How to Maximize Societal Value and Profits
- Companies that adopt effective impact strategies see significant improvements to their profits, productivity, growth, resilience, and brand value.
- These benefits materialize most for companies with advanced practices designed to maximize sustainability and positive impact.
- The most successful companies will be those that tackle the root causes of global problems and integrate the solutions to those problems into their profit models.
After a couple of rainy days, it turned out to be a beautiful sunny evening for the annual barbeque of the European Summer School for Advanced Management (ESSAM). Held at the University of Glasgow’s Adam Smith Business School, ESSAM is a credit-based two-week summer program for MBA students, delivered in partnership with several other business schools around the world.
After the barbeque, I joined a group of students in the adjacent field that boasts stunning views across Loch Lomond. We began discussing the elective I had taught during the program, which explored how companies can address issues such as climate change, pollution, poverty, social exclusion, and rising inequality. At one point, several students asked me a pointed question: “Why was this course offered as an elective at the end of the program? Why was it not a core module that everyone took at the start?”
Considering the significant impact businesses have on the challenges humanity faces, I would ask the same question of my own business education—which has included an MSc, an MBA, and a doctorate. I studied a variety of paradigms that emphasized corporate social responsibility (CSR), sustainability, stakeholder theory, shared value theory, business ethics, and social entrepreneurship, as well as environmental, social, and governance (ESG) frameworks. But in hindsight, none of these models provided me with an understanding of how businesses can work most effectively to resolve the key global crises highlighted by the United Nations Sustainable Development Goals (SDGs).
I now have been a business practitioner for many years. I’ve managed the Asia-Pacific market for a multibillion-dollar tech company, held senior management roles in IT startups, and run a business that empowered young uneducated women living in a Nairobi slum. During this time, I have observed the powerful impact business leaders can have on people’s lives and on our world—and the challenge leaders face as they try to balance the tension between profit and purpose.
But this raises another question: How can profit and purpose best go hand in hand? Why are some companies far better at making a difference compared to others with a similar purpose and context. More important, how do they achieve better commercial outcomes? What do they do differently?
Through my PhD research and work with business leaders, I have learned that those with the best outcomes have two underlying patterns in common. First, they tackle the root causes of our global issues. And, second, they integrate their social or environmental purposes into their core profit models.
Addressing Causes, Not Symptoms
Imagine that you’re running a nice warm bath. While the bathtub is filling up, you step out to take a phone call that takes longer than you expected. When you walk back into the bathroom, the tub has begun to overflow. What do you do? Does it make sense to begin mopping the floor while the tap is still running? Of course not. That’s why the first thing you most likely would do is turn off the tap.
Yet, when it comes to addressing the mountains of plastic entering our oceans each year, the carbon emissions contributing to climate change, or factors driving many other global issues, too many corporate initiatives deal only with the symptoms. In other words, they invest in efforts that only serve to “mop up” the water without turning off the flow.
For example, research has shown that recycling is an ineffective way to solve the plastic pollution crisis. According to the 2022 Global Plastics Outlook released by the Organisation for Co-Operation and Development, only 9 percent of plastic waste ever gets recycled.
Meanwhile, global plastic consumption has quadrupled over the past 30 years, with global plastics production growing to more than 460 million tons. Over their lifecycle, plastics account for 3 percent to 4 percent of our global greenhouse gas emissions—almost double the emissions generated by the entire aviation industry. Unless current trends are drastically turned around, by 2050 our oceans will contain more plastic than fish, as measured by weight.
Companies that address the origins, not just the symptoms, of our biggest global challenges will see a better return on their investments.
Groups such as The Ocean Cleanup are working tirelessly to remove plastic from the oceans. But with around 8 million metric tons of plastic entering our waterways each year, such efforts are a losing battle unless companies stop plastic waste from reaching the environment in the first place. Companies that address the origins of such issues will see a better return on their investments.
So far, these companies include Dycle, a startup in Berlin that aims to be the “world’s first fully zero-waste, systemic production company for baby diapers,” and the Swedish Return System, which supports a circular economy model for Sweden’s food and beverage industry. Both of these innovative organizations have based their business models on creating circular solutions across the lifecycle of their products to reduce carbon emissions and prevent plastic waste.
Tapping the Power of ‘Opposite’ Thinking
But addressing root causes is only one part of the answer. A second important step that sets successful impact-focused companies apart from others is their ability to avoid either/or thinking. I address this approach in my book, Lead Like a Genius: How to Outgrow the Competition and Transform Our World.
In a 1971 study, Harvard University’s Albert Rothenberg revealed that innovative thinkers such as Albert Einstein, Pablo Picasso, Vincent van Gogh, Thomas Edison, Leonardo da Vinci, and Wolfgang Amadeus Mozart had one thing in common: They engaged in “the pursuit of a unity of opposites.”
Einstein, for example, played with the simultaneity of objects in motion and at rest; Picasso sought visual images that conveyed light and dark. In his study, Rothenberg describes this way of looking at the world as “Janusian thinking” after Janus, a Roman god with two faces, each looking in the opposite direction.
Business and management scientists increasingly suggest that Janusian thinking can lead to solutions to many complex problems. Business leaders who use this approach can balance the opposites they see in their industries not as separate concepts, but as two parts of a whole. By unifying opposites, they can create synergies and virtuous cycles. Researchers refer to this ability in what is called “paradox theory.”
Let’s look at paradox theory in the context of tackling poverty and social exclusion. Many organizations and initiatives try to tackle these problems at their roots by empowering underprivileged individuals with training, apprenticeships, and employment opportunities. Not all such initiatives, however, show the same success rates.
Business leaders who embrace Albert Rothenberg’s “unity of opposites” can balance the opposites they see in their industries not as separate concepts, but as two parts of a whole.
I can think of three very successful examples. Goodwill Solutions is a U.K.-based logistics company that provides job opportunities to those who need fresh starts. Brigade, a social enterprise restaurant run by the London-based Beyond Food Foundation, offers training and work opportunities to people who are dealing with trauma or mental health issues, are at risk of homelessness, have disabilities, or were formerly incarcerated. Finally, Ctalents is a recruitment agency in Amsterdam that matches job vacancies with the talents of people with hearing and visual impairments.
The success of these organizations is 300 percent to 400 percent higher than other initiatives with similar objectives. Why? My data show that what sets their results apart from many of their peer organizations is that they each pursue profits and purpose not as mutually exclusive, but as “an integrated whole.” These organizations embrace opposite thinking.
For example, Ctalents is a for-profit company that focuses as much on aligning its candidates’ talents with its clients’ job requirements as it does on empowering those with visual and hearing impairments. Because it provides high value to the market, most of its corporate clients come back for more candidates. By successfully pursuing profits and purpose, Ctalents is growing its revenue and impact at a steep rate.
Similarly, Goodwill Solutions, another for-profit company, serves clients such as Amazon and Marks & Spencer. Financial Times has ranked the company No. 76 on its list of the 1,000 fastest growing companies in Europe.
These examples contrast with many other similar nonprofit initiatives that rely solely on funding. Without the drive to generate profits, these initiatives often do not align their products and services with market needs, and their trainees tend to be less well-equipped to find jobs after their training is complete. These factors result in financial outcomes that are not robust enough to support growth.
Goodwill Solutions and Ctalents could not achieve such high success rates in transforming people’s lives if their clients did not value their services. And they would not achieve such positive financial outcomes if they did not link their social solutions with their profit goals.
Teaching High-Impact, High-Profit Leaders
Business leaders are increasingly aware that creating a positive impact is essential, not only for the world but for the success of their organizations. Consider this: Purpose-driven companies are more productive and grow three times faster than their competitors, driven in large part by superior customer retention and customer referral rates. In addition, companies that lead on impact are more resilient and experience increased valuations of more than 175 percent (more than double that of their less purposeful peers).
Research finds that Gen Z and millennials care more than older generations about the impact companies have on the world. Over time, these younger generations will make up a larger portion of each company’s customers—not to mention employees, suppliers, investors, and other stakeholders. For that reason, I expect that creating positive value for our world will become only more important as a competitive advantage.
Companies that are early adopters on the sustainability curve will likely gain strong competitive advantages. Staff, customers, investors, media professionals, and other stakeholders are more excited and engaged by companies that are proactively creating solutions than by late adopters or those that merely comply with legal requirements.
As I mentioned before, business schools have long taught paradigms such as CSR, sustainability, shared value, stakeholder value, and ESG. While these models focus on impact, they often are taught in ways that inadvertently reinforce the idea that companies must pursue impact at the cost of their own self-interest. Business curricula need to delve more deeply into the flaws of these commonly taught models—and into the essence of what is missing from leadership in traditional free-market economies.
Business schools have an opportunity to answer the question the MBA students asked me at ESSAM. Why aren’t best practices that link profit and purpose routinely presented in the core business curricula, not just as electives? It’s time for business schools to place greater emphasis on these practices. It’s time for them to train future leaders to tackle humanity’s grandest challenges and create value for the world, in ways that also will help organizations thrive.