As economies across the globe feel the shake-out from the current pandemic, posing a temptation to shift from survival of the fairest, to survival of the fittest – the question many SMEs (small-medium enterprise) now face is whether the move towards a progressive, purpose-driven capitalism is a luxury they can still afford.
At x+why, we argue that we do not need to regress in order to progress, and that purpose means more now, than ever. According to research by aba-design on over 250+ business leaders, entrepreneurs and influencers, the age of purpose has increasingly driven consumer preference, influenced job seeker’s choices, and been credited with sustainable business growth.
But what does it mean to be a business of purpose? Certified B Corporations are the golden beacon of what this means on the level of certification – bringing together a community of likeminded new businesses that are robustly internally and externally regulated to harmonise both purpose and profit, by considering the impact of their decisions on their workers, customers, suppliers, community and the environment. This is a network of leaders, driving a global movement of people using business as a force for good.
This is a far cry from the model of ‘growth at all costs’ that still dominates much of the western hemisphere, whereby the environment is plundered without thought, cheap labour required to meet fast demand reigns, and employees are consistently on the brink of burnout in the name of maximising shareholder profit.
The new paradigm of purpose recognised that this approach to economic growth was not socially or environmentally responsible or sustainable, and that a new wave of likeminded businesses would need to collaborate to compete. What’s more, 2 out of 3 respondents of the aba-design survey agreed that their greater purpose gave them a competitive advantage in the market.
Structurally, the notion of baking purpose into the ethos of an SME is explored in Simon Sinek’s ‘The Infinite Game’, whereby having a greater vision and being mission-lead, facilitates a company’s growth and survival through remaining existentially flexible and prioritising long-term over short-term decisions. An example would be the failure of Blockbuster to withstand the rise of competitors such as Netflix, because their greater vision to meet evolving customer demand was overshadowed by complacency, short-term profits and structural resistance to change.
“When it comes to purpose, there’s a lot that SMEs can teach bigger companies. They are often much closer to their people and really care about delivering on their purpose” – Natalie Tickle from Heart of The City
As with all theologies, there appear to be two distinct sub-species in the purpose-driven movement – namely ‘creationists’ and ‘evolutionists’. The former believes that ‘true purpose is birthed’ and lays the foundations for a companies progress from the beginning, whereas the latter take a more flexible approach that focuses on the journey, as opposed to proving credentials from the outset. The truth is always a little more grey than binary, and where the two schools will find themselves intersecting is in the end result – a purpose that is both sincerely held, and authentically lived.
One of the biggest challenges at the core of successful collaboration between both consumers and SMEs alike – is communication. In a sea awash with media and PR noise, conveying an authentic purpose in a way that is intentional, clear and compelling remains a challenge, with less than 30% of businesses reporting that they felt their mission was well presented to workers, customers, their community or their industry.
So as COVID continues to sweep across the globe, are such additional challenges still worth taking on? From an economic point of view, purpose and profit have statistically been proven to make exceptional bedfellows, with businesses who are purpose-lead claiming to be on average 23% more profitable than their non-purpose driven or un-guided counterparts. This is consistent with the findings of the B Corporation movement, who validate that in spite of the additional regulatory demands, SMEs who register with them become more profitable after completing the certification process.
The crisis has been a wake-up call for businesses to seize the moment, as leaders are challenged about the kind of world we want to re-build moving forwards: on a broader societal systems level, change or progress can create a disequilibrium that reflects market imperfections and an imbalance between supply and demand conditions, and as far as the laws of entropy are concerned, all organised systems gradually decline into disorder and chaos over time unless action is taken to avert this.
As we’ve seen in the past, this creates the destruction seen in what resilience theorists term ‘the release phase’ of the adaptive cycle that characterises systemic development – a rapid and chaotic period during which capitals (natural, human, social, built and financial) tend to be lost and novelty can succeed. COVID has been a natural catalyst for much of this change, simultaneously instigating a lot of soul searching around the kind of impact we are having on the wider world, how we can better collaborate to manage unpredictable changes in the environment, and what it means to be about more than just the bottom-line.
For those who view purpose as an important element in navigating the future of business, hope lies on the horizon, with purpose-driven leaders reporting feeling at least 3 times more confident about the future than their counterparts, fuel that will set their stamina in good stead for the roads ahead, even when 52% of leaders said they would be willing to sacrifice profit in order to stay true to their purpose.
The main limitation to an otherwise positive trend, is that of green-washing or white-washing by businesses still primarily motivated to maximise profits and jump onto the latest trends, without walking the walk. This compounds the issue of communication, with the muddying of the waters in the market making it increasingly difficult for customers struggling to spot the real deal.
That’s not to say that redemption is not possible, with inspiration still waiting to strike, and those who haven’t yet bought into purpose being statistically most likely to want to play catch-up in both their thinking and their actions. In spite of the obstacles that lie ahead, becoming a purpose-lead business still remains one of the most attractive, motivating, fulfilling and arguably profitable challenges moving forwards.
In years to come, there’s a strong possibility that we could look back on one of the silver linings to the COVID age being an explosion in purpose-driven motivators, leading us into a defining era for what it means to be a modern-day business in a progressive and paradigm-shifting space.
“I hope the stories of businesses doing right and sticking by their principles during the crisis ends up inspiring the next generation of purposeful leaders” – Rupert Dean, Founder of x+why