Putting people before profit

  4 min

TRENDWATCH

facebook twitter linkedin insta insta (copy)
foto1.jpg
pattern_01
pattern_01 (copy)
Offline: This content can only be displayed when online.
Why purpose driven companies do better in times of crisis

Putting people before profit

  Lisa Appels    Wouter Noordijk

For the past two decades, the official purpose of most of America’s big corporations has been that the interests of shareholders came before the interests of all others: workers, consumers, the cities and towns in which their companies operated, and society as a whole. But the times they are a changin’.

goud-lijnen.svg
goud-lijnen.svg (copy)

Stakeholder capitalism versus shareholder capitalism

Back in 2019 the lobby group Business Roundtable, including some of America’s top CEOs, announced they would be endorsing stakeholder capitalism over shareholder capitalism, moving with the growing trend of purpose driven companies, led by demand of new generations of employees and consumers. A purpose-driven company stands for and takes action on issues bigger than its products and services. Other terms often used in association with purpose-driven companies are and Benefit corporations (B Corps for short) and Certified B Corporations. The difference between the two is that the B Corp Certification is a third-party certification administered by the non-profit B Lab and The benefit corporation is a legal structure for a business. Benefit corporations are legally empowered to pursue positive stakeholder impact alongside profit. Some companies are both Certified B Corporations and benefit corporations, and the benefit corporation structure fulfills the legal accountability requirement of B Corp Certification.

Purpose for a
resilient future

Although a shift from traditional and new companies moving towards more purpose driven business models was already happening, Andrew Kassoy cofounder of B Lab argues – in an interview in Fast Company Magazine – that the pandemic might accelerate shifts that were already underway. According to Kassoy the current COVID-19 crisis makes it clear that we haven’t built a resilient economic system. While shareholder primacy didn’t cause the COVID-19 crisis, it certainly laid bare the fact that we have a system where workers and communities aren’t prepared for a big crises like these. In a different system, where companies were paying their workers well enough that people had reserves, we might be in a different situation than we are today and wouldn't need a multi-trillion-dollar bailout, he states. If we look at previous periods of economic crisis, executives’ actions, both good and bad, lodged in company histories and forged perceptions that have endured for years. Decisions made during this crisis will likewise shape a corporation’s identity and tell a story that will leave traces long after COVID-19. 

Tony Chocolonely
A company that has been trying to make ‘work human again’ is the Dutch Chocolate company Tony Chocolonely. Since the start of the company in 2005 their mission had been to make ‘slave-free’ chocolate by buying cocoa from farmers who don't engage in child labor and other forms of modern slavery, and paying them a fair price. The chocolate company supports different initiatives through the Chocolonely Foundation. One of the initiatives they support is 100WEEKS, an organization that helps women from cocoa farming communities who live in extreme poverty. They receive 8.98 dollars a week for 100 weeks, in addition to coaching in accounting, planning, and saving. During the COVID-19 pandemic the chocolate company started organizing special talks online for primary schools, secondary schools, adults and companies. On their website they also place articles on the impact of the pandemic in West Africa and the issue of schools being closed and the difficulties with child labor monitoring when farm visits are not possible. 

Sources

  • How businesses could emerge better after COVID-19, according to B Lab, Fast Company
  • Demonstrating corporate purpose in the time of coronavirus, McKinsey
  • Why Purpose-Driven Businesses Are Faring Better In COVID-19, Forbes Magazine
  • Ben & Jerry's Radical Ice Cream Dreams, The New York Times

Coping better during a crisis

But it’s not just after times of crisis, that purpose driven companies can help to build more resilience. In an article in Forbes Magazine Nell Derick Debevoise, CEO of Inspiring Capital, explains four reasons how and why purpose-driven companies are outperforming their peers during a time of crisis. For starters purpose driven companies are more likely to survive difficult times due their ability of fast and effective innovation. When you put constraints around a situation creativity actually goes up because you’re trying to innovate within a limited space. Purpose driven companies are already used to operating in an environment of self set boundaries. 

Secondly, flattened hierarchy and flexible roles contribute to performing better during a crisis. Reallocating different people to new jobs easily, comes in handy during crucial times when a company’s needs are suddenly shifting. Also having a call to serve a higher purpose can be the clarifying and motivating force that replaces formal hierarchy or performance targets. Purpose expert Dr. Zach Mercurio refers to higher purpose as “The Invisible Leader”.

Another reason why Benefit corporations and B-corps have better chances of doing well during critical times is because of the consumers ‘pressure to do the right thing’. In the anxiety-producing environment of a global pandemic people are more and more conscious of the things they buy and the companies behind them. They’re looking at what companies do through this crisis and they’ll support the companies that do the right thing.

Last but not least, Derick Debevoise describes the notion that purpose driven companies are making work human again. COVID-19 is threatening a lot of people's livelihoods and has changed our perception of work that is more human. COVID-19 has forced a re-examination of working conditions for people in all roles and industries, and most purpose driven companies already have a head start.

Ben & Jerry’s
An example of a company that has been a pioneer in creating a purpose driven business model, in which making positive change in society is priority to making profits is Ben & Jerry’s. Since the start issues involving the environment and social justice have been a big part of the companies activities. For example in 2019 Ben & Jerry’s worked with St. Louis groups in a lawsuit to ban the city’s jails from holding inmates simply because they couldn’t post bail. Also the ice cream company publicly supported Black Lives Matter before most other companies. In an interview in The New York Times Ben Cohen and Jerry Greenfield state that part of the success of their company has been their social purpose. As they explain that when a company is acting on its values and those values resonate with your consumers’ values, it’s an incredibly deep connection based on justice, fairness, equality.

foto1.jpg
pattern_01

  4 min

Offline: This content can only be displayed when online.
Why purpose driven companies do better in times of crisis

  Lisa Appels    Wouter Noordijk

For the past two decades, the official purpose of most of America’s big corporations has been that the interests of shareholders came before the interests of all others: workers, consumers, the cities and towns in which their companies operated, and society as a whole. But the times they are a changin’.

Stakeholder capitalism versus shareholder capitalism

The power of purpose - Afdhel Aziz

Putting people before profit

Back in 2019 the lobby group Business Roundtable, including some of America’s top CEOs, announced they would be endorsing stakeholder capitalism over shareholder capitalism, moving with the growing trend of purpose driven companies, led by demand of new generations of employees and consumers. A purpose-driven company stands for and takes action on issues bigger than its products and services. Other terms often used in association with purpose-driven companies are and Benefit corporations (B Corps for short) and Certified B Corporations. The difference between the two is that the B Corp Certification is a third-party certification administered by the non-profit B Lab and The benefit corporation is a legal structure for a business. Benefit corporations are legally empowered to pursue positive stakeholder impact alongside profit. Some companies are both Certified B Corporations and benefit corporations, and the benefit corporation structure fulfills the legal accountability requirement of B Corp Certification.

goud-lijnen.svg
Purpose for a
resilient future

Although a shift from traditional and new companies moving towards more purpose driven business models was already happening, Andrew Kassoy cofounder of B Lab argues – in an interview in Fast Company Magazine – that the pandemic might accelerate shifts that were already underway. According to Kassoy the current COVID-19 crisis makes it clear that we haven’t built a resilient economic system. While shareholder primacy didn’t cause the COVID-19 crisis, it certainly laid bare the fact that we have a system where workers and communities aren’t prepared for a big crises like these. In a different system, where companies were paying their workers well enough that people had reserves, we might be in a different situation than we are today and wouldn't need a multi-trillion-dollar bailout, he states. If we look at previous periods of economic crisis, executives’ actions, both good and bad, lodged in company histories and forged perceptions that have endured for years. Decisions made during this crisis will likewise shape a corporation’s identity and tell a story that will leave traces long after COVID-19. 

Coping better during a crisis

But it’s not just after times of crisis, that purpose driven companies can help to build more resilience. In an article in Forbes Magazine Nell Derick Debevoise, CEO of Inspiring Capital, explains four reasons how and why purpose-driven companies are outperforming their peers during a time of crisis. For starters purpose driven companies are more likely to survive difficult times due their ability of fast and effective innovation. When you put constraints around a situation creativity actually goes up because you’re trying to innovate within a limited space. Purpose driven companies are already used to operating in an environment of self set boundaries. 

Secondly, flattened hierarchy and flexible roles contribute to performing better during a crisis. Reallocating different people to new jobs easily, comes in handy during crucial times when a company’s needs are suddenly shifting. Also having a call to serve a higher purpose can be the clarifying and motivating force that replaces formal hierarchy or performance targets. Purpose expert Dr. Zach Mercurio refers to higher purpose as “The Invisible Leader”.

Another reason why Benefit corporations and B-corps have better chances of doing well during critical times is because of the consumers ‘pressure to do the right thing’. In the anxiety-producing environment of a global pandemic people are more and more conscious of the things they buy and the companies behind them. They’re looking at what companies do through this crisis and they’ll support the companies that do the right thing.

goud-lijnen.svg (copy)

Ben & Jerry’s
An example of a company that has been a pioneer in creating a purpose driven business model, in which making positive change in society is priority to making profits is Ben & Jerry’s. Since the start issues involving the environment and social justice have been a big part of the companies activities. For example in 2019 Ben & Jerry’s worked with St. Louis groups in a lawsuit to ban the city’s jails from holding inmates simply because they couldn’t post bail. Also the ice cream company publicly supported Black Lives Matter before most other companies. In an interview in The New York Times Ben Cohen and Jerry Greenfield state that part of the success of their company has been their social purpose. As they explain that when a company is acting on its values and those values resonate with your consumers’ values, it’s an incredibly deep connection based on justice, fairness, equality.

pattern_01 (copy)

Sources

  • How businesses could emerge better after COVID-19, according to B Lab, Fast Company
  • Demonstrating corporate purpose in the time of coronavirus, McKinsey
  • Why Purpose-Driven Businesses Are Faring Better In COVID-19, Forbes Magazine
  • Ben & Jerry's Radical Ice Cream Dreams, The New York Times

Last but not least, Derick Debevoise describes the notion that purpose driven companies are making work human again. COVID-19 is threatening a lot of people's livelihoods and has changed our perception of work that is more human. COVID-19 has forced a re-examination of working conditions for people in all roles and industries, and most purpose driven companies already have a head start.

Tony Chocolonely
A company that has been trying to make ‘work human again’ is the Dutch Chocolate company Tony Chocolonely. Since the start of the company in 2005 their mission had been to make ‘slave-free’ chocolate by buying cocoa from farmers who don't engage in child labor and other forms of modern slavery, and paying them a fair price. The chocolate company supports different initiatives through the Chocolonely Foundation. One of the initiatives they support is 100WEEKS, an organization that helps women from cocoa farming communities who live in extreme poverty. They receive 8.98 dollars a week for 100 weeks, in addition to coaching in accounting, planning, and saving. During the COVID-19 pandemic the chocolate company started organizing special talks online for primary schools, secondary schools, adults and companies. On their website they also place articles on the impact of the pandemic in West Africa and the issue of schools being closed and the difficulties with child labor monitoring when farm visits are not possible. 

Overview magazines

Food Inspiration Magazine is the online magazine for foodservice professionals in search of inspiration and innovation. With the magazine we collect, enrich and spread inspiration. The free subscription magazine is published eight times per year and is an abundant source of inspiration for food and hospitality professionals. Our readers can be found in the U.S., Northern Europe, Latin America and Asia.
Fullscreen