated to the end of poverty and hunger in all forms and to ensure dignity and equality for every person. The global community has made strides toward achieving this goal amid complex challenges that include the climate and global conflicts. As of 2019, the global prevalence of extreme poverty was at its lowest recorded level, with fewer than 8 per cent of all people living on less than $1.90 per day.
2. Prosperity
This pillar promotes prosperous and fulfilling lives in harmony with nature. The UN considers inequality as one of the defining issues of our generation. A sluggish economy and rising inequality have complicated efforts to achieve the goals associated with this pillar. Even in many high-income countries, low unemployment rates have not equalled wage growth. Systemic inequalities continue to limit prosperity.
3. Peace
This pillar fosters peaceful, just, and inclusive societies. Human rights continue to be threatened by ongoing global conflicts. This, in turn, jeopardizes any gains made in this area in recent years. Justice is a key component of this pillar, with the most vulnerable societies having the least access.
4. Partnership
This pillar implements the agenda through a solid global partnership. Problems oftentimes do not stop at a border. More solidarity is needed to tackle issues that affect the global population, including climate change. Businesses and entrepreneurs are granted a unique opportunity to step up and serve as partners with the community and other organizations to achieve sustainability and profitability.
5. Planet
This pillar protects our planet’s natural resources and climate for future generations. There is an urgency when it comes to this P, as the global climate emergency continues to outpace the human race’s efforts to address it. Climate has a disproportionate effect on the poor and can worsen food insecurity and malnutrition in poorer communities.
There are six distinct personality types involved in standing up for profitability and purpose, each with a unique approach. They include the pragmatist, the educator, the influencer, the skeptic, the custodian, and the catalyst.
Arguably, the most effective of these personality types is the pragmatist since they are focused on the bottom line. Pragmatists, by their very definition, want to fulfill clear, business-focused goals, using a top-down approach. They ask – and answer – the following four questions in their pursuit of profit and purpose.
The 6 Profit & Purpose Personality Types:
• The Pragmatist
• The Educator
• The Influencer
• The Skeptic
• The Cusodian
• The Catalyst
1. Why is sustainability important?
The answer to this question is straightforward. Sustainability is important to businesses and entrepreneurs who wish to manage a business advantage and remain relevant in the future.
2. How do I convert others?
Getting others as excited about pursuing profitability and purpose is an important step in the process. Using a strong profit and cost/benefit analysis and supporting case studies is a solid strategy for gaining traction.
3. How can organizations like Entrepreneurs Organisation (EO) and YPO (Young Presidents Organisation) help me?
EO is a valuable resource for businesses and entrepreneurs as they embark on this journey.
4. What can the pragmatist do?
Pragmatists can guide others on how to measure and report sustainability. After all, it is easier to prove the case for supporting profitability with purpose when you have solid data to back up its benefits.
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Businesses and entrepreneurs who wish to answer the case for profitability with purpose have several tools at their disposal.
Start by defining your business’s impact by using the UN Sustainable Development Goals. These 17 UN Sustainable Development Goals were developed in 2015 as part of the UN’s 2030 Agenda for Sustainable Development. Each of the goals listed is part of an urgent call to action for all developed and developing countries and can be used by businesses and entrepreneurs to help shape their strategies to achieve profit and purpose.
1. See how impact drives profit and loss (P&L) and strategy through the Creating Shared Value framework
The CSV framework provides a step-by-step guide in the practice of creating economic value by offering solutions to societal challenges and needs.
2. Integrate impact into your business by using the Entrepreneurial Operating System (EOS)
Designed as a complete set of concepts and tools, the EOS helps businesses and entrepreneurs decide what they want from their organizations. Implementing the EOS can help leadership teams improve their vision, traction, and health.
3. Measure your impact with the B Impact Assessment
This free and confidential tool helps leadership teams and entrepreneurs build better organizations. It walks leaders through a series of questions designed to help them identify their weaknesses to build a better business.
There are four reasons impact should matter to every business:
• Value Proposition – the promise of value your product or service will bring to a consumer and how it will be delivered
• Differentiator – a key characteristic of your organization that sets it apart from competitors
• Porter’s 5 Forces – a method for evaluating and analyzing an organization’s competitive environment
• Value Chain – the process of taking an idea for a product or service from conceptualization to the market.
As the godfather of business strategy, Michael Porter identified three approaches to business and society as part of what he calls a Shared Value. It is an umbrella concept centered on the synergy between social & economic opportunity. Shared Value embodies:
1. Accountability
Corporate Social Responsibility (CSR), Sustainability, Triple Bottom Line, and Environmental, Social, and Governance (ESG)
2. Morality
Inclusive Capitalism, Conscious Capitalism, Capitalism 2.0, Net Positive, and B-Corporations
3. Opportunity
Social Entrepreneurship, Impact Investing, Base of the Pyramid
Tamara Loehr suggests the corporate sector must get on board because they dwarf the nonprofit and government spending on resources for social impact
Whilst how businesses and entrepreneurs influence society are evolving, there are three ways many are embracing. Some engage in philanthropy via donations to or volunteerism with worthy causes. Others support corporate social responsibility (CSR) that includes compliance with ethical and community standards; good corporate citizenship; sustainability initiatives; mitigating risk and harm; improving reputation and trust; and the redistribution of economic value to meet societal needs that are limited by finite resources.
Lastly, there is creating shared value (CSV), which addresses societal needs and challenges through the business itself; finding new opportunities; achieving competitive differentiation; and making a profit.
Meeting societal needs that expand opportunities for a business is considered scalable social impact because the shared value is self-sustaining. This should be the goal of every business and entrepreneur that values profit and purpose. In his guidance on the matter, Porter suggests linking impact to profit is the most effective way to encourage businesses and entrepreneurs to commit to creating shared value.
There are three distinct ways Porter says businesses and entrepreneurs can identify the link between impact and one of their business activities.
1. Reconceiving Needs, Products, and Customers
This includes developing products and services that meet societal needs or providing products to unserved or undeserved customers and communities. It involves product development, marketing, and sales. Businesses and entrepreneurs should ask if any of these things create active business opportunities to drive revenue impact.
2. Redefining Productivity in the Value Chain
Accessing and using resources, energy, suppliers, logistics, and employees differently and more productively are part of this method that focuses heavily on operations. Businesses and entrepreneurs should ask if they can reconfigure their operations department in a way that makes a social impact whilst also lowering costs.
3. Improving the Local Business Environment
Ask yourself if you can partner with other institutions in your community to create new business opportunities by establishing yourself as a community leader and your organization as a community asset. Whilst it is more time-consuming and involved, this option offers the most return on investment (ROI).
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Businesses and entrepreneurs will find value in the EOS Model from Gino Wickman. Wickman identifies six key components to help integrate impact into any organization. His six key components to help integrate impact into any organization are:
• Vision
• People
• Data
• Issues
• Process
• Traction®
The six key components to help integrate impact into any organization
1. Vision
Everyone in the organization must be 100 percent behind the goal and the methods for achieving it.
2. People
Integrating impact requires a great team behind you to achieve it.
3. Data
Leave emotions, opinions, and egos behind to focus on the cold, hard numbers for accurate analysis of your objectives.
4. Issues
Problem-solving within your organization is a must-have skill for incorporating impact.
5. Process
Wickman calls this the “secret ingredient” of an organization. It includes the core processes that define the way you operate.
6. Traction®
Discipline and accountability are required for every member of an organization to successfully integrate impact.
“How do businesses and entrepreneurs know if they are making a social impact? Using measurable, specific indicators is the best method,” Villanueva said.
Using the UN’s sustainable development goals makes it easy to measure impact. The goals are not silos. There is intersectionality amongst them in how they relate to people and the planet. Each of the goals is accompanied by a breakdown of targets that are actionable and measurable with time-bound outcomes that contribute to reaching a goal. Organizations that rely on key performance indicators (KPIs) will find each target is measured through one or more indicator.
For example, the UN’s Goal #8 is to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.”
Within this goal are 12 specific targets, each with measurable objectives and indicators. The UN uses the Gross Domestic Product (GDP) figures from across the globe to determine if it is on track for meeting this goal. Because they and other organizations track this information, it makes it easier for businesses and entrepreneurs to use that data as well.
The B Impact Assessment tool previously mentioned also is effective for measuring progress on your goals. Accounts are free to create and allow organizations to measure their impact on workers, the community, the environment, and their customers. The software walks organization leaders through a series of questions, then provides benchmarks and identifies areas for improvement. Baseline reports are produced for every Sustainable Development Goal (SDG) identified by an organization.
Lastly, businesses and entrepreneurs should not be shy about making connections with students at local universities with business programs. These students are a great resource in helping track and analyze data for measuring goals. They can crunch the numbers on their own or use the B Impact Assessment tool to provide a comprehensive report.
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Understanding the importance of sustainability as part of your overall business strategy is one thing. Successfully incorporating it takes a lot more dedication and innovation. When it comes to the gold standard of profit with a purpose, businesses and entrepreneurs need to look no further than former Unilever CEO Paul Polman.
Unilever owns some of the biggest consumer products brands, including Dove, Lipton tea, and Ben & Jerry’s ice cream. During his decade at the helm, Polman prioritized sustainability.
It was a move that paid off in spades, as the company delivered consistent top-and bottom-line growth ahead of its markets whilst embracing the profit with purpose model. Polman’s commitment to sustainable growth delivered a total shareholder return of 290 percent under his leadership.
Polman defined a new era of responsible capitalism as part of the Unilever Sustainable Living Plan. He is without a doubt one of the most far-sighted business leaders of his generation, establishing the framework for other businesses and entrepreneurs to follow.
Since leaving Unilever, Polman established IMAGINE, a social venture consisting of business leaders and entrepreneurs who are committed to being part of the solution to the planet’s historic challenges. Polman’s collective recognizes the power corporations have in the world and challenges them to drive transformative change.
Business leaders and entrepreneurs cannot be afraid to shake things up in their pursuit of profit with purpose. Bold, unconventional moves often are required to switch their focus from short-term profits to sustainable growth. This was a practice Polman understood well, shaking things up when he first took the helm at Unilever with some audacious moves. He immediately stopped providing quarterly guidance to shareholders and instead issued dire warnings about the financial effect climate change was having on the company.
Under Paul Polman's guidance, Unilever developed a blueprint for More sustainable growth
Under his guidance, Unilever developed a blueprint for more sustainable growth that included a shift to 100 percent renewable energy, reducing plastic waste and water usage, and committing to a deforestation-free supply chain by 2023. “The climate doesn’t negotiate,” Polman said in an interview with YPO. “We need to find a way to live in harmony with the planet.” He pushed for Unilever to acquire companies known for their eco-friendly practices like Seventh Generation, Schmidt’s Naturals, and Tazo. Above all else, Polman advocated that it was not his job to create value for billionaires, but rather to create profit with purpose.
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Above all else, Polman firmly grasped the notion that achieving long-term business success requires more than quarterly goals. Businesses and entrepreneurs must find that “sweet spot,” where profit meets the common good, to attain sustainable growth. A superficial understanding of sustainability is not going to cut it. Business leaders and entrepreneurs must go all-in, committing to the time and effort it will take to establish goals that allow them to be more responsible corporate citizens.
To reach a sustainability sweet spot, businesses and Entrepreneurs must overlap business interests with stakeholder Interests
Identifying and moving into your sweet spot requires a commitment to new ways of doing business. Leaders must be willing to explore the following to get there:
• Developing new products and services
• Establishing new processes
• Reaching new markets
• Creating new business models
• Identifying new methods of management
Unilever’s Sustainable Living Plan was the culmination of Polman’s dedication to helping the company find its sweet spot. Although Unilever had a long history of trying to do the right thing, it was not until Polman that it found its ultimate purpose, becoming the role model for other businesses and entrepreneurs hoping to achieve profits through purpose.
Defining a true purpose for your organization and building it into every fiber of its operation is the only way to move from Corporate Social Responsibility (CSR) to Responsible Social Corporations (RSC). In every presentation and interview he gives, Polman makes it clear that CSR is too narrow. RSC is the best way for an organization to take full account for its total impact on society if companies are to transform from circular systems to linear systems.
"I believe entrepreneurs will solve the world’s Problems, not governments. Collectively we need to Stands together and utilize our businesses as a force For good. When we embed giving as a cost of goods And stand for profit and purpose, as we grow, so Does the much needed impact.”
Tamara Loehr
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Polman’s achievements are notable and worth mentioning. However, it is easy to champion sustainability when you have a large corporation backing your every suggestion. This does not mean that small- to medium-sized businesses and organizations cannot successfully follow the same path. They just need to adjust it to suit their level of resources.
Beusail’s online beauty and wellness marketplace is a perfect example of what a smaller organization can do when it sets its mind to it
Every customer of Beusail makes an impact on the world around them. With every purchase, consumers bring a deeper meaning and relevance to their beauty and wellness regimens. The leaders at Beusail are committed to following the UN’s Sustainable Development Goals. The beauty and wellness company tracks its impact on each of the 17 UN goals. Its intention is to reach 10 million impacts every year.
Here is how they plan to do it:
1. Switch 1 per cent of the industry
Beusail encourages conscious consumers to switch from their existing beauty and wellness products to brands that are ethical and give back. To assist them, Beusail curates the best-in-class ethical products based on their mandate of female founded, indie brands, Vegan, Cruelty-free, not produced in the top polluting countries, a commitment to zero waste, and gives back.
2. Transition 100,000 women to entrepreneurship
Through its unique co-selling option, aspiring entrepreneurs can start earning up to 30% commission on product sales. This is achievable with two simple clicks and under 10 seconds. Beusail is on a mission to help 100,000 women generating revenue online and easily start their side hustle.
3. Mentor the next generation of female leaders
Beusail’s Ethical Beauty Tribe is a supportive and spiritual community of like-minded entrepreneurs. Ideal for women wanting to scale their online e-comm business, Beusail provides training in digital marketing, forums and masterminds, high-converting online strategies and mentoring from some of the top 1% of female entrepreneurs in the world.
4. Give back to 10 million projects annually
Beusail notes that women have the purchasing power to positively impact the world. By switching brands to ones that give back, women can create impacts every time they shop. As Beusail grows, so does its impact. Through their mission to switch 1% of the beauty and wellness product sales to ethical ones, this will create 10M+ impacts per year to the United Nations Sustainability Goals, whilst supporting female founders.
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