The effects of climate change and social inequalities have created serious doubts over the continued existence of mankind. Business has the unique ability to shape a resilient future, why then are we still debating the merits of marrying sustainability with profitability?
Many business leaders have the perception that one can have profits or achieve sustainability, but not both. This probably has its roots in the Friedman doctrine which argued that the sole purpose of a business is to generate profit for shareholders. This has left much of the world divided, either believing that businesses have a greater social responsibility, or those who agree with Friedman and feel social goals are best left to politics. However, I think it’s safe to say that the world has become a more complex place over the last 50 years, and businesses have become ever more complicated enterprises that need to balance many different priorities.
Sustainable businesses are redefining the corporate ecosystem by re-designing models to create long-term value and considering how it operates in the ecological, social and economic environment. Sustainability is built on the assumption that developing such strategies fosters longevity.
Blending profit with a purpose
With roadmaps to net-zero emissions underway, the pressure to meet the Paris Agreement on climate change is mounting – and businesses form a huge part of this equation. Ignoring the interrelationship between business and the environment is no longer an option with greening initiatives and circular business models on the minds of everyone from big corporations to early-stage startups.
Becoming sustainable has the potential to drive innovation and productivity growth in the global economy. Michel Porter and Mark Kramer pioneered the idea of “creating shared value,” arguing that businesses can generate economic value by identifying and addressing social problems that intersect with their business. Adding further that a shared value approach reconnects company success with social progress.
Redesigning products to meet environmental standards or social needs offers new business opportunities. Loliware, for example, an edible bioplastic company integrates sustainability into its innovation pipeline by replacing plastic with edible, hyper-compostable seaweed-based materials to address the crisis caused by the 5 trillion pieces of plastic currently in our oceans.
Andrew Beebe from Obvious Ventures said “People talk a lot about profit and purpose. For a long time, it was profit vs. purpose, then we started to realize it was possible to combine purpose and profit. Now we’re entering a world of profit because purpose where the goal is to create companies where the more they sell, the more good there is for society and the environment”.
There’s more green for companies that go green
Contrary to popular belief, being sustainable and financially successful are not mutually exclusive. According to IFA Magazine, profit and purpose go hand in hand, “what is becoming increasingly clear is that investment solutions which address broader societal and environmental challenges have the greatest market demand in the long term.”
Sustainable investing, or impact investing, is on the rise as venture capitalists and investors wake up to the long-term value of going green. According to a June 2020 survey, conducted by the Global Impact Investing Network (GIIN), 88% of impact investors reported meeting or exceeding their financial expectations. These statistics back the long-debated industry question of whether sustainability undermines or improves financial results. The survey also reports that in 2019, impact investing was a $715 billion global market. This reflects the growing reality among corporates and investors who are seeking to deliver strong financial returns for their shareholders, while building a more equitable world for their stakeholders.
The bottom line of a company shouldn’t be the only measure of success. In the race to accelerate economic growth, many imbalances have been created in the ecosystem, so much so that the very survival of our planet is at stake. It is therefore imperative that we amplify conversations around business sustainability and put actionable measures are into place.
In seeking to address the world’s most pressing challenges, business has an historic opportunity. We cannot turn away from our responsibility in working for a more sustainable society for one fundamental reason: such an environment is a prerequisite for a resilient and market-oriented private sector. At Satgana, we’re scaling our social impact through the SDG-aligned ventures we support that seek to have a successful triple bottom line. Our for-profit nature comes from our conviction that the greatest, most impactful and financially successful companies of this decade will be the ones that solve real world problems through innovation-led and market-based approaches. By showing strong long-term financial performance, we wish to inspire more people and more capital to flow towards social and environmental impact.