Let’s Scale Purpose – Why Combining Purpose with Profit should be the New Recipe for Impact

There is a strange public opinion whether purpose and profit can go hand in hand. In my opinion they have to if entrepreneurs really want to create large impact. And I would go even further and say: Impact is an equation of purpose and scale. Now, before you start opposing to this statement, let me first explain why I believe that combining purpose with profit should be the new recipe for impact. 

A few weeks ago, the German Startup Association released the new Green Startup Monitor. According to the new monitor, 21 percent of all German start-ups provide products and services for environmental and climate protection. The key is that these startups – and we are among them as well - have integrated their social and ecological impact into their business model. Their goal is to show that sustainability - in the best case -already starts thinking about your business model. While putting purpose at the core of their business, Green start-ups are just as growth- and profit-oriented, but they create a social and ecological added value at the same time. And this is where I believe the discussion starts. 

What does purpose-driven actually mean? 

A basic definition would imply that a purpose-driven company stands for and takes action on something bigger than its products and services. Purpose can be an organizational strategy and a roadmap to remain competitive in a fast-changing economy. A blueprint for achieving a better and more sustainable future has been defined in the United Nations’ Sustainable Development Goals. The seventeen SDGs address the global challenges we face, including those related to poverty, inequality, climate change, environmental degradation, peace and justice.

Today, almost every company has a purpose on its “About us” page. And companies have been encouraged to build purpose into what they do for a long time but many simply saw it as an add-on. A part of their company culture rather than their business strategy. They would include purpose in their corporate values and use it to create shared value, get employees engaged in for example community projects or help the environment. However, over the past years this has changed, and more companies have moved purpose into their actual business strategies. I will share an example later in this article. Once that shift happened and the company’s leadership got committed to its purpose, they were able to build a more resilient business and generate sustained profitable growth. 

And this also becomes visible in the stock market where shares of companies, that for example value their energy balance sheet, performed better than the average in the first quarter of this year and also better than the standard indices, such as the MSCI World. Sustainability and purpose are not an add-on anymore. 

Can NGOs and Initiatives create enough impact?

In recent years, non-governmental organisations (NGOs) have gained considerable influence. NGOs are not officially dedicated to their own well-being – such as companies are – but are striving to improve the world. In other words, they work to save the world from destruction, people from exploitation or animals from extinction. That is an incredibly positive cause and deserves respect and support (Source: WiWo).

However, can they really create enough impact? While reading upon this question I have found that there has been criticism overtime: The NGO sector has a number of important deficiencies, for example its limited size, scope, and impact. From an entrepreneurial perspective many NGOs seem too bureaucratic at the operational level which slows them down in taking action and also implies high administrative costs. There have also been media reports in the past on internal power plays that take away the focus of the actual focus of their work (Source: Spiegel & DW). 

Non-governmental organisations are important for opinion-forming and public debate. Same goes for local initiatives. Look at Fridays For Future – they are the perfect example of how a local initiative can turn into a global movement. 

Personally, I feel the work that NGOs are doing should actually be amplified as I believe they cannot and should not do it alone. Looking at the climate crisis, it is such a huge task, it needs to be addressed by all businesses together. Especially businesses who have the power and resources to really create a broader impact. 

Economy is Key to a Better and Planet Positive World

When we look at how the world works, keeping in mind businesses make the money and money ruling the world, it becomes clear that it’s our business world that needs to put purpose at the core of their business strategy. 

We need to change our mindsets and look at how we can create a more sustainable and resilient business world. And now is actually the time to do so. One way to do so is looking at a company’s carbon balance sheet. While many companies have already began to analyze their carbon footprint on a yearly basis and offset their emissions, this is not enough to reach the goals of the Paris Agreement. Companies will have to re-evaluate their business models and reduce their carbon emissions. 

Harvard Business Review published an interesting article last fall giving a few examples of companies that have made the shift from purpose just being a “Nice to have” to including it into its core business model. One of the examples struck me the most as it was an oil-refining company from Finland that basically re-designed their entire business to a purpose-driven model.  

For more 60 years Neste focused almost entirely on crude oil. By 2009 the company was struggling as oil prices had dropped sharply, margins were falling, and the EU had passed new carbon-emissions legislation. The company’s market value had shrunk by 50% within two years.  

The company’s new CEO started to evaluating changes within the corporate structure and its core business and he realized renewable energy could be a key driver of growth. Their purpose should be to develop sustainable sources of energy that would help reduce emissions. Neste majorly invested in infrastructure, innovated renewable technologies, focused on converting customers to green energy solutions, and, most important, engineered a fundamental change in the company’s culture.

A year later its comparable operating profits from renewables would surpass those of its oil-products business. In 2017 the company took yet another step by actively researching and promoting the use of waste feedstock from new sources such as algae oil, microbial oil, and tall oil pitch.

And this is what it should be about: As a business your key goal is to make money. However, if you include purpose into your business model your company can become an accelerator for impact in the area you chose to focus your purpose on.

And I do believe the bigger the business, the larger the impact.