Once there was a video rental company called Blockbuster. From the early 1980’s to the mid-1990’s, they ruled the movie rental market. Then, an upstart company by the name of Netflix came along in 1997. In 2000, the fledgling company proposed a partnership. Blockbuster balked, refusing to look at future trends. Eventually, they went bankrupt in 2010. Today, Netflix’s net worth is now more than $190 billion.
Sarah Duval of The United Way’s Social Purpose Institute says the lesson here is that companies must identify trends and possess the vision to make changes when market forces begin to shift.
That’s where things are now with Social Purpose, B-Corp and ESG, she says.
“We’re at a critical point in time in that we’re past the tipping point with the planet,” says Duval. “When it comes to business, industry leaders can no longer ignore what’s happening in the world around them.”
Which means companies must embrace concepts such as B-Corp and ESG to navigate social and environmental trends.
Social Purpose is the societal change a company wants to make in the world and describes what they will do to achieve that aspiration. Having a Social Purpose defines the big picture impact while becoming B Corp-certified provides measurement and details.
That brings us to ESG, or Environmental, Social and Governance, a set of policies that consider the companies effects on the environment and on society of how a business operates.
In other words, it’s critically important that businesses both big and small now have a well-defined social purpose woven into the way in which their company conducts business.
“Many smaller businesses don’t know when to get involved, and what their priorities should be,” Duval notes. “They need to develop a clearly defined social purpose to act as the company’s North Star and guide strategy.”
That involves thinking about the consumers of the future, not the consumers of the past.
Businesses know that they are no longer operating separate from society, so they need to think about where they can have the biggest impact on the world based on the foundation of what they do really well as a company. ESG represents an opportunity for businesses to both strengthen their operations and become more resilient.
By considering the attitudes and preferences of both consumers and employees, businesses can be both socially responsible – and profitable.
“That might mean saying no to a supplier because your values don’t align, or paying more for a sustainable product,” says Duval. “It’s all about aligning your purpose to generate profit.”
In essence, companies of all sizes will need to create a strong foundation of what they stand for as a business to prosper in the coming years as ESG becomes more prevalent.
“If you decide to stand for something but aren’t practicing it, you will be called out, likely both internally and externally. You can’t talk about sustainability if you aren’t carrying out sustainable practices.”
Not only will consumers opt to patronize other more reputable businesses, but prospective employees will likely look elsewhere for employment, as well.
“Having a clearly defined environmental and social purpose is also important for the staff you’re recruiting. Today, employees must feel aligned philosophically with the company they work for and driven by the same purpose. People want to work for companies that have values that align with theirs, in all areas of the company from the admin staff to the warehouse.”
Every small businesses can have a big impact on the world around them when they institute a company culture with a clearly defined social purpose, says Duval.
Having a social purpose, and including ESG practices, will help you mitigate risk and drive profit. She says the time is now to get on board or you may be left behind. “There is no time for waiting anymore. The buying power of consumers has changed, and employees are looking for companies offering more than just a job.”
Thirty years ago, businesses just ran in the way that was best to ensure profitability.
Today – and in the future – consumers and employees will be key stakeholders and will determine whether a business succeeds or fails based on the environmental, social and governance policies that they base the foundation of their business on.
“ESG is where the trend is,” says Duval. “Smaller businesses don’t have to do it alone. Just get started. The resources are there, and your business will ultimately do better in the long run.”