Building Businesses That Stand For Something

It is no longer acceptable (or smart) to create a business just to make money.

Last year, Patagonia launched a “Don’t Buy This Jacket” campaign, encouraging people to buy their products used instead of new. Yvonne Choiunard, the founder of Patagonia, was a climber, and realized the natural resources it took to produce new products would limit the potential of his business in the long run, which relies on preserving the outdoors as a place for people to play. The company changed their materials and started building durable, longer lasting products, only encouraging sales if used pieces couldn’t be found. Aligning customers’ values with their own will prove much more important in the long run than the bottom-line sale of coats.

This piece is part of a Collaborative Fund-curated series on creativity and values written by thought leaders in the for-profit, for-good business space.

Patagonia is just one of many companies recognizing the shift in how companies evaluate success. Still, most businesses stick to a single measurement: how much profit they make. While making money has been the single biggest motivator for companies in the last century, in the current one, that won’t be enough. If we want to have a future better than our past, companies need to stand for something by solving social and environmental challenges while also making money.

The world is changing at a pace and scale never experienced by humans. We have the impacts of climate change, diminishing natural resources (water, fish, soil, forests, etc.), income inequalities, unprecedented species loss, growing government debt (international, national, state, and local), aging infrastructure, increasing costs of crises with reduced ability to respond, and a population topping 7 billion. That’s a lot of problems that need solving, and that means a lot of opportunity for creative entrepreneurs and new companies.

These challenges are too big for governments and NGOs to solve without the leadership of businesses. Without radical change to campaign finance laws, governments will remain entrenched in the status quo, and NGOs just don’t have the global networks and resources to act as leaders. Smart businesses, however, see the pace and scale at which the world is changing. They realize their competitive advantage will come in the form of solving real problems, while their competition is stuck trying to protect an old paradigm.

There are four market forces that will cause businesses to either stand for something or eventually shutter:

  1. Corporate morality: Increasing peer pressure from industries and the race to attract talent will favor values-based businesses. Companies are getting pickier about who they do business with and talented professionals understand they can both find a good paying job and be proud of the company they work for.
  2. Cost structure/strategy: As the prices of inputs (raw materials, commodities, carbon based energy) and the cost of waste continues to increase, businesses must find ways to make that into a competitive advantage. Costs are only going to go up.
  3. Governance/risk: It is not only industry peers and employees that will cause organizations to make better choices--companies will face increasing government regulations and litigation risks if they sacrifice societal and environmental well-being for profit.
  4. Customers: People are slowly coming around to the fact that we don’t have infinite resources, and we have a lot of big challenges that need solving. We have seen this, for example, with the rise of collaborative consumption.

Big businesses can take all these market forces into account as they innovate. But there are several ways a startup or early-stage company can improve the odds that their business models can both make money and stand for something:

  • Challenge yourself or your business: The most important thing in my mind is that the entrepreneur and founding team need to really think about the problem they are solving. Is it a real problem whose solution will positively impact the long-term human experience?
  • Embed it in company DNA: No organization can be successful if it is selling a “cause marketing” solution. The problem is the opportunity, so don’t solve the symptoms, solve the problem. It’s not about making money helping fat kids get healthy, it’s about keeping them healthy in the first place. If you’re building a business in the food industry, have a by-product to help solve malnutrition. If you’re in the construction industry, a by-product could help solve homelessness.
  • It’s a competitive advantage, not a tradeoff: To build a business that really stands for something, it can’t be about taking a percentage of the profits and donating (although that is nice) to a cause. For example, carpet company Interface uses its competitors’ second-hand carpet as its raw material. Its input cost to make new carpet goes to zero, and they might even get paid to take this resource off the hands of waste companies.
  • Follow your passions: No matter what problems you end up solving with your business, you have to love it. If you’re solving a social problem to make money, you will be out-competed if you don’t truly love the industry you are working to improve. Ask yourself: what do you see as real problems in the world that impact you directly? Local solutions can have global implications.

Whether you’re a big business or a budding new one, the market forces are clear: Standing for something does not need to be a corporate trade-off or marketing ploy. It’s a way to create solutions, attract top talent and ideally, grow wealth that is healthy for our economy, our environment and, most importantly, our standard of living. Just consider Patagonia: Their customers were willing to pay higher prices for higher value--rising raw material costs actually made it more competitive. Standing for something is built into its DNA. It reduces the company’s compliance costs and keeps their customers loyal. If new companies start to measure their success with a longer ruler, just imagine the long-term innovation it can spur.

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9 Comments

  • Ellen Partal

    Excellent article Chuck. I am inspired to share my knowledge
    of another integrity-based business in Environmental
    Business Solutions inc.™ (EBS) is making life better here in
    Portland, within the company, and enriching the lives of others. Owner Jim
    Hinkley, structured the company by the motto he lives by  "Let Your
    Actions Define You'. Here is some of the highlights:

    This belief that in the end-YOUR ACTIONS DEFINE YOU- shapes
    the entire structure and philosophy at EBS. They are structured as a Management
    Owned Corporation that provides opportunity for ownership and career
    advancement from within the corporation. Enabling an individual to be his best fosters
    pride in their job, commitment to their client, and most importantly a sense of
    self worth. Mentoring, collaborating, and environmentally invested, EBS is
    dedicated to protecting our resources. The outcome of this is EBS works to
    educate and assist clients in making environmentally sound decisions regarding
    their own storm or wastewater applications.

    After more than a dozen years in Stormwater management,
    coupled with an understanding of the ever-changing needs of our clients, EBS
    recognized the need for a greener processing solutions .  Storm
    Regen™” technology is pioneering the way to a more effective, eco-friendly
    Stormwater solution and will be rolled out to the public next month. This
    mobile application is already beginning to change the way storm by-products are
    processed.

  • Esm

    Our waste is enormous, I have written about the re-use of material for all types of projects. many small easy to make crafts can be made of what would be otherwise trash.

    Recycling does not take a huge plant, it can be done in your backyard, garage, or on the kitchen table.

    Good for Patagonia, a stitch in time, makes a coat reusable.

  • Said Jama

    This article guides us to seek harmonious relationships , which are in essence holistic , and which appeal to our human nature .

    As a Muslim it reminds me of the Prophet´s peace and blessing of Allah be upon him saying
     " The most beloved people to Allah (God) are the most beneficial to the people ".
    Blessings come in abundance when we do something for others , when we aim higher than ourselves.

  • Shitij Jain

    Passionately written, but one thing which is definitely needed to create a transformational change in the approach to business is a parameter which influences movement of stock in the market, where the parameter measures something called as "environment index" - contribution from the organization to the environment. It is unreal to think of altering the lens of measuring business performance, from bottomline to "number of trees planted" - what we must do however, is to attach premium to organizational interventions to support our environment, which should be treated as positive multipliers while calculating the 'stock price'

  • Barry A. Martin

    This article expresses why part of me cringes when people bring up CSR. It's typically practiced as a band-aid solution to an issue AND as a marketing strategy. It does a diservice to both. It just doesn't wash to try to distract people from margins created unsustainably/unethically by doing good somewhere else. 

  • AJWhitman

    I agree totally with this article, and am happy that others are sensing this paradigm shift in the private sector the world over.  This comment is also a shameless pitch for readership of my blog concerning issues surrounding development in Ghana and the world as a whole: www.ajwhitman.blog.com.  Please visit!

  • Bibhuashish

    Going ahead Corporate Social Responsibility  would be a major force in all organizations to shape the future strategy.The measure of success wont be the quantum of bottom line but the quantum of Social change the business delivers to the society at large.

  • Kat

    Might want to look this over and make some edits... Too many grammatical mistakes. I expect better from FastCompany.