It used to be that the only real mission of a business is to survive the initial kinks of starting up and then to eventually thrive; that is, to earn a profit. Profit was its reason for being. Of course, it was to serve the needs of its customers or clients but, ultimately, this was the bottom line: to make money for its owners or investors.
How times have changed.
Nowadays, it is no longer enough for a business to figure out how it was going to turn a profit. Money is still important, but it was no longer the be-all and end-all of business. Money has become both result and tool to achieving another end – that is, to fulfill a purpose.
From making money to becoming about making meaning. This, in essence, is what the ‘Profit for a Purpose’ business model is all about.
To be sure, it is not an entirely new business model. One of its earliest traces can be found in Oxfam – the international aid organization. In 1948, Oxfam opened its first charity shop. The proceeds from sales in the shop were used to support Oxfam’s efforts around the globe to find lasting solutions to poverty and related injustice. 2
The model was prevalent in practice, something that can be gleaned from the fact that the model has had a name for a long time, only that it was too many names for one thing.
Variations of the Same Theme:
- Profit for a Purpose
- Social Purpose Business (SPB)
- Social Enterprise
- Social Entrepreneurship
- Social Ventures
- Triple-Bottom-Line Business
What is a ‘Profit For Purpose’ Business?
Owing to the various terms referring to the same thing, it does not have a universally accepted definition but “put simply, it involves applying business procedures and discipline to an enterprise with a social mission. “ 1
But according to Elizabeth Isele, Senior Program Director at Great Bay Foundation, a ‘Profit For Purpose’ business is when “for profits successfully leverage monies received from their revenue-generating initiatives to enhance mission impact, increase their organization’s performance and sustainability, and also create new opportunities to help their clients/beneficiaries become more self-reliant.” 3
A “Profit for Purpose” business is “led by a mission to achieve social, community and environmental benefit through trading and by channeling a portion of their profits toward their mission. “ 2 It is considered a strong business model “where these two goals intersect successfully—where both social and economic value creation result.” 4
However, it is important to note that the purpose aspect – the social goals of the business – are not mere “add-ons or marketing ploys”. They must be “part of the DNA of the business.” 4
The Shift: Organic Growth or Business Strategy?
It has been observed that the growth of “Profit for Purpose” business isn’t a one-way street – it wasn’t just about For Profit business finding their way toward a purpose. The trend was that “companies that traditionally operate in the ‘for profit’ environment are moving towards being more charitable. Similarly, organizations that traditionally operate in the ‘not-for-profit’ environment are developing business models to be profitable. The movement of companies from both ends is blurring the lines between traditional ‘not for profit’ and ‘for profit’ business models.” 2
For social entrepreneurs, the shift was about finding “the most effective methods of serving their social missions.” It is all about “a shift in leverage – a better recipe rather than simply more cooking – and it takes a different set of aptitudes, a different kind of opportunism, and a different orientation to growth.” 1
The shift may also be attributable to the fact that “Profit for Purpose” business “increasingly are run by people with backgrounds in management rather than clinical work, and they increasingly resemble the corporations that help fund their work.” 1
The merging of two seemingly incongruent models – that of Profit vs. Purpose – “is gapping the divide… we are seeing an explosion of innovation as the gap is crossed by organizations and businesses that are willing to think outside the box and explore this new area of business as a force for good.” 37
It is a trend that has been rumbling through many years, of companies realizing “that profit and purpose (aka social impact) can and should go hand in hand. Rather than separating the revenue-generating side of the business from the philanthropic side, socially progressive companies are thinking of them as co-existent, and in the process, generating greater impact and revenue than they would by keeping them separate.” 2
Millenials: Key to Sustaining the Trend
The trend, it seems, is likely here to stay as it appears to be carried and sustained by demographics: “The Deloitte Millennials Report in 2013 showed that young people believe that the number one purpose of business is to benefit society, and the 2014 report showed that fifty per cent want to work for a business with ethical practices.” 14
“There is an exciting next generation of business leaders emerging that embrace profit and purpose as the new way to do business.” 2
These social entrepreneurs, these “Profit for Purpose” entrepreneurs – these “enterprising individuals who apply business practices to solving societal problems such as pollution, poor nutrition, and poverty – are now 30,000 strong and growing”, according to B Lab, a nonprofit organization that certifies these purpose-driven companies. 5 Together, they represent an economic value of some $40 billion in revenue.
It is for this reason that ‘Profit For Purpose’ businesses have “caught the attention of venture capitalists such as those at Acumen Fund, a nonprofit that invests in companies that try to alleviate poverty, and Bay Area Equity Fund, which backs businesses aiming to make social or environmental improvements to San Francisco’s needier neighborhoods. President Obama has even suggested starting a new government agency to help socially conscious startups gain more access to venture capital. “ 5
Is ‘Profit For Purpose’ the business model of the future? Will future generations demand more from the manufacturers of consumable products? What if Coca-Cola was a ‘Profit For Purpose’ business? At Bizzy Coffee we ask ourselves these question every day.
Alex French is CEO of Get Bizzy Inc., the producer of Bizzy Coffee – a Certified Organic Cold Brew Coffee Concentrate.
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REFERENCES: 1DzFor Profit or For Purposedz, Associations Now, February 2006 , Author: Bill J. Harrison; https://m.asaecenter.org/Resources/ANowDetail.cfm?ItemNumber=147822 DzWhy is profit for purpose so darn cool?dz, Australian Anthill, December 2012, Author: Todd Spear; http://anthillonline.com/why-is-profit-for-purpose-so-darn-cool/3 DzProfit for a Purposedz, Skoll Foundation Archives, September 2006, Author: Elizabeth Isele; http://archive.skoll.org/2006/09/25/profit-for-a-purpose/4 DzSocial purpose business (SPB) modelsdz, MaRS, December 2009; https://www.marsdd.com/mars-library/social-purpose-business-spb-models/5 DzAmerica’s Most Promising Social Entrepreneursdz, Bloomberg Business, April 2009; http://www.bloomberg.com/ss/09/04/0403_social_entrepreneurs/index.htm6 DzAmerica’s Most Promising Social Entrepreneurs: Peaceworks Holdingsdz, Bloomberg Business, April 2009; http://www.bloomberg.com/ss/09/04/0403_social_entrepreneurs/19.htm
7 DzAmerica’s Most Promising Social Entrepreneurs: Revolution Foodsdz, Bloomberg Business, April 2009; http://www.bloomberg.com/ss/09/04/0403_social_entrepreneurs/23.htm8 DzAmerica’s Most Promising Social Entrepreneurs: Stonyfield Farmdz, Bloomberg Business, April 2009; http://www.bloomberg.com/ss/09/04/0403_social_entrepreneurs/25.htm9 DzAmerica’s Most Promising Social Entrepreneurs: TOMS Shoesdz, Bloomberg Business, April 2009; http://www.bloomberg.com/ss/09/04/0403_social_entrepreneurs/26.htm10 DzAmerica’s Most Promising Social Entrepreneurs: Better World Booksdz, Bloomberg Business, April 2009; http://www.bloomberg.com/ss/09/04/0403_social_entrepreneurs/3.htm11Dz4 Companies Leading The Next Wave Of Profit With Purposedz, FAST Co Exist, May 2015,
Author: Philip Haid;http://www.fastcoexist.com/3046684/4-companies-leading-the-next-wave-of-profit-with-purpose12 DzProfit with Purpose Business: The New Frontier for the Social Economydz, UNLTD, September 2014; https://unltd.org.uk/2014/09/15/profit-purpose-business-new-frontier-social-economy/13 DzWe are UNLTDdz, Company Website; https://unltd.org.uk/about_unltd/14DzThe Deloitte Millennial Survey 2016: Winning over the next generation of leadersdz, Deloitte, 2016; http://www2.deloitte.com/global/en/pages/about-deloitte/articles/millennialsurvey.html15 https://en.wikipedia.org/wiki/Teach_For_America16 https://en.wikipedia.org/wiki/Habitat_for_Humanity17 http://www.forbes.com/companies/habitat-for-humanity-international/18 https://www.interaction.org/article/habitat-humanity-awarded-2013-fedex-award-innovations-disaster-preparedness19 https://en.wikipedia.org/wiki/Newman%27s_Own20 http://www.fundinguniverse.com/company-histories/newman-s-own-inc-history/21 http://www.peaceworks.com/22 http://skoll.org/organization/peaceworks/