How Businesses become Part of the Solution: A four-options-framework
In times in which society’s trust in political institutions has faded and 80% of people think it is up to businesses to lead in solving societal issues, business leaders look for new ways in which their companies can become part of the solution to the complex challenges we are facing.
Naturally, some are more proactive than others and every shift towards a more stakeholder-oriented and sustainable way of doing business is a step in the right direction.
However, the more radical the shift, the sooner and the greater the positive impact.
We have identified four major ways in which businesses can become part of the solution.
1. Firstly, there is the option of improving operations in which businesses actively reduce the negative environmental and social impact. “Business as usual” is generally maintained and incremental adaptations are made to ensure compliance with regulations or increase profitability. Changes tend to be initiated by lower-level management and usually do not require major involvement of senior leadership. The focus is placed on efficient supply and value chains and commonly used measures include more efficient use of resources in general, health and safety standards, and pollution controls.
2. Secondly, CSR initiatives can be implemented which go beyond mere compliance and “avoiding bad” but aim to “do good”. Again, “business as usual” is normally maintained. However, here additional activities either linked to the core business or not are realised in a modular and project-based approach. And although the portfolio of different initiatives can cover a wide range of topics overall, individual projects tend to address a single issue at the time. CSR initiatives often have a philanthropic nature, come with investments or donations (net outflow of financial resources), and are considered a standard duty of corporate responsibility. Examples include donations to charities, corporate volunteering programmes, and the establishment of company-related foundations.
3. Thirdly, adding new social business models to the core business can help organisations go beyond average. In this case, the company fundamentally believes that it can benefit financially from “doing good” and serves the world with novel, sustainable products or services that are not developed to simply generate short-term revenues but to improve the quality of life for people in the long run. Here, companies thoroughly eliminate possible negative and purposefully design for positive impact. Societal and environmental challenges are seen as business opportunities and the core competences of the organisation are utilised to establish a new business model while delivering desperately needed solutions. Social business models are oftentimes more effective than traditional donation-based charity work because the competitive market environment forces them to be innovative and value-adding as well as cost-efficient and self-sustaining. Businesses who have experimented with this option (like Danone, Adidas, BASF and Veolia) report beneficial spill-over effects from the new venture onto the whole organisation in terms of learning and the capability for innovation.
4. Lastly, there is the idea of business model transformation which requires a radical paradigm shift among leaders and all people in the organisation and means nothing but dedicating the core business to a greater cause. For that to happen all actions need to be aligned with the timeless corporate purpose that the organisation exists to serve. Often this comes with a major culture change as well. Purpose companies perceive their economic activity not only as being part of society but even as a solution to one or more of its eternal challenges. Not only individual business units but the entire organisation is directed at using the power of business to be a force for good in the world. Such organisations often benefit from high employee engagement, improved talent attraction & retention as well as customer loyalty and long-term business survival. Examples of pioneer businesses that have dedicated their core business to a purpose beyond profit include Patagonia, Ben & Jerry’s, Share, and Ecosia.
There is a wide range of options out there to start turning businesses into genuinely needed solutions. Now is the time to shift gears, decide on a role your company aims to play in our world, and pick an option.
And just to get this straight, transforming an organisation is not necessarily a top-down endeavour. Yunus Social Business has published a comprehensive report on Social Intrapreneurship and how ordinary employees can become the small cog that sets a whole wheel into motion.
Let’s shift mindsets and gears and build businesses that the world desperately needs.