Why Pushing For Social Responsibility Is Smart Business
Normally when BlackRock speaks, corporate America listens. With over $6 trillion under management, BlackRock’s Founder and CEO Larry Fink is one of the most powerful men on Wall Street. But his recent annual CEO letter has sparked a fierce debate among the thousands of powerful CEOs who received it.
Do businesses, as Mr. Fink asks, have a responsibility to make a positive contribution to society or should they follow the age-old advice of Milton Friedman to be single-mindedly focused on increasing profits?
By so many indicators, businesses are now more powerful than government. Of the 100 largest economic entities in the world, 69 of them are corporations. This means that Walmart has more economic power than Spain and Exxon Mobile has more revenue than all of India’s 1.3 billion people combined. America’s new tax bill and our pro-business president are sure to shift the balance of power even more dramatically over the coming months.
In the vacuum of government power, society needs businesses to step in. But, as we’ve heard in the Wall Street backlash to the BlackRock letter, many corporations do not believe that it is in their best interest to benefit employees, customers and communities alongside shareholders.
Often when large companies want to make innovative changes, they look to startups to show them the way. As the founder of a mission-driven startup, I am convinced that having a socially responsible business isn’t just good for the world, it’s good for your bottom line. I’m not alone in this perspective. There are now over 2,000 companies who have pledged to use business as a tool for change by becoming B Corps. In my conversations with dozens of mission-driven CEOs, I’ve uncovered three key reasons why I think being a socially responsible business is just smart business.
Stakeholders Want Transparency
In the information age, everyone feels entitled to the full scope of a business. This is perhaps most evident in the food industry where transparency has been the driving force behind the farm-to-table, organic and non-GMO food movements. Millennials are most likely to seek information about the products they buy and, according to a 2015 Nielsen report, over 70% of millennials say that they’re willing to pay more for products that create positive social and environmental impacts.
Employees and investors also share this drive for transparency. We’ve seen this in tech with companies like Buffer who openly publish all of their salary data. I’ve found that simply having a monthly team meeting to discuss my startup’s performance and answer any questions has helped my entire team feel like they have real ownership over the business. The same thing applies to investors. I built a list of potential investors for my company’s next financing round and sent them high-level financials and my learnings every quarter. Having a high level of transparency with all your stakeholders will help them feel connected to your business while providing a strong incentive for you to continuously work to improve the impact that you have on consumers, investors, employees and the communities where you work.
Mission-Driven Businesses Get More Press
Many companies have begun to shift to storytelling as a marketing tool, as storytelling can humanize a product. Yet, there is an added benefit to storytelling that cannot be monetized: connection to the humans behind the product. I’ve done this by starting with my founding story of eating moringa (the product we sell) in the Peace Corps but quickly broadening the story to talk about our farmers and how their lives have improved since working with us.
By telling this story, my startup has gotten over 300 national media features in four years, while spending less than $50,000 on press outreach. Interview your best customer/clients and talk openly about how your product has impacted their lives. Create a truly compelling mission makes your company naturally interesting to the press. It will help build your brand in a way that all the marketing dollars in the world never could.
Employees Are Driven by Purpose
I can’t count the number of times I’ve heard Fortune 500 CEOs say that they want their companies to have the “soul of a startup.” What they’re really saying is that they want employees to work around the clock to accomplish the company’s goals. While part of the reason startup employees are so motivated is due to significant equity ownership, another part of it has to do with purpose. As a Harvard Business Review study showed, truly motivated and inspired employees accomplish twice as much as regular employees.
Though my startup is still tight on cash, we’ve been able to hire industry leaders who have taken large pay cuts to work with us because they believe in our cause. This isn’t unique to us — 74% of candidates from a LinkedIn surveysaid that they wanted a job where they feel like their work matters.
The Friedman doctrine of only maximizing profits might have been an appropriate economic theory for 1962. But as businesses have risen in power and consumers have become increasingly informed, it is becoming clear that the 21st-century economic doctrine revolves around social responsibility. Designing your business to benefit all of your stakeholders, not just your shareholders, is simply good business.
This article was posted on Forbes, 3/22/18