Does Your Business Make Goods, Or Is It A Force For Good?

“Wow, you sure sound like you’re anti-business….” 

That was what an audience member said to me after I gave a recent talk. I found the remark curious, considering I spoke about the important role businesses must play in solving today’s crises, some existential. I’ve been in business my entire career, from startups to Fortune 500; serving as a business school professor and then dean for a global business school. I’ve written 11 books on business and numerous articles. I’ve spoken at business conferences around the world. I’ve taught and worked with business leaders in over 40 countries. I believe business has an essential role to play in the world today, so I’m not anti-business. But businesses are at a crossroads: they must decide whether they will be a force for good in a world urgently needing answers to the world’s biggest challenges. And it begins by moving away from the profit motive and toward the societal value motive, where businesses aren’t merely makers of goods, but a force for good that contributes positively to society.

I suspect it was this part of my speech that riled the attendee: 

“Much of today’s climate crisis is due to business activities since the start of the industrial revolution. Today’s business leaders must help repair the damage caused by their predecessors…”  

The impact of business

Consider business’s impact. Global GDP has grown exponentially since 1900. Today it’s over US$100 trillion and business activities have been the dominant contributor. Business has helped connect countries and strengthen economies; provided jobs and helped grow the global middle class, lifting many people out of poverty; sparked competition, attracting new ventures hoping to outperform older ones; stimulated consumer demand for more ‘things;’ and also harmed our environment driven in large part by the pursuit of a combustible mixture of the profit motive and shareholder wealth maximisation. 

Business writ large has enormous under-tapped potential to positively impact our quality of life because of its massive global footprint and capacity to innovate, but when it is consumed with growing profits and enriching shareholders, societal benefit gets buried under an avalanche of financial measures designed to wrangle maximum efficiency out of the minimum dollar invested. In principle, this reflects a fiduciary responsibility to investors. Plus, healthy profits can be reinvested to improve the business. But this narrow obsession can also incentivise irresponsible business practices, with additional investment predicated on growth, too often at the cost to the health of society. We cannot change what has occurred, but we can change how we conduct business from now on. We need to shift our collective business mindset from pursuing growth at all costs to understanding the costs of all growth. 

There’s a complication. When we make bold declarations and then fail to follow through with meaningful actions, we create disappointment and provide fodder for profit-driven cynics who then ridicule us by saying ‘you didn’t meet the transformation targets, so your altruistic pretensions failed.’ Imagine how much innovation would have been lost in the past century had bold entrepreneurs folded in the face of critics. That same relentless anti-fragile determination is now needed from today’s business leaders to transform their companies into a force for good. The stakes couldn’t be higher because the opposition is in the form of a formidable climate crisis that has no political allegiances or concerns about profitability. It profits, and prospers, by feeding off the same destructive practices that have led to today’s rapidly warming planet. 

The advantage of purpose-led businesses

Businesses that aspire to better society will have a definite advantage over fixed mindset companies drowning on an ever-shrinking island of obsolete business models. The practices required to transform are surprisingly simple. The difficulty lies in changing human behaviour and dismantling decades of investment models that reinforce the status quo. But research shows that being purpose-led can upend business-as-usual. Purpose-led companies have 30% higher levels of innovation and 40% higher employee retention. Between 1996 to 2011 companies with a clear purpose outperformed the S&P 500 by 10x. Furthermore, people worldwide are making decisions based on a company’s contribution to society. 85% of millennials believe it is critical their companies help improve the environment. 79% of people think that companies should address social justice issues. And 80% of all consumers believe they are making a personal positive impact on the world when they buy products from purpose-led companies.  

I am optimistic

To translate that optimism to practical solutions means evolving past outdated 20th-century practices. The 21st century requires that businesses increase societal prosperity and grow value for stakeholders by going beyond simply making the next widget, communicating the next wacky idea, or financially engineering value that benefits only shareholders. The great businesses for the remainder of this century must bring imaginative thinking and courageous actions to challenge last century’s orthodoxies. Examples abound of leaders and organisations taking steps in the right direction, yet no one business has done this perfectly. That’s because becoming a force for good involves a complex mix of decisions, practices, regulations, innovations, partners, products, and people that aren’t easy to synch. But this very complexity must not dissuade us from making brave choices now for the very simple reason that the enormous challenges confronting us implore our businesses to expand their innovative capability to improve life on this planet without degrading it. Forward-thinking business leaders from startups to global MNCs that want to become a force for good must join together to embrace the societal value motive. 

About the author: John A Davis is an award-winning academic, business leader and author of Radical Business: How to Transform Your Organization in the Age of Global Crisis published by Emerald.

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