Profit-with-Purpose: How Bottom Lines Are Only the Beginning
There is ample evidence that businesses of all shapes and sizes, across a range of industries, are recognizing the need to act more ethically and sustainably. It’s not just existing businesses that have their eye on that purpose anymore, either. It appears more start-ups than ever are popping up with a strong focus on operating for the better. It also appears there is a new breed of like-minded investors emerging who are ready to fund them!
The Emergence of Profit-with-Purpose Investments
Every generation or era seems to come up with their own unique terms. This is just as true in business as it is in any other area of life. In this particular case, the term of the moment is “profit-with-purpose”, also referred to as “purpose-with-profit”. The order of the words is irrelevant as equal emphasis is given to both.
According to SeedTribe, a community that connects impactful startups with people who want to invest in them, “Profit-with-purpose investment is a term, recently coined, to describe the increasingly popular investment strategy of investing in companies whose focus is on positive social and/or environmental impact as well as profit.”
Unlike the older adage of purpose-over-profits, this newer concept strives to achieve both aspects of the term simultaneously. “It is important to understand that profit-with-purpose investments do not favour purpose over profit, but rather profit-with-purpose investors consider the ‘purpose’ side as synergistic with generating profit.”
At Joorney, this trend is becoming so apparent that VP, Marianella Manzur, has even coined her own term “P, D & I,” meaning purpose, drive, and impact. She’s seeing more frequently from both startups and investors that “there needs to be an underlying purpose from the founders and the team which guarantees the drive component making sure the project never lacks effort and commitment. Finally, what makes it all worthwhile is the impact it has not only to the shareholders but to the entire world.”
Generally speaking, the concept of more purposeful business is not new. The common term “corporate social responsibility” has been popular since the 1970s and is still taught in business courses today. On an individual level, the idea of impact investing – putting your investments in companies that strive to generate specific societal and environmental changes – has been around for quite some time as well.
What is different is the urgency and vigor with which the notion is being applied. In many instances in the past, it felt these concepts were most often promoted as a public relations angle. The idea of acting for a higher purpose tended to only show through in a marketing campaign and a day of community involvement by the staff.
In our experience, it seems a big driver of this change is the heightened awareness of our interconnectedness. Between natural disasters, the pandemic, and other global events that have marked the past year, most of the world is becoming keenly aware of the truly integrated role business has in the broader society and economy. As a result, existing businesses, startups, and investors alike are starting to walk-the-walk instead of just talking-the-talk.
Why It Matters
We could go on and on about why going into business for a purpose and profits is important. It feels good. It’s the right thing to do. But, well beyond that, it is good for business because it is what consumers are now demanding and there are a variety of recent studies that back this up.
Salesforce’s State of the Connected Customer report shows that 56% of customers have reevaluated the societal role of companies. Another consumer survey reported that 78% of consumers believe companies have a larger role to play in society. Further, Accenture, the multinational professional services giant, revealed a study that shows 70% of workers think companies will operate more sustainably post-COVID pandemic.
The list could continue but the main takeaway is that more than ever consumers are becoming aware of the role of business in society. They also want to support businesses that align with their values. Companies that hope to be truly successful and remain competitive must find a way to generate profits while operating with a bigger purpose in mind.
Just Trending or Here to Stay?
Maybe it is because the concept is good for the bottom line or because it is a natural course correction after tumultuous world events of the prior year. In either case, Joorney hopes that the profit-with-purpose concept is here to stay.
With more and more angel investors and VCs investing exclusively in these startups, it is possible that what we see is more than just a trend. With startups on board with creating more sustainable communities and finding investors who are looking to create a bigger impact, profit-with-purpose investments don’t seem to be leaving the arena anytime soon, which is good news for us all.