Creating lasting impact: the intersection of profit and purpose

• Profit and corporate purpose are two sides of the same coin and, together with an ESG framework, hold the key to long-term business success.

• Companies with a strong ESG proposition outperform peers in top-line growth, customer loyalty, and employee productivity. They also experience reduced regulatory and legal intervention.

• Aligning purpose with profit requires a forward-thinking approach focused on maximising value creation for stakeholders, society, and the environment. 

In today’s dynamic world, profit and purpose are two sides of the same coin. People believe companies must do more than just chase profits and top-line growth. They look for compelling reasons to buy from you. For instance: What makes your brand more sustainable and socially responsible? Would the world miss your brand if it were to disappear tomorrow? A well-defined corporate purpose can effectively address these questions and build trust. 

Building an ESG proposition that’s closely linked to our purpose has been a game-changer in my company. It helps us create value not only for our investors but also for other stakeholders, the community, and the environment. Of course, all of this didn’t happen magically. Understanding the intersection of profit and purpose was the first step in the journey. 

The profit-purpose paradigm shift

In the 1980s and early 1990s, businesses began receiving public backlash for activities that created a negative impact. This drove many organisations to earmark funds for Corporate Social Responsibility (CSR) initiatives, such as charitable donations and corporate volunteering programs. The trouble was that CSR reporting was quite subjective and more or less limited to virtue signalling. In fact, it did little more than help boost reputation and fulfil ethical obligations. However, it did pave the way for ESG (environmental, social, and governance) in the mid-2000s.

ESG principles, unlike CSR, are quantifiable and moored to core business strategy. If taken seriously, they can help capitalise on environmental, social, and governance priorities to create value for all stakeholders. Today, more than 90% of S&P's top 500 companies use ESG metrics to articulate the triple-bottom-line (people, planet, profit) impact with hard data. 

Australian green tech company Seabin is an excellent case study on the intersection of profit and purpose. What began as a startup for cleaning ports and marinas is now a global player generating millions in revenue from selling ocean impact data to ESG-focused companies.

Why ESG is more than a trend – it's a business imperative

Changing investor expectations

Investors see companies with a holistic ESG approach as better poised for long-term value creation, and they’re not wrong. According to a McKinsey study, a strong ESG proposition is linked to higher returns, better credit ratings, and lower downside risk, to name a few. No wonder global ESG-oriented investments have gone through the roof, showing a stunning 68% growth since 2014. 

Customer loyalty and brand equity

Consumers say they’re ready to pay nearly 10% extra for a sustainably produced product despite the rising cost of living - and they mean it. Why else would products with ESG-related claims on their packaging (think ‘cage-free,’ ‘eco-friendly,’ ‘vegan’) report a significantly higher cumulative growth than those with no such claims? 

Regulatory pressure and risks

Although it differs from industry to industry, about a third of company profits are at risk from state intervention. ESG not only makes companies more compliant and their disclosures more transparent, but it also helps them proactively address issues that could become regulatory requirements in the future.

The role of leadership in driving purpose and profit

Balancing profit with purpose would require you to implement a number of ESG initiatives. Not all would deliver instant societal, environmental, or financial returns. Some could take a while to make an impact. Visionary leaders understand this. They play the long game, whether it is embracing a new business model or nudging stakeholders into supporting a disruptive idea. 

Planet Protector’s story began with one such ‘disruptive’ idea. While working for Australia’s largest meal delivery company, I was appalled to see the amount of toxic polystyrene packaging in use. It put me on a warpath to find a better, more sustainable alternative. We created WOOLPACK - recyclable and compostable cold chain packaging made from waste wool that surpassed polystyrene in performance and cost-effectiveness. 

The payoffs didn’t disappoint. Within the first four years of operations, Planet Protector generated $20 million in revenues and kept millions of polystyrene boxes from landfills. More recently, we secured $12 million in Series A funding, including a substantial federal government grant to set up a state-of-the-art facility in Australia that offers contract manufacturing to local businesses.

Strategies for aligning profit and purpose

In a McKinsey survey, 82% of respondents agreed that a corporate purpose is important. However, only 42% believed it actually drove impact. These statistics show a huge gap between ambition and implementation. So, how do you embed purpose in your organisation that benefits society, the environment, and the bottom line?

Defining purpose

Some make the mistake of using ESG as a surrogate for purpose. If you’re doing this, you’ve got it all wrong. To me, a good purpose is emotional and memorable, so it resonates with every stakeholder and guides their decision-making. Most importantly, it should be connected to your company’s ability to create value. 

Creating a holistic ESG strategy

Regardless of product portfolio, every company can have an ESG framework. However, for it to be robust and holistic, an ESG strategy must take into account the needs of your stakeholders and community (remember stakeholder capitalism?). Finally, your ESG strategy should be linked to a clear purpose and core business model so it integrates across departments, from operations to marketing. 

Engaging stakeholders

Leaders routinely engage with investors who have their capital at stake. However, to make ESG real, they must listen to and communicate with a broad range of stakeholders, including employees, customers, and suppliers. When I say communicate, I mean going beyond reporting to actively seeking insights and feedback. In reality, engaging with a wide range of groups could be tricky, but it’ll result in well-informed decisions and smoother execution.  

Measuring impact

You can easily measure profit, but what about purpose? You can use custom metrics relevant to your purpose or rely on third-party tools, like B-corp certification, Global Reporting Initiative (GRI) standards, and Sustainability Accounts Standards Board (SASB) metrics. These tools are designed to provide a comprehensive and transparent picture of the company’s impact on society, the environment, and the economy.

Overcoming challenges at the intersection of profit and purpose

Decisions such as linking financial incentives to ESG goals could draw pushback from shareholders who see reduced returns in the short term. However, in the long run, these incentives will not only improve ESG metrics but also increase employee productivity and profits. At Planet Protector Packaging, I’ve seen several clients, such as the RCPA, overcome stakeholder resistance to align profit with purpose. 

The pharma industry’s aversion to change is why the Royal College of Pathologists of Australasia (RCPA) used polystyrene packaging for as long as it did. Their move to environmentally friendly Woolpack helped them cut down their carbon footprint and logistics costs by 66%!

What about company culture? In this era of transparency and social media, businesses can no longer say one thing and do another. Yet, we often hear horror stories about brands with ethically strong mission statements but a toxic organisational culture. They forget that employees are the heart of a purpose-led business. Your staff can give you valuable insights or reality checks when you’re failing to walk the talk. There’ll be less resistance to change if you have employees on your side. Factors like hiring talent with a growth mindset, investing in their professional growth, and encouraging open dialogue can build a sense of ownership and commitment to purpose-driven goals.

The lasting impact of balancing profit and purpose

Purpose and profits are not mutually exclusive. Research shows that a purpose-driven culture and strong ESG proposition often result in higher top-line growth, reduced costs, fewer regulatory interventions, and higher employee productivity. 

Such companies are committed to maximising value for consumers, employees, and communities, even if it means reduced short-term returns. Their actions reflect the reality that a company’s long-term success is linked to the health and prosperity of the people and the planet.